Euro Pairs Round Trip On Draghi Speech March 6, 2015
Draghi Starts With “Everything Is Awesome” Then Reality
In typical Super Mario fashion the head of the ECB tells us that he expects economic growth to rise in the Euro Zone this year revising expectations from 1% to 1.5% and of course the Euro spikes across the board. However shortly after says that risks to economic forecasts have decreased but still remain to the downside. In other words he is hoping that the ECB QE program of over one trillion Euros over two years will increase GDP in the by a measly half of a percent in 2015 while inflation expectations have decreased from .7% to the big zero. How awesome is that?
We only have to look at the recent four trillion injection the Fed has done over the last several years to see the most probable result of ECB QE and lets just forget for now that they actually will be able to buy government bonds with it. Below is the latest result of the Feds actions.
Since the start of February, 48 US macro data items have missed expectations and 8 have beaten. Since then the S&P 500 has risen over 5.5% (and the Nasdaq even more) and 10Y yields are up 50bps. Bloomberg’s US Macro Surprise index is now as weak as it was just after Lehman and is falling at the fastest pace since Summer 2012. While everyone is well aware that markets can stay irrational longer than a trader can stay liquid, one has to wonder just how long this farce can continue before even the most effusive talking head has to admit… things ain’t great.
EUR/USD Test Below 1.1000 After Draghi Stop Run
Although this is a clear second push on the EUR/USD there are a couple issues I have with treating it as a short only day today. First is the run from the highs Wednesday to the lows is a 200 pip move and although the stop run to the upside does increase short probabilities the bottoming at the lows raises some concerns. The 1.0992 is a daily level from 2003 that it found some support at and just may hold since it is NFP day today. I will still be somewhat bias for the short looking for a run to 1.1063 being the best level but if they can run it down during Asia then the 1.1032 is valid if they widen the Asian range enough. If they show they wont let it pass the lows I will be open for a long but wont hold through NFP.
GBP/USD Holding Ahead Of NFP
With the GBP/USD holding a 50 pip range and also showing some bottoming yesterday I will remain more open on direction for this pair. I do still see the higher probability of a test lower but it has already gotten rather close to the 1.5206 level and been rejected. The best level for the short is up at 1.5264 but 1.5252 is valid if they can at least widen the Asian range down to 1.5225. Otherwise the 1.5225 is also valid for the long but I prefer to see them play the breakout traders above the Asian highs before seeing a set up there. The best thing to see for a long is the stop run to the lows and tag the 1.5206 in the process.
EUR/JPY Runs Round Trip With EU
The EUR/JPY shows pretty much the same price action as the EU with the exception of a bit wilder swing getting some help from the USD/JPY as they went berserk on Draghis speech. Whats interesting is they took stops all the way to 133.52 before slamming it down probably knowing Draghi would do his normal pump and dump like he learned from his predecessor. I will be considering this the third push on this pair and open on direction even though I must say this is one of the most sloppy third pushes I have seen. The best level for the long is down at 132. 21 while the highest probability short is up at 132.94.
Forex News Today
The calendar only has German Industrial Production and Euro Zone GDP data before NFP later in the NY session. Ind Prod. is expected to rise a bit but with the dismal German Factory Orders yesterday this has a higher potential for disappointment. Not that is will cause a sustained move before NFP but has the possibility. Euro Zone GDP is expected flat and even with a big miss upward I dont expect much with what Draghi saying yesterday being priced in. A major disappointment may get them running though.
US NFP data is expected at 240K, down from last months 257K while the Unemployment Rate is expected to drop to 5.6%. This has a higher probability of a disappointment from my view. I find it hard to understand how the US can be getting over 300K per week in new unemployment claims and only 250K a month new jobs while the unemployment rate drops. Go figure.
Have a great weekend
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