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Daily FX Analysis EUR/USD, GBP/USD December 5, 2012

The EUR/USD did make an attempt at a third push to the upside yesterday but hasn’t cleared enough pips to qualify as of yet. At this point I am starting to think it may turn here. Mainly because of hourly doji and pin bar during the US session yesterday. We also have the beginnings of a 1 hour stop run to yesterdays highs during the Asian session. If this hourly candle can close below yesterdays highs I will be looking for the test of its highs during the London session for the short. However if we do get the close above yesterdays highs later in the Asian session my thoughts are it will test the daily highs at 1.3134 before it will turn. There is also a daily high just behind it from August that it may try to test at 1.3168. I will need some clear trapping candle formations to take the short from the lower levels preferably from a 1 hour stop run with the trap patterns during that hour.

We do have the 1 hour stop run candle so now I will wait to see what they have in store for Asia and go from there during London today.

The chance for a long entry is still valid today but I will want to see a test of the Monday highs with some clear trapping going on to take it.

On a side note. The typhoon totally missed us since the trade winds I expected to pull it up to us weren’t there. Now it has moved off to the west nicely and its a sunny day. 🙂

1 hour chart of the EUR/USD on Dec. 5, 2012

The GBP/USD is in a tricky situation having come within 15 pips of the lower level of resistance I mentioned in Mondays commentary at 1.6143 and then having a stiff rejection close on the daily chart. This could be a longer accumulation period since we are expecting the third push. Plus the accumulation phases of the first two pushes were extended more than I like taking more than a day to actually make the push.

I will be looking at this pair with some caution today and keeping my mind open. Should we see an hourly close below yesterdays low my bias will turn more bearish. If we get the stop run to that level I will be happy to take the long with a good entry. the same goes for yesterdays high. It has a topping formation that was rejected during the US session so any trapping candle patterns at that level will be an opportunity. Again if I am in a short from the highs and see the 1 hour close above I will exit with the smallest loss possible and look for the long after a pullback.

My bias is toward the long here since we are expecting the third push and it did have an hourly close above Mondays highs yesterday. However the daily close is concerning.

1 hour chart of the GBP/USD on Dec. 5, 2012

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Forex News Today

The Euro Zone has a few medium impact Services PMI events that I dont see creating much movement unless they miss dramatically. Since they are well below the 50 expansion level I doubt there will be much reaction. Otherwise there is a Spanish 10-y Bond Auction that has potential if rates rise or drop dramatically. The odds IMO are that there is more potential for a rise than a fall but I have been wrong about this before due to unforeseen interventions by either the ECB or other means of verbal intervention.

The UK has its Services PMI figures also. this is a high impact event due to the UK being a service based economy and it is teetering on the 50 expansion level. If it does miss and pop below 50 there will be thoughts of more asset purchases and will be GBP negative.

The US starts off with ADP Non-Farm Employment Change and is usually ignored with out a big deviation since the big NFP is just a couple days away. There is also ISM Non-Manufacturing PMI still expected to be well above 50 so as long as there isnt a big miss we probably wont see much there but an opportunity to manipulate. At the same time Factory Orders m/m are released. even though this is a medium impact event it may have the higher impact because of the drastic change in expectations from last months release. Being expected at 0.0 while the last release was 4.5 if it misses to the downside there could be some decent movement depending on how good or bad it is.

Happy trading 


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