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EUR/USD Bounces, Equities Hold as Crude Oil Drops – Nov. 5, 2014

USD Sells Off With Crude – Equities Unchanged

There is a plethora of reasons floating around as to why they haven’t made the higher push on stocks, the most simple one being no patsies or Muppets to sell to at higher levels mentioned in yesterdays commentary. However I have to admit that it is probably much deeper than that. In normal conditions I would say that they are probably waiting on NFP at the end of the week. That probably has something to do with it but there are several other factors that come to mind starting with the start of what some are calling a mutiny at the ECB. It seems as though several of Draghis colleges at the central bank are not happy with his secretiveness and lack of communication, planning to challenge him in the near future. On the surface that don’t really sound that bad, however as we have come to learn about central bankers and governments as well, we only get to see the tip of the iceberg only later finding out there was a much larger chunk of the puzzle just beneath the surface.

Next in line, in my opinion, is the potential waning of confidence as many are starting to see through the facade of all the fake data they manipulate on a regular basis. As Paul Singer notes.

“Nobody can predict how long governments can get away with fake growth, fake money, fake financial stability, fake jobs, fake inflation numbers and fake income growth. Our feeling is that confidence, especially when it is unjustified, is quite a thin veneer.When confidence is lost, that loss can be severe, sudden and simultaneous across a number of markets and sectors.”

“The situation is universal, a consequence of incompetent leaders and careless (or ignorant) citizenry.”

Remember that the whole financial world of fiat currencies are based on that confidence and trust. Most people know that trust and confidence, once blown is very hard to get back. Which brings us to the third issue at hand having the potential to be a defining factor in price movement.

Last on the list but a real potential is they are at the end of the road and there is nowhere else to kick the can. The following excerpt from an article well worth a full read here outlines the fact that there is no one left to shift the burden to.

We’ve been keeping the long lost idea of our long lost society alive by squeezing our own children wherever we can, and telling them that if they only work hard enough, they can be whoever they want to be. But they can’t, that notion is also long lost. When you keep home prices artificially high, homeowners don’t suffer as much, even if they bought at insanely high prices, but the suffering is switched to potential buyers, who remain just that, potential, while they live in their mom’s basements for years.

A surefire way to kill a society while everyone’s eagerly awaiting the growth that is just around the corner and will forever remain there. Take it from your kids. Take it from somewhere else in the world.

And that’s where we’re now passing a barrier: there’s no-one to take it from anymore.

In conclusion I should also remind readers that we should never underestimate what the powers that be will do to keep the ball rolling but all things considered this move by Japan is a sure sign they are nearing the end of the rope. Once the rest of the supposed advanced economies follow suit the dominoes will fall quickly.

Confidence, especially when it is unjustified, is quite a thin veneer.

On to the charts.

EUR/USD Bounces for First Push Upward

The conviction during Asia Monday on the EUR/USD proved to be false which is most often the case. Now we have the first push up so I will be bias for the long today. In order to confident in the 1.2540 being a solid level I want to see them push a few more pips upward during the Asian session or the probability of the test lower to 1.2528 goes higher. If that dont hold with a clear set up to go long they will probably test down to the 1.2500 level again. I will be open for the short from yesterdays highs but will need to see something rather convincing to change my bias.

EUR/USD First push up


GBP/USD Holding Upper end of Range

With the GBP/USD holding the upper end of the range it does increase the chance for the break upward but that’s not enough to give me a bias for the day. I would rather see the conviction above the range but that will likely be too late for an entry if they intend to make the first push. As usual I will be open for the short from the highs while watching for the conviction move today. Otherwise if they show the typical tricks they play on breakout traders along with a clear set up at 1.5985 I will consider the long there even though its riskier. Otherwise I will wait for the test of the lows for a long entry.

GBP/USD Range bound 11-5-2014


EUR/JPY Looking to Roll Over with GBP/JPY and USD/JPY

Although the EUR/JPY has shown some potential conviction this morning it doesnt have the support of the UJ leaving some concern that it may be false. In order to take the entries on the Yen crosses during the Asian session its best to see that they are pushing the Yen and not the Euro in this case. The hourly close does leave the set up for the short in question so in order to take it a deep pullback and confirmation in the form of another trap at the highs is warranted to get me short during the Asian session today. Otherwise I will be looking for the long at the Asian lows during the London session as well as the short from the highs if they can hold the range until then. If they do break below the current Asian lows then they will probably test down to 141.79 before a potential turn. If they do run that low I would rather be short waiting for the break to retrace some of the large move.

EUR/JPY 1hr chart 11-5-2014

Forex News Today

The calendar is busy with Services PMI data during the London session. I dont see much coming of the European releases unless for some reason the Euro Zone and/or German data drop significantly. Otherwise the UK Services PMI has a better chance of making the GBP move. Expected to slightly drop but still well above 50 means it will need a larger miss to make waves but the potential is better for the disappointment with recent UK data misses to the downside.

The US has ADP Non Farm and ISM Non Manufacturing PMI having potential to get them moving late in the day. ADP is expected to rise slightly so as long as its close they will wait for Fridays big NFP. If it does miss an a large fashion they will move the USD accordingly thinking that Fridays figures will follow suit.

Asian session traders have Aussie Unemployment data to watch tomorrow morning. Large misses on this release have a good chance to make a large move during Asia.

Happy Trading




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