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EUR/USD, GBP/USD Daily Forex Commentary August 17, 2012

As we see in the EUR/USD today the thin markets are throwing off some of our ways to determine where we are in the cycles. One of our members had brought this up to me and he made a very good point about the less than 90 pip pushes should be considered as pushes during these low volume time of the market. So we have to make some adjustments. I did mention in previous forex commentaries that the markets are much easier manipulated during times like these and we should be ready for that once the market shows us that some slight adjustments need to be made for current market conditions when they will surely last for a few months at least. We are back to the old regular summer doldrums of years past.

Today we have 3 intraday pushes to the downside and full blown reversal for a first push to the upside on the EUR/USD and will be expecting the next push up. My thoughts are we could see a deeper pullback first but having a clear daily close above the 4hr 200 ema could also provide the manipulation support in that area. I will be happier to price come down and test at the hourly 200 ema around 1.2320 but will be looking at the 4hr 200 first. A clear trap in that area will be needed for the long there. 

The GBP/USD has had a similar first push upwards after a not so clear stop run and false push down and I will be looking for the continuation here also. The place I would be most happy to see the trap move will be at the 1.5700 area where it has found some good resistance over the last several days.

Forex News Today

As usual Friday news is light starting with German PPI m/m expected to go into positive territory. If this does manage to surprise to the upside we could see weakness in the Euro due to the potential of Germany holding out and being more stubborn on letting the ECB do its own form of QE. However as long as it is still below 1% I wont be holding my breath. later is the Euro zone Current Account expected to show demand for the goods Europe is producing is down showing more evidence of the recession. I dont expect too much from this release unless its a big miss to the upside.

Later form the US there is Prelim UoM Consumer Sentiment expected to rise slightly. If by some reason we see and upward miss here too we may see some risk on take place and will help push the Euro and GBP up as well.

Germany Says Its OK For The ECB To Print?

You have to be kidding right? Well actually I am. here is what was reported by Bloomberg.

Chancellor Angela Merkel backed the European Central Bank’s insistence on conditions for helping reduce borrowing costs in indebted countries, saying Germany is “in line” with the ECB’s approach to defending the euro.

Asked about ECB chief Mario Draghi’s announcement that the central bank may return to sovereign bond-buying, Merkel said recent ECB decisions “have made it clear that the European Central Bank is counting on political action in the form of conditionality as the precondition for a positive development of the euro.”

Does that really say anything different than what we have seen before? There will be conditions met before the Germans will give in and everything we have been seeing lately show that the conditions of reducing debt and deficits are not being met.

I also wanted to add a bit from my favorite gloom and doomer Gram Summers as he makes a fine point here.

So… the US is entering a recession. Europe is imploding. Japan is imploding. And China is entering a recession.

 And yet, somehow out of all of this, the stock market will explode higher because the Central Banks have got some secret trick hidden up their sleeves… something that will magically solve the world’s problems? Are people forgetting that the ECB along with the IMF AND Germany couldn’t solve Greece’s problems in TWO YEARS!?!

Enough said

Happy Trading


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