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EUR/USD, GBP/USD FX Daily Analysis November 27, 2012

I had a sneaking suspicion that we could see the range bound chop if they took long to make up their minds on what Europe will do about Greece. Sure enough we still have had no solid news come out. We did have the spike up due to a leak that the IMF and EU leaders did agree to extend the limit of debt to 124% of GDP in 2020 for Greece. This is probably true as I am sure the IMF wants to show that they are willing to give a little on their demands. However the news also said the deal was done and then minutes late the “done deal” part was retracted as they are still working it out. My guess is that the IMF wants to have some sort of schedule for the hair cuts on Greek debt holdings at the ECB and other central banks since that is really the only way to get Greece on a decent path.

I cant say I blame them for putting the wrenches to Greece to reform. Changes have to be made in order for them to be competitive in the future or they will simply do it again down the road a few years. We will see and time will tell. Having said that, if the rest of the western world is the example then it will happen again and its only a matter of time. If the US and other countries set the example of bailing out bansters and politicians when they deserve to go down in flames then why wouldn’t any other country try it too since of course the political game isn’t much different anywhere you look in the western world.

Dont get me wrong, I am a true capitalist through and through but this sort of crony corporate capitalism leaves a putrid smell in the air that makes me want to puke.

Ok I’m done. On to the charts. Since we have the chop  and the chances are they will at least come to some sort of agreement so Greece gets the next tranche of cash the best thing to do for now is wait it out and see what happens. there is a chance they could surprise me and kill the deal but I doubt it. The price action tells a story with the negating of the topping formation started yesterday with the hourly close above yesterdays high so the probability is that we are headed up today. I do expect to see some resistance at the 1.3020 level I mentioned in yesterdays analysis then possibly a pullback to 1.3000 before the run up. It really depends on this news. If they do get a grand deal then it will most likely blow by the 1.3020 and then maybe we see a pullback to that level for a trap.

Update: We have the deal and the way I see it its not so grand. They are having the press conference now but here is the just of the deal. In my view this is not enough to send the EUR/USD to the moon at this time.  🙂 I will be keeping my options open and looking for the long at yesterdays lows or the short with an hourly stop run to the highs.

  • rates are cut on the existing commitments
  • Creditors will reduce Greek debt by EUR40bn (voluntarily)
  • and Targets are upped to 124% debt-to-GDP by 2020

The 1 hour chart of the EUR/USD on Nov. 27, 2012

The GBP/USD is in a quite similar position having shown a little more weakness yesterday. I would be more convinced that it would be headed up if it managed to test the 4 hour 200EMA yesterday so I do have a slight bias for the short today. It sure looks as though we are going to see a 1 hour stop run above yesterdays high right now but with the high from Friday right behind at 1.6050 it makes yesterdays high less significant. I will be watching what the EUR/GBP does at this point since this has potential to create general Euro weakness and the GBP/USD could run opposite the EUR/USD for awhile. The better place to take a stop run short is Fridays high. Otherwise the potential for the long is there but I will want to see some confluence with a trap at yesterdays low to take it.

1 hour chart of the GBP/USD on Nov. 27, 2012

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Forex News Today

Scheduled releases are slow during the London session with only UK Revised GDP and Prelim Business Investment. I doubt these will have much effect on price without a big miss on the GDP.

The US session has Bernanke and Fed member Lockhart speeches that could make some interesting price action but the more significant ones are Core Durable Goods Orders and CB Consumer Confidence. Durable goods are expected to drop while Confidence is expected to rise. If the confidence figures can surprise to the upside we may see some risk appetite which will cause the EUR/USD to rise by default otherwise I dont expect much from Durable goods since housing is still in the hole.

Happy Trading



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