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EUR/USD, GBP/USD Daily Analysis January 7, 2013

Here we are at the beginning of the trading year. Let the pippin commence!

Everyone should be back from vacation over the holidays and market volume will be normal again. We do still have many issues unresolved in the US on the fiscal cliff fiasco so things still have a good chance for some volatility we can profit from. What I will be watching for will be any real progress on negotiations. The way I see it is no matter what they do it wont be good for the US economy. If they do take the necessary actions to cut spending the economy will slow. If they just do a quick band aid fix then the rating agencies are not going to like it and may cut the US debt rating. The latter seems to be the more likely scenario since that is what the history has been and the rating agencies will take their time if they do ever cut. This will in effect buy the US more time, and that’s what everything is about these days…buy more time and hope and pray that the economy picks up. We will see.

Meanwhile in Europe odds are we will see more deterioration as Spain and Greece are put back in the spotlight. If we do ever see Spain ask for the bailout there will be some risk appetite come in. How long that lasts will be a different story. Having said that Spain has been able to keep their borrowing rates down tapping their own state pension fund to do it. When that runs out of money we have a better chance of their rates creeping up to 7% again. I am still sticking to last years assessment that they won’t ask for the bailout until rates are above 7% for at least a week or more, but I do think its inevitable.

On to the charts!

The EUR/USD has  a finished 3 pushes down and a possible first push to the upside. I am skeptical on the bias to the upside at this point because it has only tested a break out level from Thursday last week and found some rejection. Therefore I will be treating this as a third push scenario and keep my mind open on direction. Right now its testing a breakout level from last Friday and finding some support so I will be waiting to see how Asia finishes today before I build my trade plan for the day. If this support holds and the Asian box ends with price close to the top I will then want to see a 1 hour stop run to the highs of 1.3088 or the 15 minute 200EMA for the short which will be close to the Asian highs at that time. Otherwise if we don’t get the stop run I will be looking at the Asian lows for manipulation to take the long.

1 hour chart of the EUR/USD on Jan. 7, 2013

The GBP/USD has yet to complete its first push up. Since the ADR is up to 96 pips it would be a stretch to call a 76 pip run a first push so at this point it remains a third push chop and I will look to enter at the extremes (high or low). Again I will be happiest with a 1 hour stop run to the Asian highs for a short from 1.6077. I will happiest considering a long from the lows of 1.6007 with a 1 hour stop run also. Having said that there is a possibility that the Asian lows come into play since we do have a larger Asian range at 40+ pips right now but the manipulation will need to be very clear with some confluence to take the long at the 1.6039 area or just below at the support level at 1.6028.

1 hour chart of the GBP/USD on Jan. 7, 2013

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Forex News Today

In short there is nothing worth mentioning about scheduled releases. However we do have the chance for the usual tape bombs. I have my doubts anything substantial will come on the first real trading day of the year but nothing surprises me these days. 🙂

Happy trading


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