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EUR/USD, GBP/USD Forex Daily Analysis November 20, 2012

The price action on the EUR/USD yesterday was rather muted until we had the tape bomb regarding “constructive” talks on the US fiscal cliff. What a joke! Then this morning I read that Speaker Boehner has already indicated that it would be inappropriate to pass comprehensive legislation in the Lame Duck session, given that more than 100 current members of the House will not be returning next year. So there will just be more ‘can kicking” and pushing off any real tough decisions on the next guys who come into congress. So what we most likely will see is the raising of the debt ceiling yet again and more promises to get the job done next year, thus increasing the chance of more US downgrades. And congress wonders why they have a 9% approval rating?

The nice pop down on the EUR/USD was due to Moody’s downgrading French sovereign debt. With the conflicting ‘tape bombs’ we could be in for some choppy price action on the Euro. My gut tells me that this first push to the upside will probably have some follow through because all the “good news” on the fiscal cliff will keep coming for at least a week or two and risk appetite will more than likely follow. Its not a reason to take a trade but for now my bias will be for the long. The smart money trend does agree at this point as long as the first push up Monday holds up.

What I will be looking for today will be the test of the Asian lows at 1.2764 at which point I would like to see the manipulation. We already have some candle patterns formed during the Asian session at that level which is also where the 200EMA on the hourly as well as the 15 minute chart sits. This should be good support along with it being a key level for the manipulation. If we don’t see the manipulation at the Asian lows the possibility for the stop run down to the 1.2750 level is the next best possible reversal point. If you want some clear examples of trapping patterns that I mention in the daily commentary, then check out this training video that details a live trade setup.

1 hour chart of the EUR/USD on Nov. 20, 2012

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The GBP/USD has finally made a clear push to the upside out of the mess it was in for several days. My bias will be to the upside on this pair today as well. We do have the same trapping candle patterns on the 15 minute chart at the Asian lows but we are still fighting the hourly 200EMA from below as I type this. Today the Asian Session lows have tested pretty close to the US session lows from yesterday which were 1.5885. At this point I will be looking for the manipulation around that level from the move up. Hopefully we will have the clear trap move instead of a run away Asian market.

I should also mention that there is the chance for this to be a false push and there is the potential for the short here as well. It is always important to understand ALL the potentials, and a first push can always be a false push and therefore it is at least worth mentioning. My bias for the long would be much stronger if we had the daily close above 1.5912 which is the break out level I mentioned in Monday’s commentary. There is also the daily 200EMA to the downside at 1.5880 so the chance for a test of that is also a possibility before any push up. I never like it when price is  sandwiched between 2 significant 200EMA’s so I may just leave this pair alone today and see where it does break. After this finally does breaks out it will be easier to trade the next level in the overall smart money cycle, rather than guessing on the direction it will break.

1 hour chart of the GBP/USD on Nov. 20, 2012

Forex News Today

We only have a few news events with potential to give the smart money reason to manipulate. Starting with the German PPI figures. Then later in the US session with US housing starts and Building permits. I really don’t expect much form these because we have a much higher probability for tape bombs today, and these will take precedence over the scheduled economic data. The Eurogroup Meetings are going on today and tomorrow as well. These will be revolving around Greece and when or if they will be getting the next 44 billion euros of bail out funds.

There has been some conflicting stories coming out concerning Greece that makes things unclear at best. Starting with an EU “official” reporting that they expect the next tranche of 44 billion to be released to Greece by December 5th.

Then a Greek government spokesman saying that the Greek Government wont agree to the latest demands of the Troika, the firing of 20,000 state workers.

At this point it seems that the EU and Greece have left it up to the IMF to throw Greece to the wolves since the last statement to come from them was something to the effect of there will be no more money for Greece without a clear plan for debt sustainability (meaning more write downs). Something that almost every county is against since all of the Greek debt it held by European central banks and the ECB.

This game of chicken can only last so long. Somebody is either going to have to take the hit on Greek debt or the IMF is going to be the one who flinches and backs off on their demands. My guess is since nobody wants to be the one triggering the Greek exit from the Euro the IMF will send the cash but it may not be by December 5th.

Later in the day there is also a speech from the Feds Lacker. I have my doubts this will do much especially if we do get the tape bombs from the EU I expect. However later in the day after London closes Bernanke gets his chance to do his risk pump and that should be interesting.

Happy Trading


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