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EUR/USD, GBP/USD, EUR/JPY Daily FX Commentary April 23, 2012

The markets seem to be a little disappointed with what happened at the G20 and IMF meetings over the weekend. Of course to a degree I expected the “all is well” jibber jabber as usual but every time this happens the market buys it less and less. We did have the run up in the EUR/USD Friday. A bit more than I expected but none the less the Euro pump was on and as of now its looks like the ride may be over.

Looking at the charts alone the EUR/USD shows the first push to the upside and normally we would expect the second however with the fundamental bias to the downside I am keeping my mind open for a trade here today. It would not surprise me for a move in either direction so at this point I will be looking for the confluence along with some manipulation to trade either direction. I will only hold a trade for a longer push on the downside but will be happy to take 50+ pips either direction today.

The GBP/USD is a little trickier with an extended few pushes to the upside. The news of the BOE not doing any more Asset Purchases any time soon has added significant strength to the GBP. Having said that I am still looking for the reversal. After a run that long one would think there will be a decent correction forthcoming. Holding a trade for a long push is probably a bad idea here also but would be nice for a 50+ pip trade.

Looking at the EUR/JPY Im rather happy because I have a short from 107.78 running from Friday. As I type its still running off. My entry was at the close of the second pin just before the NY open Friday. When I woke up and checked the charts Saturday I was a bit disappointed to see it had run off 25 pips and was back to break even but at least my stop wasnt hit during the NY session the run up. To be honest I did not expect this large of a move during the Asian session but never the less happy as it is coming up on my TP at Fridays lows. Just manually closed at 107.18 for just under 60 pips. The chances are the Asian session wont make the push below this level with out a good reason. Now I can take a break until London open. You can find the details of this trade in the recent trade section.


The hourly chart of the EUR/JPY is over extended just as the GBP/USD is but this may be all the correction we get. The BOJ is expected to have a meeting later this week and has all but promised that they will add more liquidity (print Yen). The black EMA on this chart is the 200 from the 4hr chart and I expect this to find support to some extent. The hourly close below it dont have that much meaning until the 4hr candle closes but we will see.

Forex News Today

As I look over the releases scheduled for today I noticed that the Australian producer Prices dropped unexpectedly and could have been the catalyst for the drop in the EUR/JPY this morning but I have my doubts. At this time I would say its more of a manipulation before the push up considering the expectations from the BOJ this week. Otherwise the releases for the EZ are the Flash Services and Manufacturing PMI numbers from France, Germany and the Euro Zone with most all of them expecting a slight rise from last month. As one had a downward revision (French Mfg). If these surprise to the upside then that will signal that things are getting better in the EZ of which I highly doubt but remembering how much numbers are fudged these days nothing surprises me any more. All but the German numbers are hovering around the 50 level which determines expansion or contraction. If the German numbers do disappoint and over the next couple months breech 50 the EZ is in much bigger trouble as that will mean Germany will see recession. Bad no matter how you look at it. These releases are always put out 2 minutes to Reuters subscribers so Talking forex will have them then also.

All is well now right? Not so fast.

Of course as I mentioned above we got the “all is fine now” message from the IMF and G20 over the weekend. Well to be honest I have only seen a few reports on the IMF saying they brought in around 300bil in promised contributions to help Europe with their troubles and how happy they were to see that the EZ themselves have bumped up their commitments to the ESM and EFSF.

Lets look at this a bit closer. The EZ has boosted their commitments? Well sure but who is on the hook for these funds and where will they go? The way things look Spain will be next at the bailout trough. With Spain being the 4th or 5th largest economy in Europe they have a substantial contribution to these bail out funds. Meaning Spain will be on the hook for bailing out Spain? How does that compute? In my mind it dont make too much sense. Kind of sounds like using one credit card to pay on another credit card creating a vicious circle of borrowing from Peter to pay Paul then vice versa.  Then look at Germany who has the largest share of contributions and the German people are steadily getting more upset about having to fund the debt of the PIIGS countries. Of which may soon see a boiling point and lets not forget Germany has an election next year. Lastly both the IMF and EU only have promises from countries to get this money. Not one of these so called contributors has anted up yet and doled out the cash. Why? Because nobody has any cash to send to these funds. Pretty much every cent that eventually makes it to these funds will be borrowed if it ever actually gets there.

Bizzaro World, you just have to love it LOL

Happy Trading




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