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Daily Forex EUR/USD, GBP/USD Commentary June 29, 2012

The optimism for the EUR/USD that was gained from a WSJ article stating that Germany was closer to letting Euro Bonds happen was quickly crushed by the German finance ministry with a spokes person making the statement of “Schauble did not say Germany will move sooner on shared liability for debt”. What strikes me as funny is the fact that Merkel and Schauble have been saying that all week yet the WSJ still prints the rumor. I wonder whose pocket they are in.

With the well over 100 pip move to the downside yesterday I am having a slight bias for the next push down today. I would be more convinced if we had a false push up that was rejected or at least a stop run above the highs at 1.2525 so there may be a deeper pullback in store for today. Being the end of the month we will have some end of month flows that could help cause that deeper pullback. At this point the Asian session is testing the proven resistance at the 1.2450 level and as long as it holds and we get a drop back into the range I would expect a stop run above that level during the London session before the continuation down happens. Otherwise if it breaks the next level up for potential manipulation is the 1.2500 level or the manipulation range 25 pips outside the Asian range created today. 

The GBP/USD is somewhat clearer and has had the failed push to the upside after reversing off its intraday pushes. Whats interesting here is that if we look at an extended long term on the daily chart we have 2 clear pushes from the highs on  June 20 and we would be expecting the third in that scenario also. At this point this pair has a bit stronger bias for the down move. However it is testing some daily lows that has been proven as resistance as of yet. As long as this level holds (approx. 1.5534) for the Asian session and we get the move off down then this will be the first place I look for the trap move for a short today. Keeping in mind the same month end flows and potential for a larger pullback possibly to the 1.5550-60 level. Some of our more experienced members will probably be asking about the three 90+ pushes down from the highs and they would be correct. They are there but the thing is the Smart Money rarely does anything the same as the last move so I favor the longer term pushes at this point.

Forex News Today

The scheduled news for today is a bit busier but most of them are medium impact events that will likely be over shadowed by the EU Summit again. Even though the big news is out that Germany is not going to blink there will be some tape bombs I expect.

The EZ has German Retail Sales, French Consumer Spending, M3 Money Supply, CPI Flash Estimate y/y. They only thing to watch for with these is a major surprise drop for the retail sales and CPI figures of which will give reason for some manipulation in my view.

The UK have BOE Gov King Speaking with the BOE Financial Stability Report. This could be a choppy moment for the GBP like the Inflation Report was. If I am in a trade I hope to be well up ahead of this to hold on and wont be entering until after hes finished.

The US has Core PCE Price Index, Personal Spending, Chicago PMI and Revised UoM Consumer Sentiment. The one that has most potential for any movement or manipulation is PMI figures only if they surprise upwards the way I see it.

The Summit is Over

I just cant help but laugh. As I am finishing this commentary up we get the headline of the day for the Euro pump. Strangely though the EU Summit was cut short expected to last 2 days not just one. Here is the headline that just sent the EUR/USD flying.

Euro Leaders Agree To Open Funds Without Austerity Programs

They have successfully given the can the last kick. The world will be watching for the next several days, weeks and possibly months as this proverbial can heads toward the goal posts. Its anybodies guess what will happen when at the last minute it bounces off the left post and misses. Enjoy it while it lasts guys.

Here a good one too.

Merkel leaves summit without comment

You think she is probably going to lose her job next year? Its just about a guarantee now the way I see it.

Lastly I want to share with you a excerpt from an article that gets directly to the point of why Germany wont shouldnt to open up their pockets even if it surely looks as though they just did.

The first full-blown bailout Germany undertook, namely the integration of East Germany (only 17 million people), caused the German debt to nearly triple from €430 billion in 1989 to €1,200 billion in 1999, a decade during which even the US managed to reduce its debt for a couple of years. Germany greatly underestimated the integration costs. It led the country into a long phase of slow growth till 2006; and still now the west pays subsidies to the east. Spain, Italy, Portugal, Ireland, Cyprus, and Greece might be better developed than the former communist GDR. But they count over 100 million people and might need even more time to adjust than the 20 years the former Eastern Germans needed.

Needless to say my previous bias for todays movement has just been tossed out the window but there is still potential for a decent move but now prefer a long after a deeper pullback.

Happy Trading


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