EUR/USD, GBP/USD Forex Daily Analysis November 5, 2012
Looking at what we have on the EUR/USD to start off the week I half expect to see a reversal here. I have my doubts it will be a full 3 pushes due to the overwhelmingly negative outlook fundamental wise for the Euro. However I expect that the smart money will be needing to book some profits and do their best to push weak shorts out of the market before a next move to the downside. The pushes are not clear at all. I can find 3 pushes to the downside but as I always tell members the herder you have to look for them the less reliable they can be. We do have a 200 pip move from the highs over 3 days but between the second and possibly third push there was no decent accumulation period which makes the clarity a bit foggy at this point so I will be keeping an open mind on direction today.
We also have a gap at the open that has already closed and we are starting to see the trapping candle patterns during the Asian session so there is the possibility of it just running off but I will be waiting for London to see if we get the pullback. Otherwise the levels I will be looking at for the manipulation are the lows during NY Friday before the London close which is also the Asian highs now but would prefer a test into the 1.2880 level for a short and will look for the hourly stop run to the lows for a long.
Here is the update on my EUR/ USD short from Thursday last week and you can check out a detailed description by going to the link. I ended up booking 75 pips on the trade. Once it had reached the 90 pip level on the second push is started to show a potential trap before a pullback and I didnt want to risk the profit and get too greedy even though my gut was telling me it had more downside to it. That is no reason to take or hold a trade even if I was proven to be right and the move ran off for another 75 pips:) The link will be activated when we get the video of the trade posted
I remember saying in the Friday’s market analysis that I had a feeling the GBP/USD was going to make the break below its lows and it sure did. Not long after that it had the hourly close below the level I was talking about. Then it came back for a test and never looked back. Today it looks more clear and is showing two 90 pip pushes to the down side. However it has tested a major daily low and found some support so we may be in for a decent pullback before we see the next push to the downside to test the lows of 1.5912 from October 23rd.
I am not going to consider a long on this pair today but I do expect the best manipulation points to be at the 4 hour 200ema at 1.6059 or the hourly 200ema at 1.6078. There is also an inefficient move from Friday that they may want to close before the next move down and that coincides with a break out resistance level at the hourly 200. For those more aggressive members that may want to try and grab those pips with an 1 hour stop run to the lows that is an option. Personally I dont like trading against a second push so I will wait for at least the 4 hour 200 to look for the manipulation.
Forex News Today
Scheduled releases are light as typical Mondays are. The Euro Zone only has a medium impact event to watch. Sentix Investor Confidence is expected to improve a bit but even if it does its well into negative territory so I doubt it will have much impact. There also is Spanish Unemployment Change but every body knows what a mess Spain is in so my thoughts are that is well priced in.
The UK has Services PMI. I will be looking for the set up in the hour before the release as usual with this type of news. Its expected to drop slightly but remain over the expansion level of 50. If we do have a major surprise that bumps it below 50 then we will see significant GBP weakness. However I have my doubts that will happen.
The US has ISM Non-Manufacturing PMI expected to drop slightly also. I dont expect too much movement from this release unless we have a significant deviation.
There also is the second day of the G 20 meetings going on today so be on the lookout for the tape bombs. I would have expected some over the weekend that we really didnt get so we may not get any. However its a good idea to be aware of the meeting today.
Draghi and the ECB go J. C Junker-esk
It would seem that Jean Claude Junker is in a well planned circle of liars now that the ECB and Draghi have proven they are a full member of the “when things get real bad you have to lie” group. I found this on Zero Hedge over the weekend.
Things must be getting real bad since the lying has gotten to these levels and now some think that Spanish banks may get a margin call due to the ECB making loans to them on collateral that was rated A but was actually junk. Here is an excerpt form the article.
Mario Draghi has reassured the world that no matter how much ‘crap’ collateral is taken on to the ECB’s balance sheet, their risk management process is rigorous and ensures the safety of the entity’s capital thanks to well-devised haircuts and collateral. Once again, it appears from a report in Die Welt, Draghi lied, as the ECB is now checking terms on some lending to Spanish banks that may have already contravened the ECB’s mandate allowing overly generous terms to be offered on the Spanish banks’ collateral. As Bloomberg notes, the issue surrounds EUR80bn relatively short-dated T-Bills which were wrongly classified as rated ‘A’ instead of the ‘B’ that agencies – except DBRS! – had assigned (a vast difference) – which would imply (if the ECB re-assigns the correct rating) the affected Spanish banks would have to produce up to EUR16.6bn in additional collateral (cash or quality collateral that is non-existent in Europe). This of course “casts doubt on the quality of the ECB’s risk management” and merely serves to confirm the Juncker-ian lies we have come to expect from Europe’s leaders (economic and political).
Things must really be getting bad when Draghi joins the liars club. But then again he did blow a ton of smoke when he did his “the ECB will do everything and anything to save the Euro” speech. he must have gone full member the week before. 🙂
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