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Euro Rallies But Will It Continue? July 22nd 2015

Overall not much in the way of news today. Overall a quick glance through the headlines would have you think a risk off market was in place and there are some signs of that. In my opinion equities are one of the best measures of this currently and they definitely took a hit today. Overall however this is just normal daily sentiment…nothing special. Gold also continues to decline and the more I watch it the more I believe we could be in for lower prices than I expect. I watched an interesting video by Harry Dent who is a firm believer that metals will be a horrible investment for at leas the next 2 or 3 years with silver hitting possibly $5 and gold somewhere around $500. He makes a strong case for a deflationary depression rather than what everyone else talks about which is in inflationary downturn. If you have some free time you can search his name in YouTube and you will find plenty of free content to watch. On to the market.

Possible First Push Up On The EUR/USD

The Euro has given us a possible first push to the upside today. With that being said the trouble with the current situation in the Euro is the lack of a good manipulation point to take the next leg long. Another issue is the overall picture on the Euro which is still down in my opinion. At this point I think the leg up has a 50/50 chance of holding. I cannot stress enough the importance of quality level selection in this type of scenario…or any situation where you question market direction. If you learn to identify proper manipulation points and then use a successful day trading strategy like the confirmation entry, you can protect against unsuspected market movement. Because cycle does NOT give us a reason to enter the market alone, we still need to see a stop run of a high probability point. This is the last line of defense that filters our trades. 

The question I’m asking myself is, “If I were long where would I put my stop”. Another good question is, “where is the line in the sand for the market”. The overwhelming majority of the time level selection is quite easy and obvious if you apply the rules we teach. Currently, knowing where the liquidity is sitting on the Euro is rather difficult. The bottom line is the market made almost no response on the way up and therefore it is difficult to say where the liquidity is sitting on the way down. With that in mind I’m still waiting for a substantial lower level to form and therefore at this time have no level I would be going long from. For any members make sure to watch tonight’s daily market review as I go through exactly what we need to see to get a valid level.

EUR/USD Chart - July 22nd 2015

The Pound Range Tightens

The nice part about the Pound is level selection is not a problem. The current low from today is a great first lower level because there is nothing else in close proximity to it. Think about any trader who has gotten long and is still currently sitting in a long GBP/USD position. Where do you think their stops are sitting? Below today’s low is a very likely position for a mass of liquidity to be located. What really strengthens that level is the fact that there is nothing else around it….because of that it becomes the most likely option. Does that mean we just take the long if they break the lows? NO! What that does mean is if they come into the lows and create a valid stop run reversal then I’m going to be all over a long setup. As far as upper levels on the Pound…they pretty much remain the same as yesterday.

GBP/USD Chart - July 22nd 2015

Forex News For July 22nd 2015 

UK MPC Official Bank Vote 4:30 AM Eastern – This is going to be more important this month than usual in my opinon. With Carney’s comments earlier in the month to potentially raise interest rates we will see if that has any teeth to it. There are three numbers that are released all at once. The first number is the amount of people that voted to raise rates. The second number is how many voted to decrease interest rates. Finally the third is the number of those who voted to keep rates the same. The number is expected at 0-0-9. If for some reason you get a 2-0-7 or even a 1-0-8 you will see the Pound spike very aggressively to the upside as that would be further confirmation a rate hike is actually going to more than likely be coming soon. 

Lets talk strategy on this vote. I believe that if someone was going to carry a position into this trade the safest option would be a long position in case they do surprise with a vote for a hike by 1 or more people. Some may already be pre-positioning ahead of the news long for this very reason. As a result if it comes out as expected you may see the Pound fall as traders who pre-positioned long now exit that trade. The reason I wouldn’t carry long into this trade personally is because of the CAD surprise cut as well as today’s expected cut in the NZD. With everyone looking down I don’t see why the UK would be looking up.

NZD Interest Rate Decision 5:00 PM Eastern – Interest rates are expected to be cut by .25% from 3.25% to 3%. If rates remain unchanged expect to see the NZD gain stength rapidly. If they surprise with a .5% cut expect to see the NZD fall rapidly.


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