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Daily Forex EUR/USD, GBP/USD Analysis November 22, 2012

Happy Thanksgiving to all my American readers. Have some turkey for me!

As I somewhat expected when I wrote the update in yesterdays commentary after the Euro group news on Greece, we did see the push up. Since we got the big drop during the Asian session that blew out the ADR I still liked the potential for the long entry but said I was going to leave it alone and that is exactly what I did. I worked on doing some maintenance on my motorcycle for most of the day. However when I did come back and check the charts there was an aggressive entry on a trap to the lows. If any of our aggressive members caught that (John :)) good job guys. 

After having a short skype conversation with a member who asked if I was in the Euro. I told him that I might have been if I was around. the first pin on the 15 minute chart was the first sign of the trap but I wasn’t quite sure if I would have pulled the trigger on the next candle formation. More than likely I would have wanted a deeper pullback since the legs weren’t so pretty, and it just never came back far enough. On to the next trade!

Today we have the second push to the upside as we were expecting , however this last pump up was due to some news that the Fed could soon be ramping up the QE. Here is the headline. “SF Fed’s Williams Says Fed Not Near Limits On Bond Buying”. This could be simple lip service but they more often than not end up doing what they threaten when the markets do not react the way they desire them to. The metals market should tell the true story. If we continue to see Silver and Gold push up that will tell us that most believe the Fed will announce further QE.

My bias will be for the third push up once we retrace the news move and test the break out of yesterday’s highs. The EUR/USD is above the 4 hour 200EMA which was holding it down until today. This will be the first place I look for the manipulation and then the move up, but there are 2 more daily highs just below that level around 1.2820 that might be tested as well. The price action once we reach those points, as it always is, will be the determining factor on whether or not an entry is to be taken.

I should also mention that the spike to the top hit the 200EMA on the daily chart so there is a good chance they will chop it around and load up before the break to the upside. It may be a boring day since it is Thanksgiving in the US.

1 hour chart of the EUR/USD Nov. 22, 2012

The GBP/USD has also seen the second push and I am expecting the third today here also, but only after a retrace from the current highs. The first place to look for the trapping formation will be the Asian session lows unless we retrace there before London opens. If it does then it will probably go to the next breakout high of 1.5946. Having said that the best place for them to push to is the Wednesday high of 1.5934. Since we are only 30 pips away from that level it does have a good chance of getting tested before the potential move up. Once it gets there I will need to see the manipulation before taking any long entry. 

1 hour chart of the GBP/USD on Nov. 22, 2012

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Forex News Today

The London session kicks off with Flash Services and manufacturing data from France, Germany and the EU as a whole. With all of these well below the 50 expansion I doubt there will be much reaction barring a big miss. Having a couple of them revised lower on last months release there is a small chance for that. There is also a Spanish 10 year bond auction later in the day but I expect it will go off decent but it should be watched just in case.

There is also the EU Summit so we will have the chance for more tape bombs but with Greece officially off the table until next Monday any bombs will likely be on the banking union which more than likely will not get much reaction from the market.

Happy Trading


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