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EUR/USD, GBP/USD Daily Forex Commentary July 11, 2012

The EUR/USD did make a feeble attempt at a stop run as I mentioned in the July 10th commentary. However to be honest I expected a little more than that. It seems the smart money is having trouble inducing buying to sell into even though the rumors were flying around from the ECOFIN meeting and from the German Court that is holding hearings on all the lawsuits filed over the ESM. The attempts to prop up the Euro are seeing a half life that just gets shorter and shorter.

The way I see it today is we have seen yet another push to the downside and will expect another. Until we hit the next support level on the daily chart which is 100 pips away at 1.2155 I expect this move down to continue. We may or may not get the reversal there but I would at least expect a bounce. I will be looking to see a manipulation move to the 15min 200ema which coincides with the highs formed after the US open yesterday for the short today. Otherwise if I see a very clear trap move I will consider an aggressive entry below that area.

The GBP/USD is still chopping around in its third push so this pair could go either way today. The safest entries will be at the highs or lows with some clear trapping candle patterns. If it does decide it wants to attempt the reversal and push up I will be holding off and waiting for the Euro short. The chance of it dragging the EUR/USD north with it are high. I do have a slight bias for the short but will be keeping an open mind.

Forex News Today

Scheduled news releases are light today. For the Eurozone there is a 10yr German Bond Auction. I have my doubts this will be much of a market mover as German bonds are seeing a good bid these days and seen as the safer asset to buy so this should be a non event.

later in the day the US has its Trade Balance figures. Unless this misses by a large margin I dont think this will move markets much either. However toward the end of the US session there is a 10yr Bond Auction and the big one an hour later with the FOMC Meeting Minutes. The market will be looking for any clues of if the Fed will do QE3 next month when they meet. I expect it wont differ much from the Bernanke Speech but the key will be how many members are sliding over to the dovish side of the fence. From what I see out there today its a toss up. There are some that are for more QE and others that want to wait.

To QE or not to QE, That is the question.

There is the chance that we get the Fed to print in August but I have my doubts. If they dont do it this next month then they wont do it until after the elections in November. The way I see it is if we dont get the QE in August then we are almost guaranteed to get it in December. By then the potential for the equities markets to be down far enough is high plus there will be 2 more months of data that will most likely show things are getting worse.

I will leave you with the latest video from Charles Biederman and his take on what he calls the Bernanke put and where he thinks equities will need to be in order to see more QE from the Fed. Enjoy

Happy trading


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