EUR/USD Fx commentary January 24, 2012
The move on the Eur/Usd yesterday goes to show that fundamentals are just a side show in the markets sometimes. Of course they matter but then again sometimes they dont LOL. Which is why we trade the manipulation and watch the fundies rather than trade them. Everything seems to be going as planned with the Greek debt write off (joke). Well if you look at the charts anyway haha. Even though the EZ finance ministers rejected the plan the Eur/Usd barely made a retrace off the highs of the day. However it does look like the US didn’t buy into the move and equities ended mostly flat after a nasty chop through the day. This shows that the move in the euro was not risk driven but Euro strength for some crazy reason. I tend to go along the lines of manipulation and think the short squeeze but that’s just me. I will be happy to error on the side of manipulation in any case. There were also several EU banks that got a credit downgrade by S&P. This is significant because the EU banks are finding it much harder to lend to each other and has already created a credit crunch in Europe. We can see this by the fact that the deposit facility at the ECB is still at record levels and seems to be the safest place to park cash. One could say that the 500 billion euros dished out by the ECB has for the most part been parked right back with the ECB. The rest used to buy PIIGS debt to lower yields which has worked so far.
There is a decent amount of news releases today with German, French and EZ manufacturing and services PMI data. Expectations are mostly flat with a few small upticks. These really shouldn’t move the market much unless the German numbers surprise to the upside. Then we may see an opportunity for the Smart Money manipulate to the upside again and take out some stops. Otherwise the market will be focused on the EcoFin meetings still going and waiting for any tape bombs released from them. Lastly there is Industrial orders from the EZ and is expected to drop significantly. If this comes out as expected it will signal the probability for recession in the EZ is very high and the Euro will most likely sink.
Looking at the charts the daily has tested the 1.3050 level I mentioned in the trading room yesterday and had a small rejection. Just not what I would have expected after the bank downgrades and Greek debt plan rejection. the chance for a retest during Asia is there but so far not been pushed. This makes me think the pullback has good potential today. As you can see I have entered a small position short with a 40 pip stop above the highs and will be looking for the 15min to confirm the down move and add the other half later today.
Since I have gotten distracted as I wrote the market has moved off and shown some intent so once I see a pullback to the median line I will add the other half.
Take care and be careful out there guys