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EUR/USD, GBP/USD Daily Forex Analysis December 19, 2012

We finally have the next push up on the EUR/USD we expected Monday. The potential reversal I mentioned in yesterdays Euro analysis was pretty much dashed when it had the hourly close above last Fridays highs. Since there was another level right behind it with the gap and spike up Monday morning, the safer level to determine what they had in mind for direction was there at 1.3185. However since that was created by news Monday morning we have to take that move with a grain of salt and be skeptical of it. The fact that all through the day Monday there was never an hourly close above Fridays highs tells more of a story than news driven moves.

For me, once it made the close above Fridays highs it never pulled back far enough to a good level so I stayed on the sidelines. I did see that there were a couple members who caught it but I should mention that the manipulation was there but it wasn’t at a level I would be taking an entry from personally. There was the Asian highs, but entering on the trapping candle patterns there is quite aggressive when its only been broken by 10 or so pips. There was the confluence with the 1 hour close but considering the level right behind it from Monday as possible resistance I would consider that a well advanced entry. Sterling did discuss this entry but did not take it during the NY session as it was to close to the overall highs. If those highs would have held 2/1 R/R would never have been possible. Its all about understanding your personal entry comfort level. For those who tend to consistently take slightly more aggressive entries it was valid. So nice job if you did take it, I just hope you added all that up before taking the trade because with out it your only trading the candle patterns which is a no no. Its important to remember that candle patterns mean nothing unless we are at a high probability manipulation point, and preferably in the direction of the Smart Money cycle.

I am not going to be treating this as a second push scenario today although I do expect the next push up eventually. The very bullish daily close tells me its probably going up to test the next daily level at 1.3282 but since we are in an extended push move here, the potential of a 50-80 pip reversal is also a possibility before it continues up. What we have is a very inefficient move up during the US session yesterday and there may be a desire to close that before the next push up. Therefore I will be watching to see a stop run to yesterdays highs of 1.3236 for a potential short to close that move, or if it does make the push down during the Asian session I will look for trapping candle patterns at the break out level of Mondays highs of 1.3184 for a potential long position. If you would like more information on how we trade the market once it gets to those levels you can check out this forex training video on timing your trade entries, or our advanced forex bank trading course.

1 hour chart of the EUR/USD on Dec. 19, 2012

The GBP/USD is primed for the reversal. Having seen the 3 clear pushes up as it has now ended the day with a 1 hour stop run to a significant daily level during the US session yesterday. I am not saying that stop run was something to trade since it was so late in the day but if there is a test of that level any time today its a darn good risk reward trade. Meaning the level is significant enough that a short from 1.6265 or higher carries low risk with a potential large reward if they do intend on making either a failed first push down or a full 3 pushes down. The risk is that there is also a daily pin to the September highs they may want to test first so if anybody takes that trade it would be best to watch the 1 hour close of the entry candle. If it does close above 1.6265 then just close with the smallest hit possible.

When we were conducting the live London training session we got the hourly close above Mondays highs making it clear on direction for the day. At that point I was only looking for the long position. I was watching as I was playing Legos with my 3 year old in my office but the candle patterns were not at a clean level so I stayed out. However I did see some of our more aggressive members took the long and made some nice pips on the move. One actually took both the EU and GU making 130 pips on the day. Good job Ken and thanks for the email! 🙂

As I mentioned earlier the reversal for the short  is what I will mainly be looking for today at yesterdays highs. However if it does run off south without me then I will be looking for the trap at the breakout level of 1.6223 for a potential long setup.

1 hour chart of the GBP/USD on Dec. 19, 2012

Forex News Today

Scheduled releases start off with German Ifo Business Climate expected to improve slightly. This will more than likely be just a chance for them to manipulate. It would seem right now the markets are trading more off the US fiscal cliff news than anything so I dont expect much here barring a large miss. There is also Euro Zone Current Account figures expected to rise substantially. If this misses to the downside showing exports in the Euro Zone are not recovering it will be Euro negative since every one and their brother around the world are depending on exports for growth. Considering the rise in the Euro lately it only makes sense that exports would be lower since the exchange rate has potential to hurt them.

The UK has the MPC Meeting Minutes. I doubt there will be much difference in the rhetoric this month. We did have some speeches of a member or two concerned about the asset purchases causing inflation so with CPI out of the way coming in as expected yesterday there probably wont be much to see here.

The US has Building Permits expected to be close to the same as last months figures. The way I see it is there will need to be higher than a million per month before we start to see a recovery in the housing market in the US. This would also need to be accompanied with substantially better Core Durable Goods figures so in my view we are a long way off.

A Simple Fix? Nope We Will Crash First

I found a very interesting video I wanted to share with you this morning. In this 23 minute video they discuss why things are falling apart and what we can do to fix it. The question remains of will we have to crash before there is any real momentum towards what would seem to be a simple fix. The way I see it is the crash is inevitable. Not just because the powers that be are so thick headed (or more like deep into somebodies pockets) that there wont be any effort made to fix things until the current model totally goes sideways. Its like the “stoplight” analogy in the US. I come from a small town in Michigan that grew to about 10 times the population it was when I first moved there. Of course there are stories like this all over hence the whole “stoplight” analogy. Long story short, no matter how many complaints because of close calls over the years at an intersection that just got busier and busier as the population grew. The local government wouldn’t put up the stoplight residents were demanding for years until somebody died at the intersection. I don’t see it as any different now especially when we are dealing with larger government powers and a lot more money.

Enjoy the video

Happy Trading


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