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EUR/USD, GBP/USD ,EUR/JPY Forex Commentary April 6, 2012

I sure hope everybody who reads this commentary got a good trade yesterday. As I noted most all the pairs I trade had a  level 2 push and these trades have a very high probability of going the direction the market is telling us. The EUR/USD, GBP/USD, EUR/JPY and GBP/JPY all were clear with exception of the GBP/USD being a little questionable. I did manage to catch the EUR/USD and EUR/JPY for a total of 170 pips and you can see those trades in the recent forex trades section of the site. What was also great about these trades is the fact that the fundamentals lined up with the forex Smart Money trend and that’s when we see the larger moves.

Today we will be looking for the reversal since the last level has completed and considering its NFP day and everything seems rosy for the US the fundies fit with a possible risk on scenario. The wild card here is most of the world is on holiday so volume will be thin and the moves could be abrupt and quick. It would be best to take the day off of which I will unless something very clear presents its self during the Asian session and I will be looking at the JPY crosses more than anything.

The Charts

Looking here at the hourly EUR/USD the 3 levels are very clear now and we are seeing the beginnings of the bottoming going on as I type this. If you do trade today look for the manipulation to the downside and look for the long. I wouldnt expect a whole lot from it but be prepared for the larger moves if they do come along. Its probable that we will see the sideways chop because of the holiday.

The same situation is going on with the GBP/USD and as I type this looks to be starting its move during the Asian session. Its more than likely a fake out this early in the day but when there are such holidays the Smart Money will move the markets during a different session than usual. As you can see price is moving up to the 4hr 200 EMA and is likely to find resistance there and retrace before a break.

The Yen crosses are looking pretty much the same with exception of the USD/JPY still in a wide range bound market but the EUR/JPY and GBP/JPY have had the 3 pushes over 4 days. This tells me that the movements were created from USD strength and not necessarily JPY strength. I will be keeping an eye an the USD/JPY for any sign of JPY weakness as the catalyst for the move up in the Yen crosses although the possibility for a risk on environment due to a good NFP is possible and will drag the Yen pairs up as the GBP/USD and EUR/USD go up as well.

As you should know the news today is only the NFP and Unemployment rate from the US and pretty much everyone but China and Japan are on holiday of which for me means the higher probability of decent movement will be in the Yen crosses during the Asian session.

Mark these on your calendar.

As I am sifting through my news sources today I did find this bit of information that I have marked on my calendar. It has to do with the Moodys potential to downgrade a good chunk of European banks in the near future and when the report is released it will create a tape bomb of sorts and how big the bomb is will depend on how big of a downgrade each bank gets so make sure you are aware of these and mark it somewhere you wont forget. Most notably the Italian and Spanish release dates. If things go as Morgan Stanley expects there will be another funding crisis of these banks as they scramble to meet reserve requirements and the possibility of someone having to ride to the rescue again is high. Does the acronym LTRO ring a bell? Here is the short article and the dates that you should remember. Also take note how the author reminds us that Morgan Stanely may not be far behind in the downgrading process.

A major potential negative catalyst for financials globally is rapidly approaching as 114 banks are on review-for-downgrade by Moody’s across 16 countries. Why do we care so much about ratings given their historical credibility? Ask James ‘Jimmy-boy’ Gorman of Morgan Stanley who is currently begging cap-in-hand to Moodys not to downgrade his empire bank, since he knows (and so it seems does the CDS market) that, as the FT notes, a downgrade could also force the bank to provide additional collateral to back its vast derivatives business – where it acts as one of the largest counterparties. In Europe, the fun heats up in the next few weeks as first Italian banks (4/16), then Spanish banks (4/23) and then Austrian (4/30) face from 1 to 4 notch downgrades and the potential to lose their short-term (funding-/CP-related) Prime-1 top rating, implicitly raising funding costs (and liquidity concerns) even further.

and potentially even more serious, banks that face loss of P-1 short-term rating…

For all the Christians out there have a great Easter Sunday and for everybody else have a great weekend. See you all next week.

Happy Trading



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  1. DannyH
    DannyH April 08, 21:11

    Hey Chad, thanks for another useful daily commentary, as you pointed out yesterday with the 4 major pairs that I look at to trade being in level 2, I was able to catch the EUR/USD, the EUR/JPY and GBP/JPY short and some retracement trades for a total of nearly 450 pips. Keep up the great teaching 🙂
    Thanks Danny

    Reply to this comment
  2. Chad
    Chad April 09, 02:17

    Danny, Good job buddy. You continue to impress me man. Remember also even tough I am an awesome teacher (joke). The actual learning is done by the student who wants to learn. You deserve just as much if not more credit than I do buddy. Just like we discussed before you are now Darth Vader and I am Obi Wan LOL

    You are welcome my friend.


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