EUR/USD Gives First Push Down – FX Forecast 4/21/2016
EUR/USD Starting To Look South
The EUR/USD provided a beautiful stop run of the previous days high before starting today’s push down. As far as picture perfect textbook type stops runs, this one definitely fit the bill. This move to the downside also satisfies the criteria for a first push down and therefore I will only be looking for the second push to the downside today. Tomorrow is going to be an event filled day for the Euro with the interest rate decision, and more importantly the Draghi speech to follow at 8:30 AM Eastern. The vast majority of the time that is the only mover of the market on interest rate days. Its not really a surprise to see the market sell off ahead of today’s news given the situation in the Eurozone. After all, there is no way Draghi is going to come out and say everything is looking good and rate hikes are on the way. If anything he will be biased to the downside and the market will almost always pre-position for situations with very likely outcomes. For catching the second push to the downside we have only one upper manipulation point at this time. The current Asian highs could satisfy the rules for the selection of manipulation points but that would require a further push down to around the 1. 1275 area before it could be considered.
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Upward Cycle Potentially Fading
The upward cycle on the Pound has failed to produce the third push. With today’s stalled price action and the EUR/USD giving a first push to the downside, there is enough for me to question market cycle. As I always say, there are a hundred reasons to question market cycle but only one answer…go back to trading with an open directional bias. That is exactly what we will be doing today. The fact is cycle only represents 10% of the DTFL forex trading strategy and cycle is never the reason we take an entry, only a directional filter. As such we trade without cycle more often than when we trade with a valid cycle bias. As far as listed manipulation points, the levels to the downside are rather limited. As I look back I can not be confident about any lower level from which I would expect liquidity to be pooled at. When that is the case it is far better to wait for a new level to form rather than using a mediocre level that is more likely to fail. To the upside I have 2 listed points, both of which are quite strong and I would expect to hold a great deal of liquidity.
Forex Market News For April 21st 2016
UK Retail Sales 4:30 AM Eastern: For the first time in all the years I have been trading we are seeing the market reverse on Retail Sales. For the last 5 months in a row the market has spiked in the direction of the release which was then just as quickly retraced back through pre-release and often continued in the opposite direction. For this month Retail Sales w/gas is expected at 0 for the month.
Euro Interest Rate Decision 7:45 AM Eastern: Like usual I wouldn’t expect much from this release. With that being said I would not get complacent and carry a Euro trade into the release as that will be the time you get a surprise. This month rates are expected to remain unchanged.
EU Draghi Speech 8:30 AM Eastern: This is always the market mover. Overall I would expect Draghi to have a dovish tone. I believe that any slightly hawkish tone might drive the market up short term but would be quickly dropped. The EUR/USD movement around these speeches is no where near as clear as it use to be in the days of Trichet and as such I still look to avoid trading during it.
BOE Gov Carney Speaks 10:00 AM Eastern: Carney is due to speak at the United Nations tomorrow and I doubt you will get much reaction to the speech as it won’t be ground breaking policy he talks about. Based on the description of the speech it will just be lefty propaganda on how governments can shaft the people more efficiently.