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EUR/USD, GBP/USD Commentary January 8, 2013

We did get the second push on the EUR/USD yesterday and today I expect the third. There was some manipulation at the Asian lows but it only showed up on the hourly chart and the test of the level later in the day did not provide a safe entry for me so I stayed out of the market. The level I will be paying most attention to today will be the break out at 1.3087. If we do mange to see price leave the Asian box at its highs then the Asian lows will come into play. What I would be most happy seeing is the trapping of breakout traders with the push above the Asian highs then a test of the lows. Of course all this will depend on how big the Asian range is.

1 hour chart of the EUR/USD on Jan. 8, 2013

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The GBP/USD has made a clear first push to the upside and I will be expecting the second today. The level I would be happiest taking the long from is the 1.6080 break out of the Asian highs yesterday. However right now price is sandwiched between the hourly and 4 hour 200 EMAs. As long as it can get out of that spot with an hourly close to the downside the probability of seeing that break out level goes up. Otherwise if it does remain stuck in this range throughout the Asian session we may see the manipulation at the 4 hour 200 followed by the next push up. If that is the case I will need some clear manipulation to take the long from there and some good confluence would be a big plus.

1 hour chart of the GBP/USD on Jan. 8, 2013

Forex News Today

Again today we dont have any high impact news releases scheduled but there are a couple medium impact events from the Euro Zone. Starting with Retail Sales expected to get into positive territory by slightly. This will most likely only be a manipulation opportunity if we see a big miss. If its close to or as expected it will be a non event. later is German Factory Orders expected to drop by 1.4% showing Germany again is not immune to whats happening around Europe and any miss will be a reason to manipulate the market.

Today I leave you with some thoughts from my favorite gloom and doomer Graham Summers. In this article he makes some very valid points about what is causing the bullishness in investor minds these days. Yes the Fed and other central banks around the world are “all in” and this would create the thoughts of “they wont let it drop” so that is a good point. However the point he makes about the Fed and QE3 and 4 is interesting.

However, privately, the Fed balance sheet is virtually unchanged year over year. And the latest Fed minutes reveal that dissent is growing at the Fed regarding the efficacy of QE.

So the Fed really isnt printing they are making believe they are as they shuffle assets around. Funny isnt it. Then on to the ECB

The problem with this belief is that the Central Banks have reached the limits of their policies. The ECB promised unlimited bond buying under the conditions of a country formally requesting a bailout.

No country in Europe wants to do this because it would mean A) opening their books to EU officials (along with the realization that said books are cooked B) any formal EU bailout requires austerity measures which Greece has proven are a disaster for politicians.

And now for his thoughts on inflation all the data says isnt there but we all know it is. I can tell you this prices for food here in the Philippines and many other goods for that matter have almost doubled in the last year or so.

Indeed, inflationary pressures are on the rise globally. We can see this with wage protests and civil unrest in the emerging market space, higher costs and lower profit margins at multi-national corporations, and consumers paying higher prices or equal prices for less product at the supermarket.

How many times have you opened a new canister of coffee, a box of cereal, or some other item of produce to see that it’s only 75% full? That’s not chance. Inflation doesn’t just explode into a system… it creeps in at first. And corporations are already implementing strategies (small packages, higher prices, etc.) to deal with it.

Here is the link to the full article

Happy Trading


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