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Daily FX EUR/USD, GBP/USD Commentary June 12, 2012

We have had the respective closing of the gaps on the EUR/USD and GBP/USD but as to the levels of push we are still in an unclear situation. As I mentioned in the June 11, 2012 forex commentary I preferred the short entry but it never came on the EUR/USD. However the GBP/USD set up nice and even though I got stopped at break even on the first trade the NY reversal provided a nice set up and I entered at a better price and am still in holding out for the next push down today.

Looking at the charts I can see 3 clear intraday pushes down on the EUR/USD and its finding some support around the lows from Friday last week so we could be in for a decent pullback here in the Asian session. However if a risk off scenario plays out like it did in the US session yesterday then it will be limited. Good shorting opportunities will be at either yesterdays lows or the 200ema if it does manage to break above yesterdays low.

The GBP/USD is in a similar position except for the fact that it is finding support at the close of the gap while the Euro has dropped well below its. I also see 3 intraday pushes to the down side so just like the case with the Euro we could be seeing the start of a larger term cycle with this being the first of 3 pushes down. With the large up and down movements its a bit less clear since we dont have a clear 3rd push chop to clear to clarify the first push longer term so  at this point I will be looking to add to my short position during the London session if things go as planned. Since we are in the process of breaking through yesterdays low then the 200ema will be the next possible place to add around the 1.5500 level. We will have to wait and see what the market has in store today.

Forex News Today

Scheduled releases are light again today so I expect the dribble coming from the Spanish bailout to be the main factor for movement. The fact is not much has changed which I will cover here shortly. There is UK Manufacturing Production and NEISR GDP figures. The manufacturing numbers are expected to drop and if it dont surprise to the upside the market will most likely think the UK will have more reason to add to the Asset Purchases and the GBP will weaken. Otherwise I will be watching out for more news on the Spanish bailout.

What Has Changed

When asking myself the question of what has the Spanish bailout changed I cant think of one single thing. My gut tells me that one or more Spanish banks didnt have to file bankruptcy Monday morning but otherwise absolutely nothing.

Well I guess you could say that again sovereign bond holders have been subordinated yet again as they were in Greece. What fool in their right mind would want to hold Spanish debt now since they will take a back seat to the bailout loans? There is only Spanish banks that will play that part to try and keep Spain from needing a full blown bailout for the government. So do we really think that the lowly 100 billion is going to be enough? I have serious doubts.

I did find this computer generated video that pretty much says it all about how this whole mess has been just putting bandaids on a gunshot wound since 2008 and the bleeding never stopped. Enjoy

Happy Trading


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