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Daily EUR/USD, GBP/USD Analysis January 3, 2013

I know yesterday I said I thought this rally wouldn’t last long but I have to admit I did not expect a full retracement in the same day. What didn’t follow suit was US equities so this is not a risk aversion scenario but rather the US has bought its self a couple months. I do think its going to be more expensive than they originally thought but that’s just me. 

So just what is happening? Well with forcing through the lame deal and buying time while Timmy G. pillages entitlement funds so the US can keep on spending money they don’t have…the spotlight has shifted back to Europe for the time being. The fact is nothing has changed in Europe but when the fiscal cliff was looming they did get a nice reprieve while the market focused on the US. So now we will most likely see Europe get hammered for probably a month or so while the “Grand Deal” in the US gets worked out. 

The facts are still the same, and the deal was a joke to say the least. The debt ceiling was not solved, so it would seem the GOP will be holding all the cards when they start running out of money. The republicans have lost a good deal of their credibility with caving so fast but they do still hold an ace up their sleeve they will surely play come the end of February. My guess is they will fight it out until Mr. Market says jump and both the Democrats and republicans together will say HOW HIGH SIR! It can’t be much clearer as to who really runs the government in the US. Sometimes the truth is stranger than fiction and I think this qualifies. However this is old news really so lets get on to the charts. 🙂

As I mentioned above the EUR/USD and GBP/USD both have a massive pin bar on the daily chart. Starting with the Euro the push up was a failed first push and now we have a clear first push to the downside. My bias will be for the short today. The levels I will be looking at for the manipulation will start at the hourly 200EMA which also coincides with the psychological level of 1.3200. If for some reason that doesn’t hold the break out level above at 1.3234 will be the next place I will look to see signs of the smart money manipulation before the short.

As I mentioned in the forex commentary yesterday I was looking for a stop run to the highs for the short. We never did get that but there was some clear signs of manipulation at the highs. I was chatting with a new member over Skype at the time and he asked about it. I agreed with him and when he asked what entry I was looking for I said 1.3290+. Since my trade plan for the day wasn’t going precisely as planned I was still willing to enter with the manipulation, however I wanted to get an entry as close to 1.3300 as possible. Since there still was the possibility for the stop run I always want to give them the chance to do it while I still have a good probability of being in when they are done.

The price I would have been happy with was 1.3295 leaving my 20 pip stop 15 pips above 1.3300. It never got there and the member took the short at 1.3290 getting the last high before the drop. The market never went against him. I have to admit he needs some work on trade management because he closed with only 25 pips of a 134 pip move but it was a good entry obviously. A bit too aggressive for me but we aren’t trying to create Sterling or Chad duplicate traders, rather but give members the tools to create their own trade plan, taking trades at their own discretion. Good job Dave and all the other members in the Skype group that caught the move.

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1 hour chart of the EUR/USD on January 3rd 2013

The GBP/USD also has a short bias toady with the clear 1st push down after a clean 3 pushes to the upside. The levels I will be looking to see the manipulation will be the 1.6272-1.6280 area. The reason is 1.6272 is a daily high from Dec 31st but the break out level yesterday is 1.6280 so the manipulation will most likely happen in this zone. If we do see a push down here during the Asian session, and when the Asian box closes price is at or near the Asian lows then the Asian box high comes into play. If that ends up being the case the probability for the market to turn there increases. The same goes for the Euro as it seems the USD strength is controlling the market right now.

1 hour chart of the GBP/USD on Jan. 3, 2013

Forex News Today

Scheduled releases are light today with only a couple medium impact events during the London session. they are German Unemployment expected to rise by 11K . I doubt this will have much impact barring a large miss since the slow down in Germany has been in the process for some time. it should add to some Euro weakness unless it misses big to the downside meaning they don’t lose as many jobs as expected. There is also M3 money supply expected to remain close to unchanged so I doubt this will move markets much either.

The UK does have Construction PMI expected to print at 49.6. If it can manage a pop above the 50 expansion level we will most likely see some GBP strength but with the spotlight now aimed over the pond it will probably just slow the GBP/USD move down as the EUR/GBP takes a dive.

The US has ADP Non Farm figures expected around 134K but with the big NFP Friday tomorrow this will most likely be a non mover barring a big miss. 15 minutes later there is Thursday Unemployment claims only expected to rise slightly. As large deviation here does have potential to make some movement. If there is a large miss to the upside there should be some USD weakness as more QE from Big Ben comes into the picture. A large miss to the downside and we should see USD strength.

Happy Trading


On a side note. I received some emails asking for the link to the video I posted yesterday. I didnt forget to make the link so it is there. I did however change the color of the text and I have fixed that so for those who didn’t get to watch the video the link in yesterday’s commentary near the bottom is clearer now. 🙂

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