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EUR/USD, GBP/USD Forex Commentary September 18, 2012

Judging by the slow price action yesterday in the EUR/USD I am starting to think we may not see the push up I expected. There was a nice 80+ pip move to the upside but the entry was aggressive at best. Although I must admit with the Feds QE on the table the US will have a tendency to be on the buy side as the US banks are the primary beneficiaries of the freshly printed USD. Having said that what we do have today is a topping formation that has held with a close at the lows of the day. This tells me that the euphoria of the Euro going to the moon is losing steam. This doesnt mean it cant make another attempt at higher highs but sure seems that the momentum is not there anymore.

Today I will be keeping an open mind again and will be looking to see if we can get an hourly close below the 1.3080 level again to give me more reason to be bearish. Otherwise the range will be what I look to trade today unless for some reason we get that hourly close below 1.3080 during the Asian session. Of which I doubt will happen. If the Asian session holds price down in the lower part of the range I will need to see some very clear candle patterns for the long as I will suspect that the chance for the break to the downside are increasing.

The GBP/USD managed to make the higher high yesterday and closed the day in the middle of the range. This was the scenario I forgot to mention in the Sept. 17 forex commentary where the GBP makes the attempt at the highs while the Euro is subdued due to the EUR/GBP being weak. To be honest I wasnt expecting the Euro to start getting weak this early in the game but it did. The chances that the push up on the GBP is a false push is a little better in my view but I will be keeping an open mind here today also. Watching the hourly closes through out Asia and looking to see if we get commitment on a move to the downside. A hourly close below the lows during the end of the US session of  1.6230 will be a sign we have a higher probability for the down move today. Of course the lows yesterday have potential to be hard to break so if the short does present its self then the entry on a trap move to the Asian highs or higher will be what I would prefer.

Forex News Today

We do have a few decent news events today that could cause some manipulation. Starting with CPI figures from the UK. I will be looking for a clean set up to occur the hour or so before this release. There is also the BOE inflation letter from Mervin King later in the day and depending on whats in it we could see some volatility. 

The Euro Zone has German ZEW Economic Sentiment and EZ ZEW Economic Sentiment. Both are expected to improve from last months figures but still be well in negative territory. I am thinking these will be close to expectations but the chance for a disappointment is higher than a surprise to the upside.

The US has its Current Account figures along with TIC Long Term Purchases. The bigger one should be the TIC figures as they are expected to rise significantly showing a rise in foreign investment into the US. A surprise to the downside here has potential to create some risk off the way I see it.

More On The Fed

Today I leave you with a few excerpts from an article on the Fed and who they really serve. Of course this just backs up the Reggie Middleton video from yesterday and countless other posts of mine stating pretty much the same thing but I feel its necessary to keep grinding away at this because its the only way we are going to keep it fresh in our minds with all the other crap going on in the world today.

 Here is the translation of the Fed Chairman’s public comments: whatever. Did you see any of his testimony? It was painfully obvious that either 1) he was sky-high on Ibogaine or 2) he was just going through the motions, duly enunciating PR “cover” that he finds tiresome to repeat and impossible to say with any sincerity or conviction.

His body language and delivery said: “You think I believe this canned shuck and jive? Get real, chumps.”

Here is the key quote from his remarks:

“If people feel that their financial situation is better because their 401(k) looks better for whatever reason, or their house is worth more, they are more willing to go out and provide the demand.”

The key phrase here is “for whatever reason.” In other words, it doesn’t matter how artificial or phantom the increase in their assets may be, any increase is presumed to be good enough to trigger a “wealth effect” euphoria that generates a pressing urge to borrow and spend money.

It is clear Bernanke’s policies have failed to spark a “wealth effect,” even though the stock market has more than doubled from its March 2009 low.

The reason for this is self-evident: 93% of all stocks and bonds are owned by the top 10%.The bottom 90% feel little if any wealth effect from a new bubble in equities.

The other factor is the legitimacy of the rise in asset valuation. People have been burned twice in one decade by Fed-blown asset bubbles, and they can now discern the difference between an organic expansion of assets based on a healthy increase in demand driven by higher wages and productivity and a central-planning bubble based on shadow intervention and massive money-printing.

 It sure would seem like the writing is on the wall and the people are seeing the Fed for what it truly is. The time of reckoning is coming as we now have seen the last of what the fed can possibly do. Its just a question of timing now as knowing when the proverbial s*!t will hit the fan is always an unknown. However one only needs to look at the law of gravity to know that once the turd is thrown in the air its only a matter of time before gravity pulls it right into the fan. the variable is the velocity at which the turd was thrown and Ben gave this one all he has.

Happy Trading


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