Its looking like we may be getting a turn around from the drop into the abyss. The EUR/USD is showing a nice looking bottoming formation and does show more potential for a long position today. After several pushes down over the last 2 weeks its looking like we can now get a decent pullback. At least enough that we can make some decent pips on anyway. I still dont think there will be a trend change but anything is possible. So why now? The answer is Bernanke has reiterated that he will dump more money on the market should things start to look bad for the US economy. On top of that there has been more pushing on the ECB for more liquidity also. The cracks are forming and something will give in the not so far off future. My thoughts are the ECB will give in first since the US data has been rather nice of late and Ben has the upcoming presidential election to think about.

As for today I will stick with the probability of a reversal but keeping an open mind with The EUR/USD. I will be looking for a manipulation move to the downside during the London session for the long but if for some reason we see the market rise through Asia and continue the short after a nice trap move at the highs of the day are a good possibility too. We will have to wait and see.

The GBP/USD is pretty much in the same scenario showing a bottoming formation and shows good prospects for the long position today. It would only make sense to conclude that with the 220 pip move over the last 2 days the SM has caught it up with the drop on the Euro and is ready for some retracement also. I will be looking more at this pair since the UK is in a better position than the EZ and has more potential for the larger move.

The EUR/JPY looks most interesting today with also having multiple pushes down along with the Euro it seems ready for a pullback of sorts too. Considering the USD/JPY has been showing strength as of late this pair has the possibility for a larger move to the upside. The only problem I see is that if the market simply rides on USD weakness due to Bernanke talking of printing more money then the USD/JPY will suffer and the EUR/JPY will be the slower mover. Having said that my thoughts are that we will see a risk on move in the short term and the USD/JPY will rise along with the Euro and the EUR/JPY will have the larger move. Of course I will be looking for that sure sign of manipulation in the live room today and go from there.

Forex News Today

Scheduled releases during the London session are light due to the Swiss, French and German banks being on holiday today. There is only some UK MPC member speak from Weale around the start of the US session

From the US we do have Unemployment Claims, Philly Fed Manufacturing Index, CB Leading Index and some Tim Geithner speak. The big ones will be the Unemployment numbers and  Philly Fed. If Unemployment claims has a large surprise there will definitely be an opportunity for the SM to manipulate so if I am around and trading at that time thats what I will be watching for. With the Empire State Mfg surprise recently the Philly Fed has a good chance to do the same. Its expected to rise form 8.5 to 10.3 so any large surprise to the upside will most likely create some decoupling thoughts again and the USD will strengthen across the board. Considering all this and the bottoming formations we have on the GBP/USD and EUR/USD we may have a choppy day ahead so be careful out there.

Lets Talk Manipulation

Anybody who doubts that the markets are manipulated should be sure of this now considering the market reaction to the BOE Inflation Report yesterday. What a joke! I was wondering why the good news from UK unemployment got such a muted market reaction. That was a surprise of around 18K for the Claimant count and a .2% drop in the unemployment rate which should have had a much better reaction than it did for sure. We have to consider that some of that could have been workers running out of benefits but to be honest I am not familiar with how the Unemployment system works in the UK. So for argument sake lets just consider the numbers. They were awesome not just good and all the market did was a 20 pip pop and closed a pin bar. Huh?

So OK we have the Inflation report coming up and King speaking right? Thats a good reason for a muted reaction but then look at what happened when the report came out. A crazy spike down 80 pips. So of course I start scouring through the report to see just what the heck was in there to cause such a move and I couldnt find a darn thing. Yea growth forecasts were lowered but only because of concerns over the Euro Zone imploding of which in my mind would not cause the GBP to weaken against the Euro and it did. How does that happen? Manipulation, you guessed it. Then looking at the ensuing price action proves it as price steadily retraced nearly all of that move over the next couple hours. If that wasnt a clear stop run and more likely a trap move to pull in shorts so they can run price up and hit stops today then I should have my head examined hahaha.

From the mouth of babes 

We have all heard this before right? Its simply amazing the simple truths we get from children as the younger they are they are almost guaranteed to never sugar coat the truth and sometimes its brutal. Below is a video from a 12yr old Canadian girl who has enjoying her 15 minutes of fame as she tells it like it is about our current banking system but before you watch it I wanted to post some excerpts from the article by JS Kim because I could not agree more with this guy.

When I was a child my mother, rest her soul, always harped on us about lying and as I grew up I understood why more and more. Eventually I came to realize that there are no worse people in the world than liars. Even a murderer who tells the truth of his actions is better. Before you think Im nuts let me explain. The fact is that the murderer who admits what he has done has a chance for being helped or corrected and if not we have the opportunity to lock him up for life or even put him out of our misery right? However the murderer who lies is doing so because he wants to get away with it and do it again. The liar can never get help and limits societies tools to control him depending on the cunningness of him and his lawyers to get him back out on the streets to do it again. Does that make more sense? Yes it is an extreme example but the way I see it just like Mr Kim here. It is warranted to fully understand what these banking LIARS have been doing to us for the last 100+years.

Here is his view and the link to the full article which is a good read.

I will always have loads more respect for men like Pablo Escobar, “El Chapo” Guzman and “El Señor de los Cielos” Fuentes than any banking executive like Jamie Dimon, Lloyd Blankfein, Ben Bernanke, Mervyn King, Evelyn Rothschild, David Rockefeller, Vikram Pandit et al. For the feeble-minded that will seek to twist these words into an unintended meaning, no, I do not admire or believe that Escobar, Guzman or Fuentes are or were good people. However, I absolutely hold more respect for criminals that are honest enough to be 100% aboveboard about their criminality so that we never mistake or misunderstand their intent versus criminals that deliberately seek to deceive us so that they can utilize our misinformed and ill-gotten trust to enslave us. Even among criminals, a hierarchy of respect exists, as rapists, serial killers, and child molesters are the least respected of criminals within the penitentiary system and the most likely to receive a brutal beating for their sins while incarcerated.

 Lords of brutal drug cartels, when they despise someone, will spit in the face of the person they despise or simply tell that person that he or she will be executed. There is never any doubt about their evil intentions. On the flipside of this coin are the lords of our banking system. Despite being misanthropes, lords of our banking system will smile in our faces, perpetually lie to us about how banking really works, and tell us that they want to help us. However, the second we turn our backs, they will stab us six inches deep in the middle of our backs or deliberately create massive inflation that silently and secretly sentences people to death from starvation. As John Maynard Keynes stated, “By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. By this method they not only confiscate, but they confiscate arbitrarily; and, while the process impoverishes many, it actually enriches some. The sight of this arbitrary rearrangement of riches strikes not only at security but [also] at confidence in the equity of the existing distribution of wealth.” Keynes went on to explain, “There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic laws on the side of destruction, and does it in a manner which not one in a million is able to diagnose.” For those that have internalized banker-cartel propaganda and still fail to grasp the unquestionable and indisputable immorality of our current banking system, simply put, bankers are the equivalent of modern day slave owners and we are the slaves. We will never have freedom, but only the illusion of freedom sold to us by politicians and bankers, as long as our current fractional reserve banking system persists. This is an indisputable fact that even Central Bankers have admitted from time to time. Remember that the notorious Federal Reserve Chairman Alan Greenspan once stated, “gold and economic freedom are inseparable.”

Happy Trading

Chad

If you would like more information on how to trade with the banks please view our forex bank trading course & forex forum description.

The charts paint a rather bleek picture at the moment and with the drop yesterday having blown through and closed below any substantial support. The next level it has any chance for a reversal is the 1.2620 level lows from January this year and is only 100 pips away. Today I do expect more of the same and a probable test of those lows. The only thing that could change that will be some substantial good news coming from Europe to the effect of another round of LTRO or full blown money printing by the ECB. The chance for LTRO is greater than any ECB QE as Germany will have a fit if the ECB doesnt at least try to cover up their printing with the LTRO acronym.

The most likely scenario today will be an attempt to push out shorts to the upside but this will probably be limited as traders may just find any pullback a reason to add to positions for the long haul. If the SM cant find buyers to sell to they will just continue the push and there will be some profit taking at those daily lows but how much remains to be seen.

The GBP/USD was not shy about sharing in the plunge yesterday either. I would have expected some stall considering the doomed nature of the Euro but this move was pure USD strength and there was no fight from the markets on it. This pair is coming up on some daily break out support at 1.5960 so there is a possibility for a turn here but I am having my doubts on that to say the least. A break of this support will open the door for the next 100 pip drop to the daily 200ema where it found heavy support for the better part of a month at the end of March and beginning of April. The same may be true for the GBP/USD as the EUR/USD though. The USD strength may prevail today and we only get a minimal manipulation up before the move down continues. Its hard to tell but thats what I will be looking for during the London session.

I chose to cover the USD/JPY today even though I dont trade it and only use it to help me trade the GBP/JPY and EUR/JPY. The reason is to highlight that this move we saw yesterday was not a risk off move but a decoupling move. Meaning that the US can some how avoid any effects of the Euro Zone crisis and recession and still maintain growth even if it is at a snails pace. What we had happen was the Empire State Manufacturing Index had a very significant surprise to the upside and shows that the possibility is there for the US decoupling. I doubt this is actually true but what I think and the market does often differs even if I eventually get proven right and only had the timing off.

The way we see that the move was not risk based is looking at the move on the USD/JPY. When a risk off scenario is playing out we will see that the USD/JPY drops right along side the EUR/USD and GBP/USD showing that even though traders are fleeing to the USD from risk currencies they are also fleeing the USD for safer currencies like the JPY or CHF. This did not happen and the JPY and CHF weakened with the Euro and GBP. How long this will last is a mystery and will depend on US data coming in the future or any news of more LTRO or QE by the ECB so it could last a few days at least.

Forex News Today

Scheduled releases today are fairly busy. The big ones start with UK Claimant Count Change and Unemployment Rate. Later in the day BOE Governor King speaks and releases the Inflation Report. The ones to watch will be King and his report. This may give clues to any potential additions to the Asset Purchase facility and if he does hint in that direction the GBP will be hurt.

The Euro Zone starts with their CPI figures and Core CPI is expected to decline slightly. If there is a bigger drop than expected there it will open the door for a rate cut from the ECB at their next meeting and there is a Mario Draghi speech later in the US session that he may drop hints at.

The US has  Building Permits, Housing Starts, Capacity Utilization Rate,  Industrial Production and Mortgage Delinquencies. The housing data coming out good will be a plus for the decoupling scenario playing out longer as will better than expected Industrial Production. As long as these dont disappoint dramatically the USD strength will continue for the days to come.

Happy trading

Chad

If you would like more information on how to trade with the banks please view our forex bank trading course & forex forum description.

Looking at the hourly chart here we haven’t seen any sign of a bottoming formation since the May 9th and that one failed to make a solid push up to give a retracement of any significance. At this point I expect more of the same and will be looking for any manipulation moves up and waiting for the short.

The GBP/USD has been holding its own as expected and excluding Monday has been seeing some significant buying during or around the US session. This is mainly due to the relative safe haven status the GBP has. Of course its not quite the same as the USD or CHF or JPY but as the EUR/GBP drops the GBP/USD will find some support along the way and has more potential for any long position than does the EUR/USD. However I am bias short the longer term but for anybody trading the US session there has been some good long opportunities as of late on the GBP/USD. Looking at todays chart I see a nice push up during the US session yesterday for a clear 1st level and we might actually get the 2nd push today. The 4hr 200EMA held nicely yesterday and will most likely take some loading up before it breaks. The possibilities are still open on direction but the probability for a long today is better than it has been in the recent past. I will keep an open mind and look for the trap moves in either direction while keeping an eye on the EUR/GBP for some correlation factors.

The EUR/JPY is still in the longer term technical down trend and has broke down from some 3rd push chop from Wednesday thru Friday of last week and I expect this to continue at least until the USD/JPY gets below the 79 level and the BOJ starts doing some verbal intervention or even just steps in with full blown market intervention. We will have to just wait and see with this pair. I will be looking at the correlation with the GBP/JPY and USD/JPY to be taking trades on this pair. Looking at the daily chart we are at a significant support level so this seemingly bottoming formation may hold here for a pullback also. At this point it will be best to look for the correlation and manipulation on all 3 pairs once the London session starts. My bias is short but if there is going to be a retracement this is a good place to have it. The red line marks the daily support level.

Forex News Today

Scheduled news releases today are busy to say the least and to top them off we have ECOFIN meetings as well. This should be interesting. We start with French and German GDP figures the big one being Germany of course. They are expected to show slight growth at 0.1 % and if this is a negative figure like it was last quarter it will show recession has gripped Germany and will be Euro negative to say the least. If they do manage an as expected release it may give the Euro a temporary boost but will be short lived unless there is a big surprise to the upside. Next for the EZ is German ZEW Economic Sentiment and EZ ZEW Economic Sentiment which are expected to drop again to no surprise and I figure this is mostly priced in at this point. At the same time as EZ ZEW figures there is EZ GDP for last quarter and is expected to be -.20 showing the recession is still prevailing in the EuroZone. If this is the German GDP figures are worse than expected than we can expect this to disappoint also.

The UK only has its Trade Balance figures and CB Leading Index numbers and I doubt these will push the markets much. Especially considering the ECOFIN meetings.

The US session is just as busy with US Core CPI, Core Retail Sales, Retail Sales, CPI, Empire State Manufacturing Index and TIC Long-Term Purchases. These will all be looked at to see if the recovery is real and could have a significant impact on the markets today during the US session. At this point its hard to say what negative numbers will produce but if they do surprise to the upside then we will see more downside for the EUR/USD and GBP/USD as the decoupling theory comes in full force. To be honest I have my doubts these will be all that great but stranger things have happened.

Today I leave you with a video with Reggie Middleton as he discusses how the big banks like JP Morgan are getting screwed by none other than Ben Bernanke. I wasnt quite sure I would believe it until I watched it and it made a whole lot of sense. I do find it funny however how big Ben who has done everything in his power to save these bonehaeds and as it turns out he was absolutely powerless to do it even with printing trillions of USD. When will they ever learn? We have all heard the saying “what goes around comes around” well its coming around to JP Morgan right now and not even the Big Ben can save them. I find it comical. Enjoy!

Happy Trading

Chad

If you would like more information on how to trade with the banks please view our forex bank trading course & forex forum description.

Today I expect a closing of the gap at first. If not during Asia then London and if for some reason this one cant get closed it will only show more weakness for the Euro than I expect. We have already tested Fridays lows but the gap level is from the lows during the US session Friday and the test there has high probability. My bias is still to the short side and probably will be for some time to come however money can still be made on long positions when nice opportunities are set out for us. Just dont expect a long push.

The situation for the GBP/USD hasnt changed much since last week. It has already closed its gap and is finding support on the 4hr 200 EMA. It seemed to hold its ground last week through some wild swings as the Euro drags it down as I expected but as wee see the long slow move down on Friday I expect there will be some chopping around the 4hr 200 for a session or 2 before it eventually breaks and goes on to test the 1.600 level. This is a significant level mainly because it was hard to break to the upside recently. This would be a level that will hold while the EUR/USD breaks down. However sooner or later will follow suit. Going long at the 200 would not be all bad but wait for a nice manipulation move and get an entry as close to the lows as possible. there will most likely be a stop run down first and you dont want to get caught in it. Dont look for more than 30-50 pips.

The EUR/JPY looks most interesting today with the 1hr pin bars you see below from Friday and the gap already filled. The Euro weakness combined with Yen strength in the markets as of late has potential for the significant move. As of Friday it looks to be a failed 1st level push  to the upside and the pin bars sure look like solid stop runs. During the London session it may just run off with out giving an entry but if it does give a nice manipulation move to the upside I will be happy to short this pair.

Forex News Today

The scheduled news releases are quiet this Monday with some low impact events to start the European session both the German WPI and Japanese Prelim Machine Tool Orders shouldnt have a moving effect but later there is an Italian 10yr bond auction. Many expect the ECB to make sure yields dont rise significantly and I would agree so this may be a non event but if they dont we will see the Euro drop if yields do creep close to 7% or above. There is also Industrial Production from the EZ but I expect this to be overshadowed by any tape bomb news from Greece or the Italian bond auction. There is also a speech from SNB Chairman Jordan. This could be big if they hint in either direction of removing the EUR/CHF floor or increasing it. At this point I dont expect either. With the floor holding and the USD/CHF gaining they should be happy I would guess but should be at least watched.

Today I leave you with the question of who really has the upper hand in Europe? And a video I posted back in March that was so funny for readers that it was the most popular commentary for the better part of a month. It was re posted with the following article on Zero Hedge and I felt it was worth another posting here attached to the article of how the EZ has blinked and is now willing to renegotiate the terms of the Greek bail out. Enjoy.

Europe Blinks: Troika Willing To Change Terms Of Greek Bailout Deal

 The so-called troika of the European Union, the International Monetary Fund and the European Central Bank is willing to make six important changes to Greece’s financial aid agreement if a pro-European government is formed in the country, Real News said.

 The Troika is willing to extend by one year to end 2015 the time for Greece to cut its budget deficit as well as to proceed with a restructuring of loans, the Athens-based newspaper reported in its Sunday edition preleased today, citing “well informed” sources at the European Commission.

 The Troika is also willing to maintain the force of collective labor agreements, to alleviate the level of pension cuts or restore certain pensions to previous levels and to keep wage levels in the private sector and reduce the average tax burden on employees, the newspaper said.

If confirmed, and with Germany having stated repeatedly this will not happen, there is a very high possibility this is just another press-based red herring (remember all those FT headlines of an imminent Chinese bailout of Europe?) seeking to exacerbate the political power grab in Europe,where Germany is now surrounded on all sides, this will mean that the outcome of the Greek elections is no longer relevant, as Syriza will propose an adjustment to the bailout plan, Europe will promptly agree since a pro-bailout “coalition government” of ND, Pasok and Syriza will have be formed, and all shall be well, at least until the next Greek bailout in a few months. Then the country will need yet another priming DIP from Europe, and the fiasco begins anew, only this time with even less money left in Greece to be pillaged and plundered by the country’s creditors. That, and of course, German capital being pledged in the form of more “contingent liabilities” which are anything but.

But for now, between a Greek “solution”, and China easing again, it appears that all has been saved. If only for a few more days, which as the central planning regime is coming to an end, appears the best the planners can obtain.

At the end of the day, it is once again Mr. Panos who explained it all perfectly, and showed just who has all the leverage in Europe.

Happy Trading

Chad

If you would like more information on how to trade with the banks please view our forex bank trading course & forex forum description.

The GBP/USD has been doing somewhat of what I expected with holding its own as the Euro falls but I do still expect it to be dragged down as the Euro falls faster. Over the last 2 days we have seen 2 solid pushes up in a rather choppy market considering intraday levels. The safest way to look at this pair is to treat it as the chop it is and look for the manipulation during the London session. I still have a small downside bias looking at the chart from the fundamental perspective and considering that the down moves we see on the chart are the slower more persistent moves. There is a good chance for it to just continue the chop here so the safer trades will be from the extremes. (yesterdays high or low)

The EUR/GBP provided us a nice confluence trade during the London live room session for 30 pips as you can see below. neither the EUR/USD nor the GBP/USD gave me what I was looking for and the EUR/GBP was the pair to trade just as it was on May 9th. My bias for this pair is also short as the Euro gets weaker and the same reason why the GBP/USD has been chopping while the Euro falls. This is not one of my main pairs to trade but will give opportunities when the others dont. This trade will be covered in more detail in the recent trade section of the site.

Forex News Today

The scheduled news releases are light for this Friday. We start with  German Final CPI which is a low impact event and not expected to change. Then PPI Input from the UK and is expected to drop into negative territory. If it does then it may lead them to think they can afford more easing but I would think that they will want to see other inflation data to agree before they do but this may have a positive effect on the GBP for some manipulation.

For the US there is  PPI and Core PPI figures and are expected to show that US producers are not seeing any inflation at the moment. Then later is the Prelim UoM Consumer Sentiment. This will most likely be looked at close since it has to do with how consumers feel about the economy and with the US being a consumption based economy any sustained recovery will be due to them getting out and buying again. Since the release is late in the London trading day it may not have a large impact unless it does surprise in a big way.

Getting worse before it gets better

At this point my friends it looks like the proverbial pimple is about to pop or I guess a better analogy would be a volcano ready to blow. here are some excerpts from some of the articles I have been seeing this morning and I have to say things dont look good.

From the Telegraph :

 Chinese sovereign wealth fund stops buying European government debt

And here is the real kicker on JP Morgan from Zero Hedge

The “World’s Largest Prop Trading Desk” Just Went Bust

A month ago we warned that JPM’s CIO office is nothing short of the world’s largest prop trading desk. Not only were we right, but what just transpired is just shy of our worst possible prediction. At the end of the day, the real question is why did JPM put in so much money at risk in a prop trade because we can dispense with the bullshit that his was a hedge, right? Simple: because it knew with 100% certainty that if things turn out very, very badly, that the taxpayer, via the Fed, would come to its rescue. Luckily, things turned out only 80% bad. Although it is not over yet: if credit spreads soar, assuming at $200 million DV01, and a 100 bps move, JPM could suffer a $20 billion loss when all is said and done. But hey: at least “net” is not “gross” and we know, just know, that the SEC will get involved and make sure something like this never happens again.

The house of cards is losing its foundation guys. We can only hope this time it creates some incentive to get the politicians to remove their heads from the banker backsides. Time will tell.

Happy Trading

Chad

If you would like more information on how to trade with the banks please view our forex bank trading course & forex forum description.

The main pairs I watch were not setting up the way I liked and just like what happened on Wednesday the EUR/GBP gave us a very nice confluence trade about an 30 minutes before the session ended. This was almost the exact same set up as the Wednesday trade.

As you can see on the chart below we had over the 3 confluencing factors coming together that I require to take a trade when the loner term pushes are not clear. First price had made a short term 3 pushes after the start of the European manipulators shift (end of grey box) for close to 25 pips. Thats already 2. At that point price has pierced the 200EMA (3). This is the time we start looking for the trap move candle patterns and it shows us a set of reversal legs, very nice #4. Entry is taken when we get the pullback to the highs for a trade that only went two pips against my entry and away it went. My exit was based on my risk of 15 pips and I didnt want to assume it would break the lows made during the Asian session. I closed this for +30 pips for a trade that provided me twice what I risked to take it. Nice trade indeed.

Later in the day I also took this correlation trade on the EUR/JPY. This entry was a little more aggressive and the reasoning behind it was the fact that all three Yen pairs. The EUR/JPY, GBP/JPY and USD/JPY were all showing the exact same price action at the time. Meaning that they were all trading off the Yen at the time. The GBP/JPY had reached its average daily range already and the EUR/USD was showing signs it had reached its high of the day with pin bars to the 200EMA. When I got up this morning I moved my stop to break even and was going to let it run but changed my mind and just took the 39 pips (for about 1.7 times my risk of 25 pips) figuring I will have another opportunity today. Overall this has been a great week.

Happy Trading

Chad

If you would like more information on learning to trade forex by tracking the daily manipulation of the banks in the market please visit our forex trading course & members trading forum.

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The EUR/USD is showing potential signs of a reversal again. However with the fundamental picture getting worse by the day in the Euro Zone I am still more comfortable with a short than I am taking longs at this point. If a nice manipulation move does set up here at the lows today I will be happy to take the long but wont be holding on for a move more than 40-50 pips.

The GBP/USD surprised me by running off like it did yesterday considering as I said in the May 9th Commentary I figured it had more potential for the reversal of the two pairs. It just goes to show why we can never assume we know where the SM will drive price and simply look for the crumb trail they leave and follow them. Today when I look at the hourly chart I see a clearer 2 levels of push to the downside so the 3rd today seems the higher probability. however I will be keeping in mind that the bounce from the lows yesterday was off of a daily low and break out level so I expect there will be some loading up and pushing out of the weak holders before a break of that level so if I can manage to get the short then I will be looking to take profit at the lows yesterday.

Forex News Today

We have a busy day ahead for news releases today starting with French Industrial Production and ECB Monthly Bulletin. Of course the Ind. Production are expected to go negative and I doubt there will be much difference in the Monthly Bulletin than what was released in the ECB press conference so market reaction will most likely be muted for those and the usual tape bombs as of late will be drivers I expect.

The UK has Manufacturing Production, Industrial Production figures and also its Asset Purchase Facility along with the Rate Statement. I have seen talk of analysists  thinking they will not add to the Asset Purchase Facility but watch out for the surprise. The UK economy has slipped back into recession and they may want to throw in some more juice so to speak. I have my doubts also but like I have said many times nothing surprises me anymore. later during the US session the UK NIESR GDP Estimate will come out also and could be a GBP mover if it surprises. Its expected at .1% and may disappoint as did the official GDP did.

In the US there is Unemployment Claims that are expected to rise. If this surprises to the upside the market may go back to thinking Bernanke will throw more money at the market so keep that in mind if it does surprise to the upside. Later Bernanke speaks and the market will be looking for hints at more QE and if he gives it there will be some risk come back and the EUR/USD will climb. Since he did give a small hint at the last press conference I kind of expect him to step it up a bit this time even though I have doubts it will happen unless Unemployment gets much worse and stocks see a more significant drop.

Enlightening News

Every day I try to find and provide my readers with a good piece of information to spark some thinking or even entertain. Today I found a good one that really got me thinking of just how in the heck is the world ever going to get straight. I try to be optimistic but its getting harder with every passing day for sure. Here is an excerpt from an article by Bill Wilson. The president of Americans for Limited Government. This is good stuff.

By mainstream media accounts, the presidential election in France and parliamentary elections in Greece on May 6 were overwhelming verdicts against “austerity” measures being implemented in Europe.

There is only one problem. It is a lie.

First off, austerity was never really tried. Not really.

In France for example, according to Eurostat, annual expenditures have actually increased from €1.095 trillion to €1.118 trillion in 2011. In fact spending has increased every single year for the past decade. The debt there increased too from €1.932 trillion €1.987 trillion last year, just as it did every year before.

Real “austere”. The French spent more, and they borrowed more.

The deficit in France did decrease by about €34 billion in 2011, but that was largely because of a €56.6 billion surge in tax revenues. Again, there were no spending cuts. Zero.

Yet incoming socialist president François Hollande claimed after his victory over Nicolas Sarkozy that he would bring an end to this mythical austerity: “We will bring back Europe on a track for jobs, growth and the future… We’re no longer doomed to austerity.”

This is just a willful, purposeful distortion. What the heck is he talking about? Certainly not France.

If not France, then where?

In Italy and Spain, which have been dependent on tens of billions of cash infusions from the European Central Bank (ECB) to refinance their debts, cuts are hardly anywhere to be found either. In Spain, spending was cut by just €11 billion in 2011, a mere 2.3 percent reduction. In Italy, spending actually increased by €4.3 billion.

Both countries borrowed an additional €117 billion last year alone, raising their combined debts to €1.939 trillion. So, no austerity there. Just debt slaves.

Hollande might have been referring to the budgets of debt-strapped Ireland, Greece, and Portugal that have depended on over €290 billion of refinance loans from the European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF).

But even there, the cuts are rather miniscule. In Greece, spending was cut by just €6.3 billion from 2010 levels. In Portugal, just €4.8 billion. Ireland only trimmed €2.2 billion off its 2009 levels, discounting its massive bank recapitalization in 2010 that blew up its budget by €25.7 billion.

The real point is that none of them even came close to balancing their budgets, with over €47 billion of combined deficits for 2011. More debt slaves.

Yet that is not stopping pundits like New York Times columnist and economist Paul Krugman from claiming otherwise, who said recently, “All this austerity is actually self-defeating. We’re seeing countries slash spending and drive their economies into a ditch.”

What austerity? These countries are all debt addicts. They’re not addressing the root of the problem. So, what should they do? Just borrow more?

Now I have to ask myself the question. What is really causing the financial turmoil then? The simple answer is. People and/or governments living beyond their means. Anyone who has done that (myself included when I was young and stupid) knows how this turns out. Eventually it catches up with you no matter how rich or poor you are. Of which reminds me of a funny/sad video posted below. This stuff can not end good. That I can guarantee.

Happy trading all

Chad

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Here is a classic Asian range stop run trade that we see on a regular basis. The EUR/USD was doing a whole lot of nothing during the London session while the GBP/USD ran off with out providing a safe entry. In a situation like this there are still trades to be found as long as we are patient and wait for the clear set up.

Once the Smart money breaks out from the 15min triangle pattern getting the chart pattern traders in the market they run it up just above the Asian range getting break out traders orders also and start to trap them with the pin bar. The trap is not confirmed until we see the reversal legs and there is where I first entered. Having the 200EMA (50EMA on 1hr chart) right above there tells me there is a possibility of retesting that area so I put a pending order at a price improvement of 5 pips at .8055. Which was hit on the next stop run to the upside a couple hours later.

Why would they retest? The answer is simple when you know how the SM works. They know that there will be sellers there playing the resistance of that 200EMA so what they want to do is push those guys out of the market before they make the larger push. They let price run down a bit before they run it up to trigger their stops above the 200EMA. Once they have pushed enough of those traders out of the market and sucked in the ones that will go long at the break of the 200EMA the orders on the books are lopsided enough to make the push and once the US market opens the run is on.

As I am typing this the market has come up and hit my stop and I am out with a total of 55 pips. A trade that was well worth the wait.

Hope this helps guys

Happy Trading

Chad

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Often times the difference between a profitable trader and one who struggles is dicipline and patience….two things people rarely look into when they try to learn to trade forex. I can’t say how many times I talk about it in the forex room, but yet most overlook it. I mean after all isn’t the strategy what determines someones profitability?? explanation

Two people can have the same knowledge, yet one will succeed and the other might fail. If success were completely based on your forex trading strategy that would mean we could make everyone reading this a profitable trader….but we can’t! Why would I say that when I sell a product?

Look….here’s the truth. We help people everyday “see” the market for what it truly is. We have many many members who failed over and over for years that are now succeeding once they understood the forex bank trading strategy. I know we help people, I don’t doubt this…..BUT YOU AND ONLY YOU will determine your level of success. We can give you ever piece of the puzzle but you have to put it together the way we recommend….. instruction book included:)

We give everyone the same information so going back to the original point why do some become successful day traders and some don’t? Here’s a few reasons.

1.) Patience – We cannot make you wait for only the best trade setups.

2.) Discipline - We cannot force you to follow what we teach and trade it only when it is clear.

3.) Risk/Reward – I have said over and over….successful traders all have one thing in common and its not a high win/loss ratio, it’s a high risk to reward ratio on their trades. Again we cannot force traders to believe it or follow this principal.

4.) Money Management – What you risk on a trade will directly effect the way you handle a position. Trading with to much risk is like swimming with ankle weights….yes you can do it for a time but the end result is always deadly.

Now think about this for a second. When we do any Search Engine Optimization for this site do we ever do it for the words listed above??? Do you ever see the word money management hyper linked, or any of the 3 points listed above for that matter? Why don’t we if we know this is the most important part of a successful trader?? The answer is really simple….BECAUSE NO ONE CARES ABOUT THE BORING CRAP AND THUS WHY EVERYONE LOSES. Ok I really got on a rant there….

Let me discuss how this all ties in to the video above. This video should show the first 3 points in action. I was patient in waiting for the market to come into a vast array of confluent points and give a nice topping formation, and I had the discipline to stick to the level I wanted or nothing else. Finally the risk/reward from this point was at the least a 2 to 1 opportunity. You’ll just have to take my word I used the proper money management:)

Happy Trading,

Sterling

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The GBP/USD is in a similar situation with 2 clear pushes to the downside but having the big double bottom its working on retesting now does give me cause for concern. The fact is that with Europe starting to fall apart like I expected months ago the GBP is going to be seen as a save haven currency again and will get a bid like the USD so in turn will be supported somewhat throughout the Euros decent. However gravity will still be in force as the Euro drags it down with it but the moves will be smaller as the EUR/GBP makes up the difference. having said that the GBP/USD is still worth trading and once the EUR/USD has a daily close below the 1.30 level it could be a race for the bottom so to speak.

The GBP/JPY and EUR/JPY look interesting for some continuation to the downside also but we need to keep an eye on the USD/JPY as it dips below the 79 level and the BOJ steps up its rhetoric on intervention or even jumps in at any given time. The fact is the Yen is tied with the Swiss franc for the  top dog  in safe haven currencies so with the floor on the EUR/CHF being maintained the Yen will have more potential for strength until the BOJ steps in and buys USD. Which in my opinion will be anywhere below the 79 level so the drops in the GBP/JPY and EUR/JPY will be mostly determined by the decent of the EU and GU once the BOJ starts stepping in. That may not happen as soon as I expect so I will still be looking for the manipulation up before shorting the Yen crosses.

Forex News Today

Scheduled news today is light again with the French and German trade balance, a 30yr bond autcion from the UK and a 10yr auction from the US. I dont thing either the UK or US will have any trouble getting rid of these bonds so the market will be moving on tape bombs coming from any spew from the European politicians and of course there will be alot of that just as there was yesterday. What I will be watching out for and the reason I tried to hold my Euro short yesterday is if the leader of the Greek Syriza party can get a government of the leftists together. i have my doubts but if he can then its over for Greece and we will have to wait and see just how bad the fallout is when Greece has a hard default like he wants. things are about to get very interesting my friends.

Lets point the finger at the Fed for a moment.

I came across this article awhile back and have been waiting for an opportune time to post some of the content of it and I figure that this is a good of time as any. Just when everyone is pointing at Greece and the EZ for corruption all the US needs to do is look to the east (New York and Washington) to see some of the most “legalized” corruption in the world. Here is the entire piece from The Testosterone Pit talking about the second ever audit of the FED and what was found.

The Government Accountability Office (GAO) finished its second audit of the Federal Reserve System and came out with a 127-page report that outlines, among other issues, the huge and complex conflicts of interests that arose when the Fed decided who got what during the multi-trillion dollar bailout mania between 2007 and 2009 

Speaking of conflicts of interest: the GAO audit was authorized by the Dodd-Frank financial reform act—whose co-sponsor Barney Frank (D) is scheduled to attend a Wall Street fundraiser in New York tonight, according to Politico. Last June, Frank attended a Wall Street fundraiser organized by the Securities Industry and Financial Markets Association, which lobbies against financial reforms. Money is important, after all. Even for President Obama. He raised more money from Wall Street than did all GOP presidential candidates combined, according to a Washington Post analysis.

So where were we? Ah yes, conflicts of interest, favoritism, and lots of money for some—but not all:

The GAO identified 18 former and current members of the Federal Reserve’s board affiliated with banks and companies that received emergency loans from the Federal Reserve during the financial crisis….

For the heck of it, let’s dive into a specific example.

In January 2008 when the financial crisis was already in full swing, Goldman Sachs board member and shareholder Stephen Friedman joined the Federal Reserve Bank of New York as a Class C director. At the time, Goldman Sachs was an investment bank, and thus not regulated by the Federal Reserve.

But then Lehman Brothers began to totter. Its CEO, Richard Fuld, a Class B director at the New York Fed, met with Timothy Geithner, president of the New York Fed, and with Friedman, who was then chairman of the New York Fed (and still sat on the board of Goldman Sachs). Fuld needed help. However, due to potential “reputational risks,” Geithner and Friedman turned down his request. Further, Federal Reserve Board practice sees to it that directors resign when their financial institutions get in trouble. So, instead of getting bailed out, Fuld had to resign. And on September 15, Lehman filed for bankruptcy.

September 20, Goldman Sachs, now tottering too, submitted an application to become a bank holding company. With Friedman being chairman of the New York Fed, the application was approved overnight. That did a number of things, among them: It gave the firm access to the Fed’s unlimited resources; and Friedman became ineligible to remain a Class C director and should have resigned. But he didn’t.

Then on September 23, there was a public demonstration of just how intertwined the financial elite around the Fed is. Friedman’s long-time friend and client Warren Buffet announced Berkshire Hathaway’s investment in Goldman Sachs. During an interview with CNBC, Buffet said that he wouldn’t have made the move, had he not been certain that Goldman Sachs would get bailed out. And he got a special deal: $5 billion in preferred stock with a 10% annual dividend plus warrants to buy $5 billion in common stock at a strike price of $115. When the announcement was made after hours, GS jumped to $134.75. The warrants were already in the money (today, GS closed at $100.86).

In October that year, the New York Fed asked for a waiver that would allow Friedman to remain a Class C director while being a board member and stockholder of Goldman Sachs, the very firm he was now regulating and bailing out. On January 21, 2009, the waiver was approved though not publicly disclosed. But throughout that time, Friedman, as chairman of the New York Fed, purchased more Goldman Sachs stock, knowing what bailout instruments were being planned and implemented, and which firm got how much and under what conditions.

Among the 18 people identified in the GAO report was Jeffrey Immelt, the CEO of General Electric, and a director on the board of the New York Fed. He was involved in establishing the Commercial Paper Funding Facility that later handed GE $16 billion in bailout funds (he is now Chairman of the Council on Jobs and Competitiveness in the Obama administration). Another was Jamie Dimon, the CEO of JP Morgan Chase, and a director at the New York Fed. And we can assume that there were many more that the audit didn’t identify.

These audits are good. And they’re necessary. So we’re grateful that Senator Bernie Sanders sponsored the amendment to Frank-Dodd that authorized them. But they’re only a feeble first step. Courageous congressional action to clean up the financial cesspool that is bogging down the economy should be next. But Congress is hooked on Wall Street fund raisers. And it is hooked on the Fed’s printing press to monetize the gigantic budget deficits. So there isn’t much hope for serious reform.

Interesting to say the least wouldnt you say?

Happy trading

Chad

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EUR/USD

The way I am looking at the EUR/USD now is the reversal has started but being the 1st push from the lows (3 intraday pushes as well) does still have potential to form the 3rd long term push chop in price here so I will be looking to short from the highs (of which I would be most happy with considering fundies) or go long at the lows from a stop run there. I do still feel there could be some optimism creep into the market considering the possibility of a vain attempt by Greek officials to work together plus I do believe the new French president Hollande will be saying how happy he is with working together with Merkel on the fiscal pact. From what I read the news was a bit overblown with what he wanted to change in the fiscal pact so that has potential to simmer down from my perspective. Having said that it really doesnt change the fundamental picture in Europe and my longer term bias is down.

GBP/USD

The GBP/USD is in the same scenario but price is at the opposite end of the scale. We have seen 3 intraday pushes to the upside yesterday and it has now formed the high and low of what could be the 3rd push chop. This pair has potential for either direction at this point so in order to take the short I need some clear manipulation at the highs from yesterday and for a long I would want to see the manipulation at the hourly 200EMA at least.

Forex News Today

Scheduled news releases are light again today with German Industrial Production and some speak from the ECBs Draghi later in the day. The French banks are on holiday but that shouldnt effect liquidity that much. The US does have one low impact event with IBD/TIPP Economic Optimism but I dont expect that to move the market.

What will be watched are the bond auctions I mentioned in the May 7th commentary. The Greeks will be trying to sell their bonds on the market and with the election only making more questions whether they will receive the next chunk of cash from the bailout or not I have my doubts this will go well. Also the EFSF will be trying to sell bonds today. The last time they tried it didnt go so well either so we will be watching for any tape bombs referring to these two auctions as well.

Whats Next? 

As I filter through my news sources Idid find a very good article that describes my opinions on what will happen in the short term in the Euro Zone and it just makes sense to me. Just how much time this sidestepping will gain remains to be seen but I do fully expect a dance to ensue something to the degree described here. Of course with some fancy moves added in for creativity hahaha. This from Peter Tchir from TF Market Advisors.

The markets will digest the elections as we illustrate in the weekly report.  We are already seeing it play out.  After an initial swoon in markets, they have rebounded, and already threaten to take out some post election shorts.  Germany has said they will play nice with France.  Merkel seems to have the trickiest job as she and her supporters lost support for their bailouts, and yet in Greece, the people who took the bailouts also lost power.  It is funny that both the giver and receiver are viewed as having done the wrong thing.  This will be important over time, but not this week.

This week we will see everyone play nice. Conciliatory words will be spoken.  Growth will become the topic de jour.  The markets will fall all over themselves once again on news of bank bailouts.  The headlines we get in the early part of this week will once again be overwhelmingly designed to encourage people and the markets.  Europe will have a new spirit of co-operation and will welcome fresh insights into the process.  Growth, growth pacts, plans to grow, infrastructure growth, etc., will be talked about.  There will be talk, and maybe even action on the bank recapitalization efforts.  Good banks and bad banks will abound.  Governments will promise money to banks at rates so low no sane investor would even consider.  So I look for a continued bounce and am a bit net long in the TFMkts Best Ideas™.

Ultimately these plans will fail, and we will see fresh lows on the year for stocks, with the U.S. and Germany hit hardest (having outperformed by far too much already), because:

• Germany in particular, but France and the Netherlands will have trouble justifying their contributions to the bail-out.  They will be forced to turn to domestic issues to satisfy their electorate and this will become obvious to the market.
• Growth isn’t easy to achieve.  Once “growth” moves from a vague concept stage into something resembled a plan, investors will likely laugh at the attempts.  It will be clear that most of the plans are unlikely of achieving long term growth above and beyond the cost of achieving it.  That will not help the bond markets, and in turn will spill over into equities as they realize they were fooled by headlines and hype over reality, once again.
• The good bank/bad bank concept is a loser to start with.  The bank recapitalizations just enshrine zombie banks.  By the time a bank is getting government gifts, the problems they have hidden are likely as large as the obvious ones.  The managers don’t worry about lending, they worry about protecting their jobs and their income and hoping nothing else comes out.  They hoard the new money in an effort to grow capital and in the hopes that the problems no one noticed go away before someone notices.  Starting fresh banks would be ideal.  Or letting some bad banks fail and then starting them fresh would be okay.  Letting the existing banks get taxpayer money at uneconomic rates, does nothing for the citizens, or the country, and ultimately if there is any “winner” it will be the banks, but even that may take years to play out.

Looking at the 1hr chart here we definitely have a 3rd push down and I do expect some effort to try and close the gap from the news. We should see that attempt during the London session but if you do take a long here I wouldnt expect a large push out of it. I do have a feeling there will be some rhetoric coming from Europe today and to calm the markets from the political shake up there will be words of “working together” and such just to keep the tumble in check for the moment. Having said that my crystal ball has never been that accurate and there is plenty of reason to see more downside for the Euro in the near term. I will be looking to play the manipulation as usual and prefer a short position to be holding for any length of time.

The GBP/USD has a clearer 3 pushes now too so this pair has more probability for the reversal. I wouldnt expect too much from a long trade here either but as the EUR/GBP has potential to run off south the chance for the EU and GU running in opposite directions is higher. However eventually the EU will drag it down with it considering the fact of how intertwined the UK and European economies are. The longer term move will depend on the European rhetoric also. What does concern me a bit here too is that the Sunday gap has already closed and the pair is finding resistance to the upside move. We could possibly see the run off with no safe entry also.

Forex News Today

Of course any news events today will be overshadowed by the elections and its a good thing that there isnt much in way of releases from Europe with Sentix Investor Confidence and German Factory Orders. If the Factory orders are a big disappointment then we should see the Euro accelerate any drop but otherwise this will most likely be an opportunity for manipulation.

Uk banks are on holiday today observing May Day so with thinner liquidity during the London session the potential for larger moves is there also. Be careful and it would be best to trade from extreme levels (highs/lows)

We dont have any US news today so the US session will most likely be price action based moves digesting European rhetoric. Chance for manipulation is high during the US session.

European events to remember

• 7 May: Germany to debate ESM. Parliamentary public hearing on the ESM Treaty.
• 8 May: Greece auction. Bills.
• 8 May: EFSF auction. Bills.
• 11 May: European Commission to release spring economic forecasts.
• 11 May: Italy auction. Bills.
• 13 May: German state election in NRW. The vote in NRW can be seen as an important test of the electorate’s political mood.
• 14 May: Spain auction. Bills.
• 14 May: Italy auction. Bonds.
• 14-15 May: Eurogroup and ECOFIN finance ministers meetings.
• 15 May: Greece auction. Bills.
• 15 May: Flash Estimate EU and euro area GDP. Eurostat to publish preliminary estimates for Q1 2012 GDP.
• 17 May: Spain auction. Bonds.
• 22 May: Spain auction. Bills.
• 25 May: German parliament vote on Eurozone ‘Fiscal Compact’. The Fiscal Compact to strengthen budgetary discipline within the euro area will require a two-thirds majority in both the Bundestag and the Bundesrat, the upper house. Until now, cooperation between the coalition parties and the opposition has been smooth, underlining the pro-Europe sentiment. The SPD and the Greens are insisting on taxation of the financial sector and a growth package in return for their support.

The parallel’s between the crash of 1929 and today are so obvious, but yet so blissfully ignored. The last ditch efforts to keep the market from crashing was a ‘heroic” move by the banks to infuse capital to free up lending. Sound familiar? Again on “Black Thursday” they again promised capital as a last ditch effort to shore up the market and it worked….until Monday.

Now we have the FED pouring trillions of dollars into the economy as a last ditch effort. What has history shown us. The greatest tell tale sign might however be in the manipulation. As the economic indicators were turning down through 2007 and 2008 the DOW rallied to a new high? Shouldn’t equities reflect the general overall health of the economy?

Today as we see more reason than every to worry about the global financial system, you should ask yourself one question. Shouldn’t equities reflect the general health of the global economy?

History predicts the future, and without fail this will be no exception. I strongly urge those with market exposure to talk to your professional advisor as to ways to protect yourself from market downside/free fall. Eventually (within the next year or two I believe) the market will correct and it is now you and I alike should be preparing. I hope this article and these videos spur you to action.

While I urge everyone to go through all 6 parts (about an hour all together), if you are short on time part 4 & 5 provide some stark parallel’s to today.

Part 1

Part 2

Part 3

Part 4

Part 5

Part 6

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The GBP/USD is a bit more tricky today. I can clearly see 3 pushes down but they are all less than the 90 pip pushes we like to see which makes the reversal a possibility here. At this point I will be looking for the obvious manipulation and trap move to take any entries during the London session.

The Yen crosses all are trading from intraday levels at the moment with no clear longer term pushes that dont go back several days and we could find several pushes down from the highs. The trade I entered here was taken off the manipulation during the Draghi speech yesterday and I expect the Yen to strengthen more as the Euro gets weaker so my thoughts are that if we can break these recent lows from Wednesday then we should be off to the races.

Forex News Today

Todays news starts off with Halifax HPI from the UK and considering the Nationwide HPI release was negative if this does surprise it will be to the downside but since expectations are for the drop I doubt it will be much if any.

From the EZ there is Final Services PMI and Retail Sales. The big one being Retail Sales having an expectation of improvement is what will be watched. If it does improve (of which I doubt) then the Euro will most likely get a small bump but if its in negative territory again the EZ will be showing more signs of the slow down we all know is happening and we will see more Euro weakness.

Lastly today is the most major news event of any month being Non Farm Paroll numbers from the US and the Unemployment rate. The NFP numbers are expected to improve a bit from last months at 173K. I never try to predict this one guys since it is such a manipulated  figure so we will just have to wait and see how it comes out. Below is another video from Charles Biederman on just how screwed up and inaccurate the numbers are. Enjoy.

Happy Trading

Chad

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The GBP/USD is in a similar situation as the Euro with 2 clear pushes to the downside so here I will be looking for the short also. It has already tested the hourly 200ema from the top of which coincides with the daily support from April 27th. This was the pair I traded yesterday as the news proved me wrong about the GBP/JPY and pretty much everything else ran off with out providing an entry for me. When it pulled back on a UK news event I took the short from 1.6222. It proceeded to make the drop for 60+ pips and given the probability of the next push I decided to protect just under 20 pips above the psychological level of 1.6200 and during the US session it came back and got me at +18. Not too bad but could have been much better for sure. Up coming news could keep this pair range bound also but still biased for the short.

Forex News Today

The European news starts with Nationwide HPI and Services PMI from the UK. With the UK construction data yesterday being much better than expected the HPI data will likely follow suit and at least meet expectations. Since the UK is a service based economy any improvement there will be a plus for the GBP so I will be keeping an eye on that.

Later in the day there is a French 10 year bond auction that even though shows as a low impact event may prove to be otherwise. If there is any uptick in the yields here will cause ripples across the more troubled countries like Spain and Italy. After the big manufacturing disappointment the chance does increase that the markets feel less optimistic on French debt and if so Spain and Italy will be in bigger trouble. The big one for today is the Rate decision from the ECB and press conference. As I mentioned above I expect the speech to be somewhat less of the typical Euro pump and when the questions start the markets will be looking to see how well Draghi can sidestep the fact that things are looking terrible for any sort of recovery from the crisis. We will ahve to just wait and see.

The US data has  Unemployment Claims, Prelim Nonfarm Productivity, Prelim Unit Labor Costs, ISM Non-Manufacturing PMI. The bigger ones here are of course the Unemployment figures which if they have a surprise to the upside then the ADP Nonfarm disappointment will be looked at as a closer resemblance to tomorrows Non Farm Payroll and will be bad for the USD. If there is a surprise drop (of which I doubt) then NFP tomorrow has a chance of at least coming out as expected. The ISM PMI will be watched also for any improvement. It is expected to drop slightly so any surprise up or down will have an effect on the USD.

I did find an interesting video of an interview with Charles Biederman from Trim Tabs and I have to say I totally agree with his views here. I do think his timing for the European implosion may be a bit off as I think the politicians and banksters will drag this out a bit longer than 12 months but never the less it is an inevitable outcome. To be honest I expected it sooner but now that I realize just how much effort they have put into the kicking of the can I have reevaluated my opinion and it wouldnt surprise me in the least if this farce lasts another 2 years. Time will tell on that one. Enjoy

Happy Trading

Chad

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The chart is still a mess but if we can get a good push below the 200EMA (blue) today I will be expecting the 3 push drop. As for any trades today on this pair I am keeping an open mind and has a small bias to the downside. I will be most happy to short off some upside manipulation during the London session. With the decoupling and European problems in favor of the short here it could be a significant move and if it does happen may be worth holding for the longer term swing trade down. Just going to have to wait and see what the market brings today.

The GBP/USD has made a significant push to the downside for well over 100 pips and shows a possible 1st push down. However I am a little concerned that it hasnt broke below any significant support and is finding it at a break out level rather than a bottom. There seems to be a desire to retest the highs here and has more probability of chopping here for awhile. So when in doubt we treat this as the 3rd push chop and trade the intraday pushes along with confluence of Smart Money habits. Yesterdays high will be where I start to look and see if there is a good reason to short this pair today but will be better to see it hit a more significant level.

The EUR/JPY has made the weak reversal at this point due to some JPY weakness off the PMI data from the US yesterday but is seemingly having trouble on a clear push due to the Euro being weak also. With that in mind I will be focused more on the GBP/JPY today as it is holding the correlation with the USD/JPY pretty tight.

The GBP/JPY looks the most interesting today with a not so clear direction on the GU and potential reversal coming with Yen weakness this will be the pair I watch close today. Some decent manipulation into the 4hr 200EMA and I will be looking for the long on this pair today as long as the tight correlation with the USD/JPY is still there which I think will be likely.

Forex News Today

News releases are busy today starting with the PMI and Retail Sales from the Switzerland. I usually dont talk about Swiss news but this could be something that adds to some USD strength since the Swiss Franc is a safe haven currency if these figures show a deteriorating economic outlook then the safe haven status may go with it. What will be most interesting is if the PMI release drops below the 50 level signaling shrinking business conditions from purchasing managers.

Next in line is German employment numbers the EZ Unemployment Rate and for icing on the cake the ECOFIN Meeting that lasts all day.

The potential for tape bombs today are high with this meeting. From what I have been reading lately this will be an attempt to pressure Germany and the other financiers of the major portion of the ESM to agree to changing the law that created the bailout fund to be able for the money there to be used to bail out European banks directly. If they do this it will significantly change the outlook for the EZ. They will be able to kick the can alot further down the road and it will seem for awhile that all is well again in Europe.

With allowing the ESM to bail out banks directly it will also create an environment where the governments that are failing will not have to undergo the harsh austerity and get their financial houses in order. Therefore will create the look of everything being well in the EZ until of course the markets realize its not which will take time and they will focus on other countries like the US and Japan for example.

Having said that I highly doubt the Germany will agree to this especially with elections coming up next year and the German people already quite upset with them being the main funder of reckless spending European governments that  are up to their eyeballs in debt. However the chance of some finance minister coming out of this meeting and saying to the effect of “we are getting closer to an agreement on the ESM” will have a boosting effect for the Euro. Of course a statement like that will likely be shot down by Schauble but if the market believes this has a chance of coming to fruition the Euro will get the boost they want. Her is an excerpt from the Business Insider article with a little more detail.

Even at the highest levels, the can of worms has now been acknowledged as open—just as the rift that zigzags through the Eurozone has become deeper and wider: according to information the Süddeutsche Zeitung obtained, the ECB and a group of Eurozone countries are trying to make it possible for the permanent bailout fund, the ESM, to bail banks out directly. The countries remained unnamed but, given the nature of the topic, would have to include Spain.

Any such effort would violate the two fundamental principles of the ESM—that a country will get bailed out if, and really only if, it commits to the reforms necessary to make its economy competitive and to reduce its deficit; and that only countries will receive funds, and not banks. The goal was to alleviate the causes of the debt crisis—high deficits and uncompetitive economies. It was how German parliamentarians had been persuaded to vote for the bailout packages.

Nevertheless, a working group will determine over the next two weeks—lightning speed by EU standards—how, not if, banks could receive bailout funds directly from the ESM. Cause for the rush: Spain.

Spanish banks have been ravaged by the implosion of a real-estate bubble that they caused with their reckless lending practices. Now they needed an immediate injection of at least €50 billion, and much more later, as bad loans and collapsing real-estate values on their books would finally have to be dealt with.

By having the ESM bail out banks directly, a debt-sinner government could avoid painful reforms and deficit reduction programs; and it could avoid having to bail out its own banks, highly unpopular when “austerity” is being imposed on the citizens. This just happened in Greece where banks reported €28.2 billion in losses. 13% of GDP! But €25 billion in rescue funds had already been transferred to the government—to bail out the banks, not the Greeks themselves. Yet it’s almost over. Read….  “Drachma Clauses” For Greece’s Exit from the Eurozone.

Spain could have asked for bailout funds long ago, but it didn’t want to do that because it didn’t want to subject itself to the painful reforms that had been imposed on Greece, Ireland, and Portugal. It would be much easier if the banks could get bailed out directly.

Now with all that out in the open I should also mention that it is entirely possible that Germany refuse to discuss the ESM at all which will kill any thoughts of changing the structure it and the house of cards will be that much closer to falling. I will be the first to say that nothing will surprise me and I have absolutely no clue as to what will come of this.

The news from the UK is Construction PMI and Net Lending to individuals and both are expected to drop and I dont expect much movement from these unless the is a big surprise from the PMI numbers.

Lastly is the US news with ADP Nonfarm Payrolls and Factory orders. ADP is expected to drop and if it does surprise down then the euphoria from the good ISM figures yesterday will be wiped out and the decoupling theory fade yet again. Otherwise if it does miraculously surprise to the upside then the euphoria will continue as it will create some small expectations for Non Farm Payroll on Friday to be better also.

The safest trades today considering all this together is play the extremes where we see manipulation or a stop run.

Happy trading

Chad

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Looking at the EUR/USD we are still in the nasty chop. Yesterday didnt quite turn out as I expected with a manipulation down and push up however there was a trade short. No I didnt take it as there wasnt quite enough confluence for me and I did have a small bias to the upside so in order to override that I need some good confluence to change that. Today considering the holiday it could go either way. I do have a small bias to the upside again mainly due to the fact of the fundamentals all point to downside for the Euro at the moment but given the chance for manipulation on low volume the Smart Money may have an easier time taking higher stops and I expect them to take advantage of that.

The GBP/USD looks to be starting a retracement of the long run up its had over the last couple weeks. The push up I expected yesterday never came true so at this point I will be looking for the continuation of the turn to the downside. The move down from the highs dont quite fit the criteria of a first push so a deeper manipulation up may be in store. possibly a test of the highs for a stop run. Today I will be keeping an open mind and looking for the manipulation outside the Asian range.

The EUR/JPY did what I expected in the April 30 commentary with a move down. However it never gave me a high probability trade and I did not get a trade during my best trading hours yesterday. Today looking at the hourly chart I see a clear 3 pushes to the downside and a potential bottoming formation. There hasnt been a real test of the lows with rejection to clearly show it has bottomed but the reversal is the higher probability trade today. As I mentioned above be careful out there with the volatility on low volume. Only take very clear entries and watch the USD/JPY. In order for this pair to make the reversal the USD/JPY should go with it.

Forex News Today

Given most of the world is on holiday the news is light and we only have Manufacturing PMI from the UK during the London session.

The US session has ISM Manufacturing PMI which is expected to drop slightly but still be well above 50 considered to be expansion. I have my doubts this its self will move the markets but may look like it does as they use any deviation and the low volume to manipulate. At the same time the US PMI figures there is Construction spending and ISM Manufacturing Prices both of which are low impact events. After that there is 2 members of the Fed speaking 30 minutes apart. My feeling is that these guys will be watched the closest and the market will try and get a clue for any more QE. I think the market will be disappointed but dont go by my thoughts on that since these guys do what I expect only about 50% of the time haha.

Happy Trading

Chad

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Looking at the markets this morning (the Yen crosses being the exception) it would almost seem as if risk is on. With equities rising slightly last Friday and the Euro refusing to lose any ground. The GBP/USD still on a tear. To be honest I dont believe it but the markets are not logical most of the time so we just deal with what it brings.

At this point I am expecting the chop to continue on the EUR/USD. It may be starting to roll over but like I said Friday I wont be convinced until we have a break and nice push below the hourly and 4hr 200EMAs on the chart below.

The GBP/USD is in a far different situation as it has been in a solid up trend. It is hitting some resistance from a daily break out point but it is weaker than the daily high it seemed to break rather easily on Friday of last week. At this point for both of these pairs I will be looking to trade from the extremes (highs/lows) using the intraday medium term levels and manipulation. The long term levels are fuzzy to say the least and there is no point in looking for them right now.

The pair that does look most interesting today is the EUR/JPY. I can see 2 fairly clear pushes to the downside and the gap to the lows this morning does tell me there is some more weakness there. however trading this I will want to see some correlation with the USD/JPY at least. The GBP/JPY will most likely not be in sync due to the fact the GBP/USD is acting like it is climbing Mt Everest. The gap has already closed this morning so I will be looking for some manipulation to the upside at London and be looking for the short however my bias is not so strong that I wont take a long but would be happier with the short today.

Forex News Today

European news starts the day with German Retail Sales, M3 Money Supply and Euro Zone Flash CPI figures. The more important being the German Retail sales. Having a disappointment last month and going into negative territory its expected to get slightly above at .08 but if it does drop again it will signal Germany is slowing more than expected and we may see the Euro turn. I think it may take more than that but it is possible. The CPI figures are expected to drop slightly also but since its still right around the limit for the ECB I doubt it will move the markets much with out a significant surprise drop.

Later in the US session the release of the Core PCE index from the US is due and expected to rise slightly. If it does and the US is actually starting to admit they have some inflation the chances for QE3 get further away. At the same time we get Personal Spending and a bit later the Chicago PMI numbers. The more important being the PMI which is expected to drop slightly but still be well above 50 (level indicating expansion) so with out a significant surprise to the downside I doubt this will have much impact.

A must hear podcast

I have to say I really like Chris Martenson. This guy does great research and is not afraid to tell it like it is. Below is podcast interview he does with Bill Black and they outline just how screwed up the system is and detail how it will stay that way until something major happens. Something to the effect of a revolt by the people the way I see it. Enjoy and be warned that you will probably be very angry when its done. Even though its only half of the interview.

Happy Trading

Chad

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Happy Trading

Sterling

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While I am on the subject of news from yesterday I should mention the Spanish downgrade from S&P. This sheds a whole new light on the potential for Spanish banks being downgraded by Moodys in the coming month or so. With this added in, the picture for the Euro seems even more bleak. The fact that the ECB is on a ledge so to speak with Germany regarding more LTRO, its going to take a bank on the verge of failure before they do another one. I wont be looking for longs on the Euro any time in the near future.

The Charts

With that news and considerable drop at the end of the US market the EUR/USD is starting to become more clear but I want to see a solid push below the 4hr 200EMA  (black) here for a clear 1st push to the downside. I will be happy to take a manipulation short with decent confluence but I will be strict on getting a good entry here without having clear direction as of yet.

The GBP/USD is in a bit trickier of a situation with the weakness of the Euro. Its still possible if not probable that the GBP go up from here while the Euro goes down and the EUR/GBP drops like a stone but that will have to be how it plays out. Otherwise if true USD strength comes into play the GBP/USD will be dragged down with the Euro. Of which will eventually be the case but may not happen for a few days. I will not be looking to trade this pair today just for that reason as their are factors that tell me this could go either way and the levels are skewed.

The GBP/JPY is in a medium term chop where I can see 3 pushes down yesterday then it has reversed for the push up with only 2 pushes seen so far.

I have my doubts I will get a trade off before the BOJ makes the announcement mainly because I would prefer the long entry at the lows at this point. If they dont ease and do more QE then its will most likely drop substantially but the probability is low that they will do nothing in my opinion. Check out this report from a previous BOJ board member and you will see what I mean. This is from Bloomberg.

Any failure by the Bank of Japan to expand its asset-purchase program at tomorrow’s board meeting would sow confusion over its policy, a former policy maker said.

Inaction “would be a disaster for communication,” Atsushi Mizuno, who served on the Bank of Japan board from 2004 to 2009, said in an interview yesterday in Tokyo. All 14 economists surveyed by Bloomberg News before tomorrow’s gathering predict Governor Masaaki Shirakawa and his colleagues will boost asset purchases amid forecasts for growth to slow through the year.

Forex News Today

News today is busy with the BOJ report due sometime before 1am EST. they always have this as a tentative schedule and usually time the release during lunch hour in Japan and as inconvenient for other traders around the world. Its no wonder with the lack of liquidity at these times we often see large moves that get a good part of retraced before or during London.

For Europe there is  GfK German Consumer Climate, German Import Prices, French Consumer Spending and an Italian 10-year Bond Auction. the ones most watched will be the Consumer Climate and Italian bond auction. If Italian yields start shooting up the Euro will feel the heat and we will have a risk off scenario during the London session.

The US news is light but a biggie with Advance GDP figures. This will be watched close also with the previous quarter being revised upwards but expecting a drop from the previous release. Any surprise to the upside should have the decoupling risk on for US stocks and more pain for the EUR/USD. If its close to as expected or a slight drop I dont expect too much reaction unless this Italian bond auction goes off with out a hitch. What that will mean is investors are willing to fund Italy while the US isnt growing as much as they like. This has more potential to push the Euro up in that case. I think its unlikely but to be honest it wouldnt surprise me as they try to do anything they can to prop up the markets these days.

Now I will leave you with what I would call a fair assessment of Ben Bernanke and his policy I received in an email from Jack Crooks at Black Swan Capital.

Once again it seems the Fed Chairman Bernanke didn’t disappoint the stock bulls.   I expected otherwise.  Wrong again I was.  I continue to be amazed by Ben’s logic here.   

He says he wants to produce some inflation through monetary policy so the US economy doesn’t get caught up in a Japanese-like deflationary spiral.  But in the process of creating inflation, which is in commodity prices primarily, thanks to the implicit weak dollar policy (driven by the Treasury and deftly executed by the Fed), he hurts consumers and businesses with many of these policies even though he tells us he is really saving them.   

So, let me see if I get his right:  

1. Pay those who save nothing on their deposits
2. Then further reduce their purchasing power by creating inflation
3. Continue to punish the interbank lending market (because of zero interest rates); therefore, banks have no incentive to lend to other banks that may actually have real economy lending opportunities.
4. Pretend the US labor market is healing, when it is now starting to weaken again, and unofficial unemployment and under-employed rate is off the charts, proving that something is very wrong with existing policy.
5. Then proceed to tell us how much this policy is working, and just in case there is a slowdown, tell us we will get more of this same policy that is working so well.

My head hurts after writing that.   

But we do know who this policy helps—the financial economy; which consists of some very smart people who know where their bread is buttered and just so happen to have a lot of extra money lying around to make campaign contributions. Hmmm…   

So Ben, you are telling us to forget about:  

1. Faith in the currency and benefits of rising purchasing power (falling prices in a recession are supposed to deliver rising purchasing power for consumers who naturally have fewer dollars in a recession)
2. Massive over-regulation
3. Incredible federal government waste and incompetence among its agencies
4. Punishing tax rates that discourage entrepreneurs and business investment
5. The self-reinforcing positive impact an active interbank market
6. On and on and on …

Of course, many of these things are out of the Fed’s control.  But that is the point.  Don’t pretend monetary policy is a substitute for the rest of the ills, otherwise you create even more distortions.    

This is a comment posted to our blog yesterday from one of our readers:  

No disappointment for the markets as that stupidest of Fed Chairman held out the possibility of more publicly announced QE if the economy deteriorated. Yet he is sending out conflicting messages because he concedes that another round of QE would have negligible effect on unemployment. All of his mixed messages are deceitful and disingenuous; as was an earlier statement that he gave to 60 Minutes that he was not printing money. Why can’t he admit that the principal reason for all this monetary maneuvering is to prevent the US from plunging off a fiscal cliff? For if interest rates were not kept artificially low, there would be no way for the US to service its enormous national debt. Better still, his best before date has expired and it is time to give him the boot.  

Have a great weekend

Chad

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MAKE FULL SCREEN FOR EASIER VIEWING:

The reason personally have full faith it will never change is a basic market fact….smart money needs buyers when they want to sell and sellers when they want to buy. Without the other side of the market they cannot place a trade.

Think about what that really means. Essentially they sell into rising markets (selling into buying pressure), and they buy into falling markets (buy into selling pressure). Think about more than likely every forex system you have ever bought. Does the price not have to begin to work up before triggering a long? Does the price not have to begin to fall before triggering a sell? While each has its own “specific requirement they all go back to that basic fact.

Wait a second!! Smart money does the exact opposite?? Is it really any wonder retail traders end up with the results they do. Manipulation is the key….and understanding how they manipulate the market provides the direction we should trade. I hope this training video was useful. To our success!

Happy Trading

Sterling

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The chart of the EUR/USD is still a mess but with the Fed doing pretty much as expected with just a small hint of holding rates low through 2014 and no mention of QE3. the Euro seems poised for a next move to the upside. Its really only a small bias up but considering its held its 4hr 200EMA well first finding resistance then support after the break on Tuesday I am thinking it will only take a bit more optimism to push it up through the recent highs. As I said yesterday I am paying more attention to the GBP/JPY and today the GBP/USD looks interesting also.

The GBP/USD is more interesting today because of the break above the daily high I mentioned yesterday. It has made a test of it twice and now broke above and finding support from the upside. I wont be totally convinced until after London opens today but would be happy to take the long here with some nice manipulation down before the push up. Plus it does not conflict with my GBP/JPY long I am still in from yesterday. What does concern me is the 3 intraday pushes from the lows on the 25th but at this point the reversal may have already been seen as they are intraday levels and we are in a long term technical up trend. Breaking through the daily resistance will open the door for and extension up. Just going to have to wait and see during London.

Here is the current situation for my GBP/JPY trade. I have gone ahead and moved my stop to protect 60 pips. It has already moved 115 from my entry and pulled back so to me that should be enough wiggle room to give it a chance to make the push. As long as my analysis for the GBP/USD and JPY are correct we should see a sustained move. No guarantees though guys.

Forex News Today

UK News

The scheduled releases today are average and the UK Consumer confidence figures were much better than expected and is at a nine month high. Later during the London session the BBA Mortgage Approvals and the CBI Realized Sales numbers will come out with Mortgage Approvals expected to increase while the Sales are expected to drop again. If that makes any sense. That would mean people are buying more homes but retailers and wholesalers are selling less goods. I guess its possible but with consumer confidence up I would say the odds on the Sales figures having the deviation to the positive side is more probable. No guarantees as stranger things have happened.

Euro Zone News

Later we have the German Prelim CPI and ECB President Draghi speaking again. The CPI is expected to drop a couple ticks and if it does come out as expected will mean that the ECB has less chance of doing another LTRO any time soon mainly since yesterday Draghi all but said there wont be one and other ECB members have been saying there is no need for it in the near future a well. Its the same situation as the US on QE3 at this point. They wont be doing anything drastic until something drastic happens to stocks or another bank is about to go under. Of which could be anytime or weeks to months down the road.

US News

The US has  Unemployment Claims and Pending Home Sales. Both I expect to be somewhere close to expectations. What would be a surprise and move the markets is if the Unemployment Claims bumps above 400K of which I have doubts on any probability for.

More on European Banks

As I mentioned above the chance for a new LTRO scheme is low at this point but here is my favorite gloom and doomer again with a few points on where the European Banks stand at the present time which is what leads me to believe it could be any time but also could be pushed out for weeks or months.

Consider the following:

1. According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans… the real leverage levels are likely much, much higher.) These are a Lehman Brothers leverage levels.
2. The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).
3. The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).
4. Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)

So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

And all of this is occurring in a region of 17 different countries none of which have a great history of getting along… at a time when old political tensions are rapidly heating up.

As bad as the above points may be, they don’t even come close to describing the REAL situation in Europe. Case in point, regarding leverage levels, PIMCO’s Co-CIO Mohammad El-Erian (one of the most connected insiders in the financial elite) recently noted that French banks (not Greece or Spain) currently have 1-1.5% capital relative to their assets, putting them at leverage levels of nearly 100-to-1.

And that’s France we’re talking about: one of the alleged key backstops for the EU as a whole.

Happy Trading

Chad

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Looking at the charts today the hourly Euro has seen what I would consider 3 pushes to the upside but I consider these medium term levels and half expect it to reverse after a stop run to the highs and this does concur with my fundamental bias to the downside. Having said that I will be more comfortable trading the Yen crosses today if that makes any sense LOL. I will explain more on that here when I cover them shortly. Any trade I may take on the Euro will be after a clear stop run to the highs of either Monday or Friday of last week. The higher the better. Otherwise I havent totally ruled out a long position either and some clear manipulation down to the 4hr 200EMA and some nice confluence and I would be happy with a long position.

The GBP/USD is in a similar situation but having different issues. Seeing its in a long term technical up trend the levels are not clear and yesterday it went up and tested some major daily resistance at the 1.6164 level and has a clear topping formation going on. I half expect this pair to still head north but a reversal here is not out of the question either. If i only look back 4 days I can see 3 pushes up however just adding a couple more days to the chart there are even more. In either case I will need some heavy confluence to trade this pair.

The GBP/JPY looks the most interesting to me today. Mainly because the way the 1hr chart looks it has only seen 2 pushes from the lows yesterday and the fundamental picture for the JPY is weakness. I mentioned in the April 24th commentary that the BOJ has all but promised more printing of Yen and later in the day somebody did more or less fulfill the promise and said they were looking to print 5-10 trillion Yen at the next BOJ meeting this Friday. At this point I am only concerned about getting an entry today with out having to chase it.

Forex News Today

The news is actually going to be eventful today. Starting with the ECB chief Draghi speech. I would expect more of the same from him with austerity and how well things are going LOL. Then next on tap is GDP figures from the UK. With a downward revision from last month this does have a chance to disappoint. If it does we might see the drop in the GBP mainly because the market will be thinking the Asset Purchasing may ramp up at the next MPC meeting but if it does surprise to the upside the push through the daily resistance has a better chance than if this release comes out negative. Also from the UK there is CBI Industrial Order Expectations and if this is good it will show improvement in the UK but I have my doubts as it is still in negative territory and will need a large deviation to get back positive. There is also a 30yr German bond auction which should be a non event with their bonds.being the most sought in the EZ.

Later from the US we have Core Durable Goods Orders, Durable Goods Orders and Crude Oil Inventories however the biggie for the day is the Fed Fund Rate and Press Conference. I am rather sure the market will be looking at this for more clues to QE3 and any change in the rhetoric to show just how close we are to seeing it. I have my doubts there will be much difference since we are not past the presidential election and there hasnt been a steep drop in stocks to warrant such a move so even though the market will likely be choppy I am not thinking we will see a large move from this but it wouldnt be the first time I was wrong about what the Fed has up its sleeve LOL

I will leave you with a few excerpts from my favorite gloom and doomer Graham Summers with a little more detail on the article from The Telegraph on how the German people are just about to see the writing on the wall and how the Bundesbank has racked up a massive amount of back door debt that will leave the people in the poor house in the future. And a few possibilities of how this may play out in the future.

German tempers boil over back-door euro rescues

 Professor Hans-Werner Sinn, head of Germany’s IFO Institute, said German taxpayers are facing a dangerous rise in credit risk from a plethora of bail-out schemes. “The euro-system is near explosion,” he told Austria’s Economics Academy on Thursday.

 Dr Sinn said Germany is on the hook for much of the €2.1 trillion (£1.72 trillion) in rescue measures for EMU debtors – often by the back-door – that will saddle Germans with ruinous losses one day.

 ”It is a horror scenario,” he said, warning that the euro system is splitting friendly countries into blocs of mutually hostile creditors and debtors, exactly the opposite of what was hoped.

 Earlier this week, the Foundation for Family Business in Munich filed a criminal lawsuit against the Bundesbank, accusing the board of disguising the true scale of risk born by German citizens.

Remember, in the last six months Germany has:

1. Passed legislation that would permit Germany to leave the Euro but remain a part of the EU

2. Reinstated its Special Financial Market Stabilization Funds, (or SoFFin for short)

 It is the second of these items (the reinstatement of the SoFFIN) that the western media and 99% of investors have missed entirely. In short, Germany has given the SoFFIN:

1. €400 billion to be used as guarantees for German banks.

2. €80 billion to be used for the recapitalization of German banks

3. Passed legislation that would permit German banks to dump their euro-zone government bonds if needed.

 That is correct. Any German bank, if it so chooses, will have the option to dump its EU sovereign bonds into the SoFFIN during a Crisis. So in simple terms, Germany has put a €480 billion firewall around its banks thereby allowing Germany to potentially pull out of the Euro if it has to.

 Now, I’m not suggesting that Merkel will suddenly opt to do pull Germany out of the Euro. Doing that would only worsen EU relationship and arouse more anti-German sentiment.

 However, I wouldn’t be surprised to see Merkel start threatening this in the coming weeks as German outrage grows regarding their exposure to back-door EU bailouts. Remember, her political popularity is largely due to her appearing tough on the PIIGS. She has to regain that appearance as quickly as possible in order not to face serious political consequences.

Happy Trading guys

Chad

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This week will also see some bond sales from Italy which if go as I expect there will be a rush from the Euro.

Looking at the Euro chart with no fundamental bias I can find 3 pushes up from the lows keeping focus on just the previous 4 days of data. Then a reversal and 3 intraday pushes down before the EUR/USD turned and went back to consolidation for the Asian market today. Since this commentary is getting out late I can also point out that the Asian range today so far has been very tight at only 15 pips so far. this most often will mean a significant move is in store. I will be looking for some manipulation to the upside for the short during the training room today.

The way I am looking at the GBP/USD is it does have potential upside in it but if a risk off scenario plays out with a failed bond auction this week it could drop with the Euro but considering the EUR/GBP may also fall off the cliff the GBP/USD could hold steady so I will most likely stay clear of this pair today. I did manage a long trade yesterday for 24 pips. I took it on the same premise of the EUR/JPY confluence trade from Friday but when it made the 3rd pass and ran up for 30+ pips I wasnt going to wait for the 4th pass and just took the 24 and good thing because it would have got me BE on the 4th pass.

Forex News Today

The calendar is a bit busy today starting with the Public Sector Borrowing from the UK and is expected to show a climb in the budget deficit  in the UK. I have my doubts this will be as high impact with the market focused on the EZ right now but a big surprise to the downside (better than expected) may have a rising effect for the GBP. From the EZ we have Industrial New Orders and Belgium NBB Business climate both of which are supposed to be better figures than last month. If these surprise to the downside it will show that a recession is even closer than figured and should have a negative effect for the Euro. What is not on the list of releases today is an Italian bond auction. I have been too busy this morning to find out exactly what they are auctioning but you should keep your ears open on Talking Forex for any reports on it. Finally the US has S&P/CS Composite-20 HPI, CB Consumer Confidence, New Home Sales and two other low impact events. Any surprise to the upside from consumer confidence and new home sales and I would expect the USD to gain some strength. Surprising to the downside may have a muted effect since we do have the Fed rate and statement late Wednesday.

Happy Trading

Chad

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Here is the trade I took on Friday April 12. When the markets are not clear the way we take the higher probability trades can be taken using some confluence of events. Meaning the clues the Smart Money is about to turn after a stop run reversal or is manipulating the markets. This trade I had to hold over the weekend but in the end come Monday morning it was well worth the wait. I hope this helps.

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Happy Trading,

Chad

P.S – I just noticed the order only shows up for the last second or two. You can pause the video towards the end to see the order. I will post a pic of the order below the video later as well which will make it clearer.

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Looking at the charts alone the EUR/USD shows the first push to the upside and normally we would expect the second however with the fundamental bias to the downside I am keeping my mind open for a trade here today. It would not surprise me for a move in either direction so at this point I will be looking for the confluence along with some manipulation to trade either direction. I will only hold a trade for a longer push on the downside but will be happy to take 50+ pips either direction today.

The GBP/USD is a little trickier with an extended few pushes to the upside. The news of the BOE not doing any more Asset Purchases any time soon has added significant strength to the GBP. Having said that I am still looking for the reversal. After a run that long one would think there will be a decent correction forthcoming. Holding a trade for a long push is probably a bad idea here also but would be nice for a 50+ pip trade.

Looking at the EUR/JPY Im rather happy because I have a short from 107.78 running from Friday. As I type its still running off. My entry was at the close of the second pin just before the NY open Friday. When I woke up and checked the charts Saturday I was a bit disappointed to see it had run off 25 pips and was back to break even but at least my stop wasnt hit during the NY session the run up. To be honest I did not expect this large of a move during the Asian session but never the less happy as it is coming up on my TP at Fridays lows. Just manually closed at 107.18 for just under 60 pips. The chances are the Asian session wont make the push below this level with out a good reason. Now I can take a break until London open. You can find the details of this trade in the recent trade section.

The hourly chart of the EUR/JPY is over extended just as the GBP/USD is but this may be all the correction we get. The BOJ is expected to have a meeting later this week and has all but promised that they will add more liquidity (print Yen). The black EMA on this chart is the 200 from the 4hr chart and I expect this to find support to some extent. The hourly close below it dont have that much meaning until the 4hr candle closes but we will see.

Forex News Today

As I look over the releases scheduled for today I noticed that the Australian producer Prices dropped unexpectedly and could have been the catalyst for the drop in the EUR/JPY this morning but I have my doubts. At this time I would say its more of a manipulation before the push up considering the expectations from the BOJ this week. Otherwise the releases for the EZ are the Flash Services and Manufacturing PMI numbers from France, Germany and the Euro Zone with most all of them expecting a slight rise from last month. As one had a downward revision (French Mfg). If these surprise to the upside then that will signal that things are getting better in the EZ of which I highly doubt but remembering how much numbers are fudged these days nothing surprises me any more. All but the German numbers are hovering around the 50 level which determines expansion or contraction. If the German numbers do disappoint and over the next couple months breech 50 the EZ is in much bigger trouble as that will mean Germany will see recession. Bad no matter how you look at it. These releases are always put out 2 minutes to Reuters subscribers so Talking forex will have them then also.

All is well now right? Not so fast.

Of course as I mentioned above we got the “all is fine now” message from the IMF and G20 over the weekend. Well to be honest I have only seen a few reports on the IMF saying they brought in around 300bil in promised contributions to help Europe with their troubles and how happy they were to see that the EZ themselves have bumped up their commitments to the ESM and EFSF.

Lets look at this a bit closer. The EZ has boosted their commitments? Well sure but who is on the hook for these funds and where will they go? The way things look Spain will be next at the bailout trough. With Spain being the 4th or 5th largest economy in Europe they have a substantial contribution to these bail out funds. Meaning Spain will be on the hook for bailing out Spain? How does that compute? In my mind it dont make too much sense. Kind of sounds like using one credit card to pay on another credit card creating a vicious circle of borrowing from Peter to pay Paul then vice versa.  Then look at Germany who has the largest share of contributions and the German people are steadily getting more upset about having to fund the debt of the PIIGS countries. Of which may soon see a boiling point and lets not forget Germany has an election next year. Lastly both the IMF and EU only have promises from countries to get this money. Not one of these so called contributors has anted up yet and doled out the cash. Why? Because nobody has any cash to send to these funds. Pretty much every cent that eventually makes it to these funds will be borrowed if it ever actually gets there.

Bizzaro World, you just have to love it LOL

Happy Trading

Chad

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Today the EUR/USD is in the same predicament with about no clue on direction. Fundamental wise it should be pushing on down so I will stick with a light bias down and be looking for the manipulation to the upside  for the short today.

The GBP/USD is in the same situation as yesterday with a nicer topping formation and since the prospect that they will not add to the asset purchase facility has been priced in by now the reversal has a bit higher probability now. I will be paying more attention to this pair today as it is more clear. Looking for the trap move to the upside and short again today.

Forex News Today

The news releases for today in the Euro Zone are German PPI numbers that is expected to increase slightly from 0.4 to 0.5%. Any large surprise to the upside may have a significant impact on the Euro since Germany is kind of freaked out by inflation and they will put even more pressure on the ECB for an exit strategy for the LTRO when in reality the EZ is already in need of more cash infusion from the ECB. Then there is the German IFO Business Climate that is expected to drop slightly. This one has potential to surprise to the upside since previous consumer climate numbers did the same but with the rest of the EZ deteriorating it would make more sense for it to drop.

Other than those there is the G20 meetings and the IMF meetings starting today where I expect the typical Euro pumping, every thing is just fine and bizarro talk as usual so with that in mind dont be surprised if the market is choppy today. At least the EUR/USD anyway.

Happy Trading

Chad

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As a day trader, entry timing is a definite key to being successful. If you haven’t seen the first 2 training videos in this series I recommend viewing Forex Trend Trading – Is the Trend Your Friend. Once we understand how smart money tends to drive the forex market we can then begin to narrow our focus to exactly WHEN they will drive the price. This video covers more in depth the possible timing for entries. We hope this forex training series has been useful in your own trading!

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There was a nice trade setup we were mentioning in the forex forum & I also took a recording of the setup. Towards the end I cover some important topics in regards to the GBP/USD as well. There is a valuable lesson taught with the GBP/USD today…and that is sometimes good forex trade setups go bad.

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After I wrap up the EUR/USD trade setup I discuss why the GBP/USD was a great setup as well. Essentially the same tips we talk about in the GBP/JPY Stop Run Reversal Long recent trade are the same mentioned in regards to the Pound today as well. While both had different end results, both were quality trade setups that fullfiled the bank trading strategy clearly! I hope you find the info useful in your own trading!

Sterling

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Today the picture on the EUR/USD is pretty much the same and could go either way. I will be ignoring this pair today unless there is a bunch of confluence factors that warrant a trade. It sure seems like the market is rather confused on direction here but should the ECB start buying Spanish debt again then those yields will drop and the Euro get a bid. We did have an ECB board member say that the bond buying program at the ECB is not over but remember its Germany who really runs the ECB and has been against buying government debt all along. having said that I dont think they will have much choice in the near future so watch out for that.

The GBP/USD was not the most beautiful trade but there are times that they dont manipulate at all and I totally miss those trades. The entry had to be an aggressive one unless it was taken after the clear hourly stop run reversal at the 200ema. As for today the reversal is the higher probability trade but watch out for a stop run to the highs as this could happen before the move down. A clear trap move to yesterdays high would make me most happy to go ahead and short this pair today.

The GBP/JPY was a much nicer entry even though it missed my pending order by 2 darn pips. Today is going to be a bit more tricky though. As I type is has blown through a topping formation and showing it may have more potential upside in it. I do feel that the reversal is the higher probability trade at this point but want to see a clear stop run to the highs and some confluence of factors in order to take the short today. I am also open for the long here should the USD/JPY break it topping formation to the upside also.

Forex News Today:

The major news coming from the Euro Zone today is the Spanish 10yr bond auction. There is not a scheduled release time but most bond auctions start early in the day and depending on how they go the results are sometime around noon London time. I will be keeping an ear to my Talking Forex today to try and catch it but the price movement in the Euro will be a sure tell for it. The way I see it is the auction earlier did go a little better than expected but yields have not dropped all that much and concern there was enough to keep the EUR/USD in a slump most of yesterday until the US market opened. However the fast push up during the US session could have easily been due to more repatriation since US equities dropped as the EUR/USD went up. I do expect that if the Spanish auction does go bad the ECB will step in and buy to keep yields from getting to high. We will just have to wait and see.

The news from the US is light but does have Existing Home Sales and Philly Fed Manufacturing. Home sales are expected to rise and if this disappoints then I am thinking risk will be off and the risk currencies will drop. It seems like the QE or no QE trade is off for the time being so we should be back to risk on or off trading. the Philly numbers are expected to go down so unless there is a big surprise this news event shouldnt have much effect.

Happy Trading

Chad

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The  GBP/USD looks better with a clear 2 pushes up from its lows and I am expecting the third today. I will be much happier to see it test the hourly 200ema with a trap formation to go long this pair mainly for the same reason that its is in the same daily range we are fighting with the Euro. I am a little concerned that looking at the hourly chart here I can see 3 intraday pushes from the lows but considering the chop at the bottom there it looks to be more of trap at the lows rather than a first push to the upside as they hit stops to the lows and then highs before the first push for 90 pips so the probability still remains to the upside for today.

The GBP/JPY looks interesting also as we are seeing a 2nd push to the upside during Asia as I type. Its testing the daily highs from Friday and at this point I expect to see it have a pullback or consolidation area during the London session before it makes the break to the upside. With the USD/JPY on a tear today and having broke through Fridays highs it would seem a test down to those might be in order and then the Yen crosses could be off to the races upwards and if the GBP/USD and EUR/USD do as I expect today then the crosses will have a substantial move in them.

In the news

The scheduled news releases are fairly light today with the Current account figures from The ECB. Its expected to drop a bit but I have my doubts it will impact the market much today. Then later from the UK there are unemployment figures, MPC meeting minutes and Member Tucker speaks 30 minutes after the release of unemployment. The one to watch is the MPC meeting minutes for any clue that they will be doing any more adding to the Asset Purchase Facility. They did have pretty much as expected CPI figures yesterday so its a toss up as to any discussion on more QE from the BOE. There was some MPC talk over the last few weeks saying that its still an option but the Meeting Minutes confirming that would have a negative impact for the GBP.

The US releases are rather dull with just Crude Oil Inventories which rarely has an impact these days.

I did run across a link to an article I wanted to share with you last week concerning the fact that more Fed members are openly criticizing the Too Big To Fail banks and calling for their break up. As usual since these guys are not at the top of the totem pole they are mostly ignored but it is a step in the right direction since they would only whisper it privately before and now are acknowledging it publicly. Its a rather long article and you can read it in its entirety here  but here are some key parts that stuck out to me. Its definitely worth reading.

Fisher sent out the following letter in his official capacity:

Letter from the President

If you are running one of the “too-big-to-fail” (TBTF) banks—alternatively known as “systemically important financial institutions,” or SIFIs—I doubt you are going to like what you read in this annual report essay written by Harvey Rosenblum, the head of the Dallas Fed’s Research Department, a highly regarded Federal Reserve veteran of 40 years and the former president of the National Association for Business Economics.

Memory fades with the passage of time. Yet it is important to recall that it was in recognition of the precarious position in which the TBTF banks and SIFIs placed our economy in 2008 that the U.S. Congress passed into law the Dodd–Frank Wall Street Reform and Consumer Protection Act (Dodd–Frank). While the act established a number of new macroprudential features to help promote financial stability, its overarching purpose, as stated unambiguously in its preamble, is ending TBTF.

They were a primary culprit in magnifying the financial crisis, and their presence continues to play an important role in prolonging our economic malaise. There are good reasons why this recovery has remained frustratingly slow compared with periods following previous recessions

I encourage you to read the following essay. The TBTF institutions that amplified and prolonged the recent financial crisis remain a hindrance to full economic recovery and to the very ideal of American capitalism.

It is imperative that we end TBTF. In my view, downsizing the behemoths over time into institutions that can be prudently managed and regulated across borders is the appropriate policy response. Only then can the process of “creative destruction”— which America has perfected and practiced with such effectiveness that it led our country to unprecedented economic achievement— work its wonders in the financial sector, just as it does elsewhere in our economy. Only then will we have a financial system fit and proper for serving as the lubricant for an economy as dynamic as that of the United States.

Here are some ways TBTF has violated basic tenets of a capitalist system:

Capitalism requires the freedom to succeed and the freedom to fail.
Hard work and good decisions should be rewarded. Perhaps more important, bad decisions should lead to failure—openly and publicly. Economist Allan Meltzer put it this way:“Capitalism without failure is like religion without sin.”

Capitalism requires government to enforce the rule of law. This requires maintaining a level playing field. The privatization of profits and socialization of losses is completely unacceptable. TBTF undermines equal treatment, reinforcing the perception of a system tilted in favor of the rich and powerful.

Capitalism requires businesses and individuals be held accountable for the consequences of their actions. Accountability is a key ingredient for maintaining public faith in the economic system.The perception—and the reality—is that virtually nobody has been punished or held account- able for their roles in the financial crisis

Now I am no hard core conspiracy theorist but seeing Fisher and many more like him addressing the issue and seeing the efforts to just get the TBTF banks on a leash of sorts has resulted in them actually getting bigger. This is a travesty in my mind and makes me give more credence to those that think the big banks are plotting to take over the world. Here is the proof from Blooberg courtesy of the Fed.

  Two years after President Barack Obama vowed to eliminate the danger of financial institutions becoming “too big to fail,” the nation’s largest banks are bigger than they were before the credit crisis.

 Five banks – JPMorgan Chase & Co. (JPM), Bank of America Corp., Citigroup Inc., Wells Fargo & Co., and Goldman Sachs Group Inc. — held $8.5 trillion in assets at the end of 2011, equal to 56 percent of the U.S. economy, according to the Federal Reserve.

 Five years earlier, before the financial crisis, the largest banks’ assets amounted to 43 percent of U.S. output. The Big Five today are about twice as large as they were a decade ago relative to the economy, sparking concern that trouble at a major bank would rock the financial system and force the government to step in as it did during the 2008 crunch.

Seems as if the conspiracy nuts (AKA Sterling LOL) might actually have something here but I like to think of it in terms of this quote by somebody wiser than me I am sure. “Paybacks are a B!t@h”

Happy trading guys

Chad

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Before the large stop run to the downside there was an opportunity to take the GBP/JPY as it completed the topping formation. At this point the GBP/JPY had only give what looked like the second push down in the overall weekly cycle. Because of this the safer trade was looking for a push up ending in a stop run reversal or topping formation. As you can see it gave the clear M trap move which candle confirmation for the move back to the downside in the direction of the weekly cycle.

I should have taken a bit more out of this trade after the stop run setup long that Ster took was visible, but either way it was a nice trade that netted about +50 pips between both positions I had running.

Happy Trading

Chad

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The GBP/JPY gave us a nice stop run reversal at the end of what looked like the third push to the downside. I decided to close the trade sooner than I was originally anticipating, and managed a nice +40 pip profit. Although this could be the end of the previous weekly push down, there are still some unanswered questions which has led me to play it safe on this trade.

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If we are going to begin to see the GBP/JPY cycle to the upside then we should expect manipulation down out of the accumulation seen at the end of the video. If this shows itself clearly it would offer a nice day trading oppertunity to go long for the next push up.

Happy Trading

Sterling

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So here is where we are at today. The EUR/USD has pulled back into the range after a 3 push intraday drop and done it in 3 pushes also. (easier seen on the 1hr chart) Here is where the reversal has a higher probability as at the 3rd push up it has closed on its highs and we do have a topping formation on the 15min. This is still 3rd level trading guys so in the middle of this range is a riskier trade. If you trade this be sure to have at least a few confluencing factors in your favor. We are hovering around the 200ema on the hourly chart so at this point I would like to see the Asian range close below this and see the manipulation up to it and the trap move to short from there or around yesterdays high. Having said that with the possibility of more repatriation this may be a pair to stay away from for now.

The GBP/USD is a bit clearer and moved substantially less yesterday and looking at the 15min chart has closed the inefficient move from Friday and has the same 3 pushes up and topping formation on the 15min chart. This pair will be my preferred pair to trade today given the situation with the Euro.

In the news

The news is rather busy today starting with CPI and RPI numbers from the UK which are expected to have little change. A surprise to the upside in either of these  mainly CPI will have an effect on any more potential adding to the asset purchase facility. The opposite for a big surprise down of which I thing the former is more likely. The UK does have a MPC member speaking late in the day but I dont expect much reaction as its right at the end of the London session.

The Eurozone data has German economic sentiment, CPI, Core CPI and EZ economic sentiment all released at the same time with the sentiment numbers expected to drop slightly and CPI figures expected to remain that same as last month. What I will be looking at most is the CPI numbers mainly because the economic sentiment is bound to be bad considering the situation in the EZ but if inflation surprises to the upside then the Germans are going to be a bit upset and will start putting more pressure on the ECB to keep from monetizing debt (buying PIIGS bonds) and the potential for any more LTRO will go down. Then to top it off for the EZ. Draghi is speaking at the start of the US session which should be interesting.

The US session has more housing data with US building permits, Housing starts and later the Capacity utilization and Industrial production. The housing data will be more important considering that in order for the US to have a real recovery the housing market has to bottom and start to gain footing. Something of which I personally feel has a bit of room to the bottom but we will see.

Happy Trading

Chad

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What really got me thinking over the weekend is that the US data last week was crap and NFP the week before crap I totally expected Bernanke to give just a small hint at QE3 and he didnt even spew one small drop. Now what really kind of gets me in the craw is the fact that the market started dropping roughly 5 hours before his speech and did absolutely nothing after. Something smells here dont ya think. Oh well such as the markets and why we do our best to track these crooks rather than trade against them. I actually scoured Zero Hedge this morning for an article that showed that the Fed has sitting members that have high positions at 5 or more of the 10 largest banks but I couldnt find it or I would have a picture showing just who they are and who they work for. Sorry guys.

So where we are today is sort of in between a rock and a hard spot considering the news so we will just have to rely on the charts as usual but bare in mind what is in store. The fact is we have some bond auctions coming up and unless the ECB steps in and buys we will see some spreads widening and the Euro tanking. I am kind of thinking the ECB will step in. In the April 6th forex commentary I posted a schedule of the Moodys release of their assessment of many European banks this month. Well that has all changed over the weekend. Now this release has been put off until the beginning of May with no actual date set. This is from the Moodys website.

London, 13 April 2012 — Moody’s Investors Service today updated its timetable for concluding the reviews of Western European banks and of firms with global capital markets operations (see press releases published on 15 February 2012 “Rating Action: Moody’s reviews Ratings for European Banks” and “Moody’s Reviews Ratings for Banks and Securities Firms with Global Capital Market Operations”, available on Moodys.com). Moody’s is taking an appropriately deliberate approach during this review process and will conclude when it is confident that all relevant information has been received and analyzed. As noted in a previous communication on March 15, the review timeline is subject to change and Moody’s intends to keep the market informed of any relevant updates.

 The next rating action is now expected to occur in early May and rating actions should, in general, follow the sequential order by system included below. Moody’s expects to conclude the reviews by the end of June.

Something tells me somebody has given Moodys a bit of a nudge to hold those off until these auctions are finished. Most likely so the ECB can step in now rather than later and try to get the yields under control  so these banks have a better chance after their downgrades. Looking at the chart posted on the 6th you will see that the release for the Italian banks were supposed to be today. And guess who has a bond auction coming up in 2 weeks? You guessed it Italy not to mention the Spanish auction on Thursday this week. So hold on to your hats guys and watch close for the manipulation because this time we will be playing with the ECB not just the 10 largest banks in the world.

There is really not much to describe with the charts at this time. The EUR/USD has broke through its lows but still has some daily support from the 14th and 15th at 1.3000 to get through. This will most likely need the London market to do but make sure you see the clear manipulation as the ECB could step in at any time.

The GBP/USD is a bit different of a story with it not breaking any recent lows due to the EUR/GBP tanking right along side the EUR/USD. However showing signs of weakness also having closed below the 4hr 200ema Friday and testing it during Asia before its small drop so far.

News Today

The scheduled news releases are light today for the EZ with just trade balance numbers from Italy and the EZ as a whole but ramp up during the US session starting with Retail Sales released along with the Empire State Manufacturing Index then TIC long term purchases a bit later. All of these are expected to decline from last month. Next is business inventories that is expected to increase the same as last month. The one that may be the bigger surprise is a Fed speech from member Pianalto. Since I am not too familiar with many of her speeches I cant make an assessment on whether she will be hawkish or dovish so just keep in mind she will be speaking at 12:30pm EST and keep a close eye on any trades you are in. It would be a good idea if you trade the US session to have your Talking Forex on also.

Happy Trading all

Chad

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I took out about an hour of Q&A and this video just cover my presentation. Because I didn’t record the text from the room it made the Q&A hard to follow so I decided to leave it out.

Live Forex Trading Seminar: March 12th 2012

After the Q&A we were asked to go over the members forex training forum & forex course. The next video below covers that. I was also asked if we had testimonials from any members…while we have many from email they are not available for others to see and I’d like to change by having members add them in the comments below.

Members Forex Training Course & Forex Forum Overview:

CURRENT MEMBERS: If you have an opinion on the forex course & members forex forum please share it in a comment below. We get many questions as to what people think of the service, and if you value the effort Chad & I put into helping members please do us the service of leaving your opinion:)

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At this point things are a bit clearer and as long as the market continues to believe QE3 is on the way then we will see more of the risk on trade playing out. I should also mention the the ECB had one of their members hint at more bond purchases so now we have a bias to the upside that agrees with a 1st push out of the nasty chop we have seen over the last several days on the Euro and Pound.

Right now I will be looking for the manipulation to the down side during the London Session for the long but keeping in mind that this is the first clear push. Unless we get a clean run north after the entry I wont be looking for a long run up.

In the news

This morning China released their GDP figures with a big disappointment so this adds to the probability of them lowering their reserve requirements again essentially (more easing) so every Central bank around the world is printing money more or less so this will most likely add to the risk appetite depending on just how fooled investors are but keep in mind that each round of QE from anywhere has had less and less effect on risk so this could be very short lived indeed.

From the EZ today there is only German Final CPI and  Italian Industrial Production which are both low impact events but there is the UK PPI data which could be a market mover but I expect it will be just another chance for manipulation before the main move for the day. Then dovie  Dudley is speaking again and will most likely have something to add to the bad unemployment numbers from yesterday and push for more printing. Then from the US the CPI figures come out and are expected to drop which if that is true will add to the probability of QE sooner rather than later and later Consumer Sentiment that has been improving but slightly. Everything seems to be adding up for the risk on day.

As I looked through my news sources today I did find an entertaining video of Rick Santelli. I have to say I like his no BS approach to things. I cant say I always agree with him but he pulls no punches and you have to respect him for that. In the video below I was thinking his head just might spin around like he was possessed by a demon LOL

Happy trading guys and be careful out there

Chad

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The charts today really are not much different than yesterday. We havent had a clear break lower as I still expect and if memory serves me I did warn that we could stay in this chop for a few days before something gives a good reason to break. Yes there are plenty of real facts that say the Euro and Pound should drop however Mr. Market is holding them up at the moment. I still think the break down is more probable and the EUR/USD has tested the hourly 200ema and been rejected while the GBP/USD has been trying to slam the highs from Tuesday and finding support at its hourly 200ema so a stop run above that level is possible and as we can see the triangle pattern I would expect the Smart Money to take advantage of such pattern traders at this point. The EUR/JPY still looks the best to me since even though it made a push up yesterday it was rejected by the 3rd push lows and during the Asian session  has not has much desire to test up again.

In the news

The releases during the London session are fair with the ECB monthly bulletin being the big one as we will find out what is going through the minds of the banksters there and what tricks they may have up their sleeve anyway. Other than that there is Eurozone Industrial Production and the UK Trade Balance of which both could have a decent reason for some manipulation if there is a surprise.

Otherwise the US has a few big releases along  with 2 Fed members speaking. The first being Dudley (speaking twice) who is a well known “lets just print more money” dove so keep that in mind even though his speech is shown as a low impact event. The other being Lockhart who is a moderate if memory serves. Then we also have PPI, Core PPI, Trade Balance and Unemployment Claims all of which could make the market jittery with and big deviations or most of them disappoint.

Other news

As I looked through my favorite news sources this morning I came across another good article from my favorite gloom and doomer Graham Summers. I have to say I agree with him and like him I thought things would correct (blow up) long ago. Not because things were so bad they were out of control but thats what the boneheads in charge should have let happen rather than think they can just push the much needed correction down the road for somebody else to deal with on a much grander scale. If you do much reading on economic issues it really can be simplified down to a small business. If Mom and Pops Grocery goes too far in debt and makes bad investments in stock that they take losses on and cant pay their debt what happens? They go bankrupt and most likely out of business for a time but then they can have a fresh start to learn from their mistakes and start a business that has a much better chance of success. Thats the same thing that should happen with larger businesses dont you agree? Well not in the world we live in today. I really think its worth reading Grahams entire article but here are a few key points that really stick out in my mind.

The following is an excerpt from a client letter published back in mid-March. By the look of things, this forecast is playing out precisely.

For starters, unemployment in Greece as a whole is now over 20%. For Greek youth (aged 15-24) it’s over 50%. The country is in nothing short of a Depression.

Indeed, Greece has now experienced five straight years of contraction bringing the total contraction of Greece’s GDP to 17%. To provide some historical perspective here, when Argentina collapsed in 2001 its total GDP collapse was 20% and this was accompanied by full-scale defaults as well as systemic collapse and open riots.

With new austerity measures now in place there is little doubt Greece will see a GDP contraction of 20%, if not more. I expect we’ll see other “Argentina-esque” developments in the country as well. Put mildly, the Greek issue is not resolved.

The one thing that would stop me here would be if Greece staged a full-scale default. While the political leaders and others view a total default as a nightmare (and it would be for Greek pensions, retirees, and many EU banks), it is only a total default that could possibly solve Greece’s debt problems and allow it to return to growth.

Defaults are akin to forest fires; they wipe out all the dead wood and set the stage for a new period of growth. We’ve just witnessed this in Iceland, which did the following between 2008 and 2011:

             1.  Had its banks default on $85 billion in debt (the country’s GDP is just $13 billion).

             2.  Jailed the bankers responsible for committing fraud during the bubble.

             3.  Gave Icelandic citizens debt forgiveness equal to 13% of GD.

 Today, just a few years later, Iceland is posting GDP growth of 2.9%: above that of both the EU and the developed world in general. In plain terms, the short-term pain combined with moves that reestablished trust in the financial system (holding those who broke the law accountable) created a solid foundation for Iceland’s recovery.

The European Banking System

1. According to the IMF, European banks as a whole are leveraged at 26 to 1 (this data point is based on reported loans… the real leverage levels are likely much, much higher.) These are a Lehman Brothers leverage levels.

2. The European Banking system is over $46 trillion in size (nearly 3X total EU GDP).

3. The European Central Bank’s (ECB) balance sheet is now nearly $4 trillion in size (larger than Germany’s economy and roughly 1/3 the size of the ENTIRE EU’s GDP). Aside from the inflationary and systemic risks this poses (the ECB is now leveraged at over 36 to 1).

4. Over a quarter of the ECB’s balance sheet is PIIGS debt which the ECB will dump any and all losses from onto national Central Banks (read: Germany)

 So we’re talking about a banking system that is nearly four times that of the US ($46 trillion vs. $12 trillion) with at least twice the amount of leverage (26 to 1 for the EU vs. 13 to 1 for the US), and a Central Bank that has stuffed its balance sheet with loads of garbage debts, giving it a leverage level of 36 to 1.

 And all of this is occurring in a region of 17 different countries none of which have a great history of getting along… at a time when old political tensions are rapidly heating up.

As you can see this is an old publication but sure looks like hes getting closer to the crunch date when something may just have to give. We will see. On another note I opened up my email and found another entertaining piece by Jack Crooks as Black Swan. This is well worth seeing as he compares Mario Draghi to Obi Wan Kanobi. Kind of an insult to Obi Wan I think but entertaining to say the least. Here is the link

Happy trading all

Chad

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Considering the charts presently most all the pairs have retreated to the 3rd push chop and direction is not that clear. I do have a small bias for the move down and thats what I will be looking for today. The reason is the failed push up and price closing closer to the lows than the highs and fundamentals agree with a decent down move for the time being. As I type this the EUR/USD is testing the 200ema on the 15min and showing some resistance I would expect there to be a stop run of sorts above that level but if it hold here the stop run around it and the Asian session high may be all we get before the drop during the London session. If we get the clear trap move I will be happy but would like to see a better stop run than what I see now.

The GBP/USD is in a similar situation back in 3rd push chop and sandwiched between the hourly and 4hr 200emas at the moment. It is showing some what of the trap on the 15min right now but for me I would be happier waiting for the test of the hourly 200 just 15 pips above current price. If we dont get that before London open the chance is we wont so just waiting to see on this pair.

The EUR/JPY is pretty much attached at the hip to the USD/JPY right now which is typical in the risk on/off scenario. In this case off. What does look good is that all the Yen crosses have seen a false push to the upside and then a clear push below and with a risk off market these should see the 2nd push down today however they all need to agree on the trap move at the same time to give me the confidence in direction here. At that point a trade on any of the 3 pairs is good.

In the news

Scheduled releases are light today with only German WPI from the EZ,  US Import prices and Crude oil inventories. These are low impact events so the manipulation should be clearer.

On the radar

As I mentioned in the April 6th Commentary Spains banks are coming up on judgement day on April 23rd and they are coming into the radar of investors again as their bond yields are taking off once again. this is also most likely contributing to the risk off we see going on. Here are a couple excerpts from The Telegraph article today and Zero Hedge a few days ago.

 The country’s (Spain)borrowing costs have jumped 100 basis points since February, when the European Central Bank last flooded banks with liquidity under its three-year lending scheme (LTRO). “The LTRO was supposed to be the game changer but the stimulus has worn off. It looks like it is falling apart at the seams,” said the Suki Mann from Societe Generale.

And ZH

Since we have grown tired of variations on the theme of “The Pain in ….” (having been guilty of encouraging it ourselves), we will spare readers this triteness, and instead summarize the attached must read slidedeck from Carmel Asset Management as the ultimate Spanish doomsday presentation. Naive and/or idealistic Spanish readers are advised to resume sticking their heads in the sand, and to stay as far away as possible from the attached 54 pages, which prove without any doubt why not only was Greece the appetizer (have your UK law:non-UK Law divergence trade on yet?) but why things in Europe are about to get far, far worse, as the Hurricane shifts to its next preferred location, somewhere above and just south of the Pyrenees.

In summary, here are Carmel’s five reasons why Spain’s problems are worse than the market anticipates:

1. Spain’s national debt is 50% greater than the headline numbers

Spain’s debt-to-GDP balloons from 60% to 90% of GDP with regional and other debts

2. Spain’s housing prices will fall by an additional 35%

Spain built one house for every additional person added to the population during the past two decades; the fall will decrease GDP by ~2% each of the next two years

3. Spain has “zombie” banks with massive loans to developers and to homeowners

Banks have not begun to realize losses and are vastly undercapitalized

4. Spain’s economy has not stabilized and will continue to deteriorate

Spain has the highest unemployment in the developed world, one of the highest overall debt loads, and the most uncompetitive labor market in Europe

5. The EU will not have the firepower or political will to bail out Spain

Rescue fund headline numbers are misleading and count capital that is not yet committed

And here are the problems that will manifest themselves over the next 12 months:

• Spain’s true debt burden will pass the 90% “tipping point” identified by Rogoff and Reinhart
• Housing prices will fall further and faster than anticipated (consensus is 15%; CAM estimate is 35%)
• Banks underestimate the residential real estate loan defaults (consensus estimate is 2.8% vs. CAM estimate of 11%)
• Expected housing price depreciation and loan defaults will deepen Spain’s recession (additional 2% contraction in 2012 and 2013)
• Spain will need to refinance €186.1 Billion in 2012 alone

The chart below is a screen shot of my entries after I entered a second position with the second push up. The first entry was at the close of the candle after the pin bar to the highs and the second when it was making the 2nd pin.

Notice the candle that tested the previous highs formed a stop run reversal. This stop run gives us a strong indication that smart money is about to reverse the short term trend. This was key, and the candles confirmed it. Additionally did you notice the level at which the stop run was created? The price was right around the psychological round number .9200 which tends to be manipulation points, as retail traders tend to stack stops around these points. Everything in conjunction lined up nicely for this trade.

Overall I ended up with roughly 40 pips on each position for a total of +80 pips on this between the 2 separate positions. Not a bad day overall.

Happy Trading,

Chad

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The GBP/USD seems to look even better with its break above the hourly 200ema and seems to be finding support there during the Asian session. It could also go back down for some manipulation but I expect the next push up in this pair today also.

The pair I like most today is the EUR/JPY. The reason is the USD/JPY is due for a reversal to the upside and with the EUR/USD looking for another level up the EUR/JPY should make an extended move.

In the news

First off for the Asian market we have had Ben Bernanke speaking and by the looks of the markets the Q&A session has started. Things could get a bit choppy until after thats over. The speech its self seemed to say that QE3 is not going to come soon as many expect. He did say that they have plenty of new tools to avoid a credit crisis so it would seem like more twisting will be going on but not full blown QE. This is my point of view also. I agerr that Ben cant do more QE until after the election or stocks take a big plunge which is not likely in the near future.

It would seem that Forex Factory had a misprint yesterday or the Sentix Investor Confidence release got moved to today. Anyway its not a big issue but will have an impact if its a big surprise. There is also French Industrial Production which shouldt be too much of a market mover. the big one for today is the Japanese rate decision and press conference scheduled tentatively so this will more than likely be a tape bomb of sorts especially if they decide to fire up their printing presses again.

Here is one reason why Ben will not QE3 just yet. This is an excerpt of an article that I agree with on one of the many arguments against QE3 from Zero Hedge. It also explains well why the Chinese are most likely manipulating their data to give them a “wait and see what Ben does” period of time.

Last week, when we commented on the amusing spread between the Chinese PMI as measured by HSBC on one hand (plunging) and the official number (soaring), we had one very simple explanation for this divergence: “the Schrödinger paradox – where the economy was doing better and worse at the same time – which was experienced for the past three months in the US (and is now finished with the economy rolling over), has shifted to Shanghai, where it is now the PBOC’s turn to baffle all with bullshit. Why? One simple reason: despite what everyone believes, China still has residual and quite strong pockets of inflation. So while the world may be expecting an RRR, or even interest rate, cut any second now (just as China surprised everyone literally house before the November the global FX swap line expansion by the Fed in November 2011), the PBOC is just not sure it can afford the spike in inflation, or even perception thereof.” It appears we were correct, following the just released Chinese CPI number, which in March printed at a far greater than expected 3.6%, on expectations of a 3.4% print, and well above the February 3.2%.

Along with these quotes from Bloomberg and Reuters.

“Inflation will pick up further as China’s economy warms up again,” Liu Li-Gang, Hong Kong-based head of Greater China Economics at Australia & New Zealand Banking Group Ltd., said before the release. Rising wage costs and the government’s policies to boost consumption will add upward pressure on prices, he said.

 Wen said last month the government aims to keep consumer- price gains within about 4 percent for 2012, taking into account risks from imported inflation and rising costs of land, labor and capital. He also pledged to change the way the price of resources including electricity and fuel are set to better reflect their costs.

 China, the world’s largest oil consumer after the U.S., increased gasoline and diesel prices for the second time in less than six weeks on March 20 after crude had its biggest monthly gain in a year, adding to pressure for consumer prices to rise.

 China Petroleum & Chemical Corp., Asia’s biggest refiner, said last month it will ramp up crude production and develop natural gas fields to counter losses from selling diesel and gasoline at state-mandated prices. Sinopec, as the Beijing-based company is known, said fourth-quarter profit dropped 23 percent, missing estimates.

Reuters

China’s annual inflation spiked unexpectedly in March to 3.6 percent driven by rising food prices, data showed on Monday, surprising investors who had bet on cooling price pressures to give Beijing room to ease monetary policy.

Underlining slowing food inflation, official data showed pork prices fell every week in March and have shed 10 percent in the past two months. Pork is a staple meat in Chinese diets and a key component of food inflation.

 And though China raised retail gasoline and diesel prices in March by 6-7 percent, analysts say that has limited direct impact on overall inflation as they believe energy carries a small weight in China’s consumer price index basket

Shouldnt be QE3 any time soon guys

Happy Trading

Chad

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The GBP/USD is a bit different of a story. One could argue that its seen 3 levels intraday down but they are not that clear as intraday levels can be sometimes. What concerns me about a drop from here is its sandwiched between the 200ema from the 4hr and 1hr charts. It may need some build up of orders to break that 4hr 200 to the downside. Have to wait and see if we get the same 3 levels up and trap move.

In the news

The news today is extremely light with the holiday in Europe but there is Sentix Investor Confidence which is expected to drop and i would agree. With stocks in Europe dropping I would think if there will be a surprise with this release it will be to the downside. Otherwise we did just have the Chinese CPI and PPI data releases with CPI up a bit higher than expectations and PPI being slightly lower. The only reason I mention this is not just for the Aussie traders out there but the offset of these numbers. Yes commodities have gone down but one would think that should be passed on to consumers and the CPI would not rise that much. The wonders of Chinese data LOL

Earnings season

We have another earnings season starting this week and to be honest I usually never pay attention to this but now corporate earnings are looked at as a possible sign of recovery (or not) for the US. The reason being that if corporations are doing well then they will do more hiring and create more jobs, get more people back to work etc. What gets me is even though last year earnings were relatively good the corporations that made good money by cutting personnel just pocketed the cash and we actually have the highest corporate cash reserve amounts than ever. The previous earning season was sort of dismal and I expect this to continue. So what do we look for? The main thing is the large companies like GE, Alcoa, UPS etc… need to be watched. The reason is if these large companies are losing money they may be cutting jobs soon also and the recovery will stumble. The way this will affect currencies is whippy moves around the release times and after. This will also give the Smart Money a good opportunity to manipulate using this news so its a good idea to be aware of days where companies such as these have their release date. Most importantly for NY session traders as most American companies release their earnings just before the opening bell and  during the NY session. The best place to get prerelease data is from CNBC.com. They let you know who is releasing data on a weekly schedule.

Happy Trading

Chad

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The reason I took the GBP/USD instead of the EUR/USD or USD/CHF was because it showed a clear stop run reversal W bottoming formation. This live forex trade overview is longer than usual but I go into more detail of why this day trade was taken. I hope it helps!

What was really nice about this day was the fact that it offered the oppertunity to catch the third push down as Chad took in the EUR/USD, EUR/JPY Short Trade, and the reversal as we mention in the forex room on Thursday. I hope this video helps!

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The EUR/USD was in the same level 2 position however the trap came a bit later and confirmed when the reversal legs happened at the end of my Asian box and I took the short here on the pullback afterwards. The exits on both pairs were based on the 90 pip range tool and even though it broke through I closed after the pin bars at the lows.

I was glad to hear that several members took the same trade before the live room opened. Good job guys!

Happy Trading and have a great weekend all

Chad

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Today we will be looking for the reversal since the last level has completed and considering its NFP day and everything seems rosy for the US the fundies fit with a possible risk on scenario. The wild card here is most of the world is on holiday so volume will be thin and the moves could be abrupt and quick. It would be best to take the day off of which I will unless something very clear presents its self during the Asian session and I will be looking at the JPY crosses more than anything.

The Charts

Looking here at the hourly EUR/USD the 3 levels are very clear now and we are seeing the beginnings of the bottoming going on as I type this. If you do trade today look for the manipulation to the downside and look for the long. I wouldnt expect a whole lot from it but be prepared for the larger moves if they do come along. Its probable that we will see the sideways chop because of the holiday.

The same situation is going on with the GBP/USD and as I type this looks to be starting its move during the Asian session. Its more than likely a fake out this early in the day but when there are such holidays the Smart Money will move the markets during a different session than usual. As you can see price is moving up to the 4hr 200 EMA and is likely to find resistance there and retrace before a break.

The Yen crosses are looking pretty much the same with exception of the USD/JPY still in a wide range bound market but the EUR/JPY and GBP/JPY have had the 3 pushes over 4 days. This tells me that the movements were created from USD strength and not necessarily JPY strength. I will be keeping an eye an the USD/JPY for any sign of JPY weakness as the catalyst for the move up in the Yen crosses although the possibility for a risk on environment due to a good NFP is possible and will drag the Yen pairs up as the GBP/USD and EUR/USD go up as well.

As you should know the news today is only the NFP and Unemployment rate from the US and pretty much everyone but China and Japan are on holiday of which for me means the higher probability of decent movement will be in the Yen crosses during the Asian session.

Mark these on your calendar.

As I am sifting through my news sources today I did find this bit of information that I have marked on my calendar. It has to do with the Moodys potential to downgrade a good chunk of European banks in the near future and when the report is released it will create a tape bomb of sorts and how big the bomb is will depend on how big of a downgrade each bank gets so make sure you are aware of these and mark it somewhere you wont forget. Most notably the Italian and Spanish release dates. If things go as Morgan Stanley expects there will be another funding crisis of these banks as they scramble to meet reserve requirements and the possibility of someone having to ride to the rescue again is high. Does the acronym LTRO ring a bell? Here is the short article and the dates that you should remember. Also take note how the author reminds us that Morgan Stanely may not be far behind in the downgrading process.

A major potential negative catalyst for financials globally is rapidly approaching as 114 banks are on review-for-downgrade by Moody’s across 16 countries. Why do we care so much about ratings given their historical credibility? Ask James ‘Jimmy-boy’ Gorman of Morgan Stanley who is currently begging cap-in-hand to Moodys not to downgrade his empire bank, since he knows (and so it seems does the CDS market) that, as the FT notes, a downgrade could also force the bank to provide additional collateral to back its vast derivatives business – where it acts as one of the largest counterparties. In Europe, the fun heats up in the next few weeks as first Italian banks (4/16), then Spanish banks (4/23) and then Austrian (4/30) face from 1 to 4 notch downgrades and the potential to lose their short-term (funding-/CP-related) Prime-1 top rating, implicitly raising funding costs (and liquidity concerns) even further.

and potentially even more serious, banks that face loss of P-1 short-term rating…

For all the Christians out there have a great Easter Sunday and for everybody else have a great weekend. See you all next week.

Happy Trading

Chad

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Why is that? The key lies with the driving force behind trends in the forex market….the banks. The banks tend to drive the fx market is a series of 3 cycles which often traps retail traders on the wrong side of the market. This cycle is found not only on a weekly scale, but also on an intra-day scale. If we understand how smart money often moves the market over the course of a week we can then learn to trade forex with them, rather than fighting the smart money.

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P.S – I forgot to add this in the video but everyone should check out your “weekly” chart of the EUR/USD….since the beginning of 2009 the EUR/USD has cycled 3 up and 3 down….looks like were in for the 3rd cycle down now on the much larger scale.

Watch the next training video in the series here – Forex Trend Trading Strategy – Part 2: Retail Trader Manipulation

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The GBP/USD is a bit trickier as it has a possible 3 levels down and has come into some daily support along with the 200EMA from the 4hr chart and shows some bottoming support. In order to short this pair today I would like to see it come up and test the hourly 200EMA and see a trap move at that point. The trap at yesterdays high would also suffice. The testing of the either area will be a 90+ pip move from the lows also which adds some probability but I will most likely be keeping a closer eye on the EUR/USD.

Todays News

In the news today there is only the German Industrial production scheduled for the Eurozone. It is expected to drop from 1.3% last month to -0.03 of which if it does come out as expected it will mean that Europe is sliding deeper towards recession as a whole since Germany is the last of the bunch who sees it and being the Eurozones main economic powerhouse once they do go into recession its a slippery slope for Europe.

The UK has their Asset Purchase Facility and though are expected to leave it unchanged there has been talk from a couple of the MPC members that they may have more room to ease meaning they actually could surprise with adding more to the facility. Im not holding my breath for that but there is a chance. This will be released at the same time as the rate statement which shouldnt get much reaction until the statement comes out a bit later.

The US also has Unemployment claims expected to be roughly the same and its NEISR GDP Estimate which is expected to be barely above zero. Any surprise here to the up or down side I think will be USD positive as a big deviation up will bring on the decoupling theory and stocks may rise along with the USD and a big surprise down will mean risk is off again as it has been the last couple days and the USD will benefit from that. The former scenario does have the possibility of creating a risk on environment and the USD will suffer so keep that in mind and trade the manipulation.

Happy Trading

Chad

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As we can see here on the hourly EUR/USD the 2nd leg intraday has begun in the Asian session and there is the possibility for the third push during the European market followed by the reversal for the pullback. At this point I wont be looking for a lot of pips on the reversal but will be willing to take the long providing we have a clear manipulation or trap move. Otherwise the longer term move should be down but remember level 1 trades can reverse back into level 3

The GBP/USD has had 3 pushes down at this point for over 170 pips and a reversal seems more likely for a short term retracement. This pair I will be looking for the bottoming formation and manipulation for that and if I miss the pullback trade then will want to see a trap move to the upside for the follow through to the downside. With the ECB rate decision and subsequent press release today things mat be quiet until then on both pairs.

 News today

There is a decent chunk of news releases today starting with Halifax HPI and Services PMI from the UK. These will be looked at closely since improvements in the housing sector will be good for the Pound and the Services PMI data is important because the UK is a service based economy so their purchase managers feeling good will also be a good sign. If these do surprise to the downside then the Pound will take the hit most notably against the JPY.

For the Eurozone there are the Retail sales figures (expected to drop) and German Factory Orders. With any further sign that Germany is feeling the crunch from the austerity forced around the EZ the chance of the recession creeping in there will be higher and they may actually let the ECB lower interest rates but remember that things really have to get bad before that will happen so dont expect a surprise in the ECB rate decision today. After the tate decision which will most likely be a non event as usual the press conference will be watched closely as usual and most will be looking for any hints of potential rate reductions in the future and Draghi will be grilled by reporters over Portugal and Spain the way I see it. So far those two countries have been able to avoid the news headlines but with a potential union strike on the horizon for Spain things could get headline worthy soon.

The news from the US will start with Treasury Sec Geithner Speaking and ADP nonfarm payroll shortly after then ISM Non-Manufacturing PMI, Crude oil Inventories and then some FED speak from member Williams. I do expect some choppy price action around this time and will wait until the markets calm down if I trade it at all. mainly due to the fact that 15 minutes after the ADP release is the start of the ECB press conference.

Be careful out there today guys.

Chad

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On Monday the EUR/USD did as expected and had a manipulation move to the upside before the 100 pip drop. Unfortunately I missed the entry and had to sit on the sidelines and watch. I did manage to get 30 pips off the GBP/JPY later in the day but wasnt happy to see so much left on the table in the 170 pip move. Oh well we cant catch every pip.

Today I am expecting more of the same with an hourly topping formation on both the EUR/USD and GBP/USD. The Cable has made a clearer level 3 to the upside and exhibits the more choppy price action noted before the reversal. The Euro is seeing the same chop which tells me the Smart Money is loading up. However I also want to point out the daily chart. Looking there we see very clear 2 levels to the upside and the possibility for a third is high mainly because we are in April which is a historically stock rally month due to tax season as investors put money into stock portfolios before they file taxes. Considering that and the fact that risk currencies such as the Euro will get a bid also. All this considered I am thinking the Euro could break the highs and test the recent highs on the daily chart around 1.3480 or at least the daily 200EMA at 1.3448. Fundamentals aside I would prefer the short but I pay attention to them for this reason as its much nicer when we see them agree with technicals as the moves are more extended. At this point I am a bit biased to the upside for this reason but will be paying most attention to the manipulation outside the Asian session for clearer signals since we do have some conflict here.

Today is light with any scheduled news releases with PPI figures and  Final GDP from the Eurozone. These are minimum impact releases and should have little effect today. Then Factory Orders and Vehicle sales from the US. As long as factory orders comes out as or better than expected the risk on scenario should continue and the Euro will benefit. How much remains to be seen because of the decoupling theory so its entirely possible we still see the chop until after NFP Friday.

How low can they go?

No Im not talking about stocks or currencies here. I just want to point out to anybody who had not seen the article from the New York times over the weekend that found that Goldman Sachs owns or did own a large stake in the largest website for sex trafficking of under age girls. Check out this excerpt from the article.

THE biggest forum for sex trafficking of under-age girls in the United States appears to be a Web site called Backpage.com.

This emporium for girls and women – some under age or forced into prostitution – is in turn owned by an opaque private company called Village Voice Media. Until now it has been unclear who the ultimate owners are.

That mystery is solved. The owners turn out to include private equity financiers, including Goldman Sachs with a 16 percent stake.

Goldman Sachs was mortified when I began inquiring last week about its stake in America’s leading Web site for prostitution ads. It began working frantically to unload its shares, and on Friday afternoon it called to say that it had just signed an agreement to sell its stake to management.

“We had no influence over operations,” Andrea Raphael, a Goldman Sachs spokeswoman, told me.

Let’s back up for a moment. There’s no doubt that many escort ads on Backpage are placed by consenting adults. But it’s equally clear that Backpage plays a major role in the trafficking of minors or women who are coerced. In one recent case in New York City, prosecutors say that a 15-year-old girl was drugged, tied up, raped and sold to johns through Backpage and other sites.

Now as you can see they about crapped their pants when the found out this news was getting out. However check out this part just a bit further down in the article.

That said, for more than six years Goldman has held a significant stake in a company notorious for ties to sex trafficking, and it sat on the company’s board for four of those years. There’s no indication that Goldman or anyone else ever used its ownership to urge Village Voice Media to drop escort ads or verify ages. Elizabeth L. McDougall, chief counsel for Village Voice Media, told me Friday that she was “unaware of any dissent” from owners.

I find it as appalling as any body to see such things but also think that Goldman is just getting what they deserve and hopefully (even though I doubt it) somebody at least loses their job. It is true that what goes around eventually comes around and it looks as though things may be coming full circle to the Vampire Squid.

Happy trading

Chad

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Back in February we were quite amused by conflicting internal and external reports of manufacturing growth in China, which according to the HSBC Markit Manufacturing PMI index had contracted for a 4th consecutive month even as the official Chinese PMI data showed 3 consecutive expansions. It just happened again, only this time the spread between the two indices has jumped to the second highest ever, with the official PMI index surging to 53.1, an expansionary number, an eleven month high while according to HSBC it slid to 48.3, indicative of contraction, and paradoxically indicating that in “the first quarter as a whole, the index averaged its lowest reading since Q1 2009.” In other words, the Schrödinger paradox – where the economy was doing better and worse at the same time – which was experienced for the past three months in the US (and is now finished with the economy rolling over), has shifted to Shanghai, where it is now the PBOC’s turn to baffle all with bullshit. Why? One simple reason: despite what everyone believes, China still has residual and quite strong pockets of inflation. So while the world may be expecting an RRR, or even interest rate, cut any second now (just as China surprised everyone literally house before the November the global FX swap line expansion by the Fed in November 2011), the PBOC is just not sure it can afford the spike in inflation, or even perception thereof.

This also explains why while HSBC, being a member of the banking cartel would love nothing more than more easing from PBOC, China is far more more cautious about further easing, especially if the Fed does go ahead with more QE anyway, the bulk of which China would import as excess inflation anyway. The last time we had a record spread between HSBC and China PMI, Chinese CPI soared from -2% to over 6%. China is now at 3%, just as the index spread is the second highest ever. If we are to assume that Chinese easing will follow the March 2009 episode, and thus assume a trough Chinese inflation of 3.2%, one can see that the 12% implied inflation at the end of the current easing episode is why the PBOC will be far, far more reluctant to engage in the same easing policies as the Markit group of banks would wish for it to.

So to put it in more simple terms the Chinese want everyone to believe they can be the ones to pull the world back from the mess created by the big banks and Central Planners while the way I see it is the hard landing is more likely. Considering that inflation in China has already brought on pockets of civil unrest that they squashed rather quickly the last thing the communists can afford is inflation worsening and more unrest with a regime change coming within the next year. The fact is while the Fed was printing and now the ECB doing the same the Chinese were doing their own back door printing all along and the civil unrest shows it. The thing to remember is that the west only hears about a small percentage of these so the chances are the unrest goes well beyond what we know. Everyone is playing the same game now and it seems more like a race to the bottom to me. To say I know how things will turn out would be crazy on my part but I can say its going to get interesting in the not so far off future.

Happy trading guys. Im still looking for the shorts I mentioned in the weekly wrap.

Chad

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I’m going to get around to making a new video on the stop run, but here is a training video I did on the stop run reversal 2 years ago if your unfamiliar with the basic concept.

Stop Run Reversal Setup Training Video

Anyway, back to the USD/CHF and the trade we took Thursday in the live training room. While trades are not what the room is about, when a pair is setting up were happy to take them. This was the case in regards to the USD/CHF.

A few days earlier we had broken out of an accumulating range bound market. Given this fact the probability lies we will have further downside in the forum of at least 2 more cycles depending on how things stack up. With out bias being to the downside we were only looking for stop runs on previous highs. Notice how the 1H chart shows multiple clear pushes through the previous days high….with all of them getting rejected back to the downside.

I took the entry in the room on the USD/CHF short from .9077 and as I mentioned in the members daily market review I have closed half for +50 pips before the Friday close. We have now gaped down a few pips and it is possible we will see the market fill the gap. My current stop is .9037 which should give it enough room to move while still protecting profits of at least +40 on the last half. Currently there is an open take profit until the next wave down. Given the fact that the USD/CHF, EUR/USD, and GBP/USD accumulated for so long we could be in for a larger overall move.

Happy Trading!

-Sterling

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The Euro has formed a 3 level drop in what I would consider level 3 price action and after the sharp rise to a topping formation I have a small bias to the downside for Monday. Im expecting the stop run to the upside first and will look for the manipulation to go short. This will also agree with the fact of the ECOFIN meetings producing some Euro pumping and should only be a matter of time before the market sees it for what it is (fluff) and the Euro will drop. Every time these guys get together this has happened and the euphoria is shorter lived each time.

The GBP/USD is in a similar situation with a very long 3 level rise starting back on March 14th. I am not as impressed with the topping formation however it does have 2 hourly rejection (stop runs) that agree with the more clear topping formation on the 15min chart. It also has a fairly ugly 3 level rise over 3 days for over 200 pips which would add to the probability of the short. I will be looking for the attempt at the highs and look to short this pair once the manipulation is finished.

The EUR/JPY and GBP/JPY are still tracking the USD/JPY so any trades taken on those pairs will have to be agreeing with that pair in order to trade them. If the Euro and Cable drop and the USD/JPY rises then they will most likely not move much unless the USD/JPY out paces the drop substantially. I will most likely leave these pairs alone next week.

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In the news this week

We do have a fairly eventful week in the news coming up. There not a whole lot data wise but there is the UK and ECB rate decisions and press conferences. Then also the ADP and Non Farm Payroll on Wednesday and Friday. I will cover these more in depth during the week but wanted to point out that most banks across the world will be closed on Friday so NFP will be a very risky trade with low liquidity. I usually dont trade it but for those that do should be aware of that.

In other news. 

In the March 26th commentary I posted a video of a Greek having a go at Germany and I see that commentary has been the most looked at since then. In it he talks about how Germany is using financing to take over Europe and will now pay the price as its loans wont get repaid.

I didnt really put much faith in the idea even though I agree its plausible but since then I have seen some other respected news letter writers having the same idea. This I got from Jack Crooks over at Black Swan quoting a researcher at  Ash Center of Harvard’s Kennedy School. I have to say this makes alot of sense to me and actually is a well worded tale of almost exactly what the crazy Greek was saying.

“When the global financial crisis began, the world could be saved by depression only by massive fiscal stimulus.  Because of the size and global engagement, three countries bore responsibility for saving the global economy:  the United States, China and Germany.  The United States and China acted decisively and averted depression.  Germany stood aside and profited as a parasite on the US and particularly Chinese stimulus.  

“…As Europe struggles to avoid collapse of the southern European economies and the Franco-German banks, Germany sought to paint its own role as virtuous and the Greek/Portuguese/Spanish/Italian role as debauched in order to justify forcing most of the costs onto the southern Europeans.  Greeks should, according to this logic, bear almost the whole burden of sacrifice while the German companies and banks who profited for decades from an unfair currency structure and predatory lending should pay minimally.  

“It won’t work.  The burden on Greece and others is too great for them to bear.  By worsening, rather than ameliorating southern depression, Germany ensures those countries failure.  Squeezing Greece the way the allies squeezed Germany after 1918 can only lead to the fracturing of Europe.  

“…Germany is exploiting the euro crisis to impose on Europe a system that will be structured by German rules and dominated by German power.”  

Others see it the same way it seems.  This is from Criton Zoakos, at Leto Research:  

“A collapse of Germany’s export markets in the Eurozone’s periphery has posed a challenge to its commitment to remain the world’s pre-eminent advanced exporting nation. Germany is meeting this challenge in a twofold way: it is making great efforts to develop new markets for its exports among the BRICS, and it is pushing hard to convert the Eurozone periphery from export markets into sources of large amounts of cheap labor. If the BRICS are the future destination of German exports, the PIIGS trapped in the Eurozone will ensure competitive labor costs and a competitive Euro exchange rate.”  

There are major problems with Germany’s grand strategy to grow as the world’s premiere export nation; here are a few:

1) The global demand dynamics have changed considerably as the private sector de-leveraging continues in earnest (i.e. thanks to the balance sheet recession in the US particularly).

2) There may not be enough demand from the BRICS, as they fight for similar portions of the export pie given their export models, in the same vein as Germany.

3) The US and China know the game Germany is playing and will not play the role of patsy as the weak states in the Eurozone have been forced to play.

4) Germany underestimates US capabilities at its own peril.  Expecting a straight-line US decline is a big mistake, I believe, given the rising angst amongst US citizens and voters. A few major policy change dynamics, in terms of either defense policy, i.e. forcing NATO to start paying for itself (which means Germany), or a new US industrial policy that allows US corporations to bring home cash and provide siginificant incentives to build domestically, could change the balance of competition quickly.

5) And a brilliant point from Mr. Zoakos as it relates to the where real sustained growth flows; it is not about exporting of existing supply of goods:  

“As a rule, sustainable growth originates in the supply of new, innovative goods and services provided by entrepreneurial activity – the type of supply that creates ex nihilo its own demand. There was zero demand for telephones before Alexander Bell invented them. There was zero demand for personal computers before the creation of the first PC with a workable operating system, and so forth. Supply of pre-existing goods and services does not stimulate growth once it has satisfied market demand: Once the supply and demand curves intersect, the marginal rate of profit in the given industry reaches zero, meaning that the given industry stops contributing to macroeconomic growth.”  

So far, not even the US government has been able to destroy the innovativeness of most American entrepreneurs.  The US was declared dead on arrival—heading into decline, once before by a major world export power, it was Japan at the time (as Germany and China are declaring the same now).   

I remember vividly a story I read in The Wall Street Journal, it was back in 1986-87 range.  At the time, you may remember, Japan was about to swallow up the globe. It was the world’s second-largest economy and destined to become number one, racing past the US, we were told by those great seers back then a la the usual gang of simplistic regression analysis-thinkers so common among our top global financial types. Mr. Japanese Finance Minister (or Foreign Minister) said: “Europe will become our boutique and America will become our farm.”  Oops!  That didn’t seem to work out so well now did it?  

Germany seems increasingly hubris-filled as the outline of its next grand strategy for total European control seems to be heading toward fruition. But once again, I believe its plans will be thwarted, as many PIIGS captives inside Europe and those with out interests outside are on to the game. 

Hope everyone has a great weekend.

Chad

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The GBP/JPY and EUR/JPY are a little more clear with both having a 3 level 3 day push down and the reversal of 3 levels of intraday levels. The GBP/JPY has a H&S pattern for a run up however as tight these pairs have been trading with the USD/JPY the intraday reversal may be all they get. We will have to wait and see which way the manipulation goes during London session to get a better idea of direction for today. I am thinking down but not holding any bias right now.

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There is a few decent news releases today with German retail sales that are expected to improve on last months negative release. Any deviation will be good reason for a manipulation move so keep an eye on that.  The EZ Flash CPI numbers are expected to drop slightly and if that comes out as expected or lower then the Germans may lighten up on the ECB a bit but its still borderline at the high end of what the ECB wants so we will ahve to wait and see. Lastly is the ECOFIN Meeting going all day. The scheduled news may be overshadowed by tape bombs from these guys but if history can be any guide here these meetings almost always get the pump as they go in and the very next day as even though they did their best to give the markets a jolt to the upside. What is actually resolved during the meeting will be a disappointment. We will hear “we have agreed to agree in the future” several times throughout the day but at the end there will be an “well now we have to go back home and see what mommy says and I will get back to you later” LOL What seems funny about this meeting is they are holding it over the weekend also which seems fishy and smells of “lets do this when the markets are closed so the reaction wont be quite so bad” It should be interesting trading today guys. Just look for the clear manipulation and go from there.

During the US session there also is  Core PCE Price Index, Personal Spending, Chicago PMI and Revised UoM Consumer Sentiment. They are all medium impact releases but the PCE numbers will be most watched since if inflation is on the rise then the Fed will have to rethink. However it would need a big deviation to move the markets today and will most likely be overshadowed by the ECOFIN meetings.

Happy Trading Guys and have a great weekend

Chad

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The GBP/USD does have a tad bit more clarity with it closing back in the level 3 PA . However direction is still up in the air for today. We will not know that the market has reset until it moves off to the downside out of this level 3. So this pair will traded carefully today also.

The EUR/JPY does show slightly more clarity with its 3rd level PA having a head and shoulders pattern that is typical of level 3 also. The chart below shows 2 intraday levels to the down side so the third should be in the works but may actually happen during Asia so the London session may still be questionable. We will have to wait and see.

In the news today there is only German unemployment numbers that are expected to drop 10K. (Germany employed 10K people last month) Which I expect to be close. Germany has been creating jobs consistently  so I dont expect much of a surprise from this and even if it did the chance of it moving the Euro substantially are low since the ECB dont even peek through the window at unemployment numbers. Unlike the Fed as it is part of the mandate.

There is a few goodies from the UK though with some MPC member speak, BOE Credit Conditions and Net Lending to Individuals. I dont really expect much movement from these either unless the MPC Fisher drops a tape bomb or two.

The biggie for today is the US unemployment which is expected to rise and the Final GDP numbers. These both could cause some risk off action if they disappoint in a large fashion. So watch out for those.

There was a comical picture of Bernanke I found that I thought you all might enjoy. It sure looks like these guys got him pretty much nailed from all perspectives. Hope you get a good laugh as I did.

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With the GBP/USD having tested and was rejected by a weekly high I somewhat expected a build up before it broke. Even though its possible we have seen level 2 on this pair. Its not that clear. This chop seen on the hourly chart tells me there has been effort to push traders out of the market as they take stops in both directions. Never the less the next level should be to the upside. The EUR/USD is a bit clearer and is most likely in consolidation after level 1.

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The Yen crosses are actually a little clearer and have shown us a  2nd level up and I will be expecting the 3rd today and will be watching for the stop run and trap before taking the long.  Today should be a good day on the Yen crosses as even the USD/JPY has made a break above its hourly 200EMA and is testing it from the topside during the Asian session. As long as this test holds the possibility for the up move on the crosses increases.

In the news today the Euro has what are marked as medium impact releases of German Prelim CPI and M3 money supply. These actually are more looked at these days since the interest rates in the EZ are more based on how Germany is doing with inflation and the M3 is related to interest rates also. Having said that if these do come out as expected then the markets shouldn’t have a large reaction but any deviation will be used by the Smart Money for manipulation so be aware of the time of these releases. The UK their Current Account numbers and Final GDP and should be treated the same. Lastly the US has Core Durable Goods and Durable Goods Orders. These releases are related to the housing market and with a vast improvement from last months results expected I have my doubts they will reach the expected numbers. In my mind with the revisions to the upside being as small as they are for last months releases it seems a bit more like wishful thinking than anything. We will see. There is also Crude oil inventories which is expected to rise by around 4 million barrels. For those who don know why this is important for the USD. When oil dealers expect the price of oil to rise they stock up at a lower price and inventories rise. The opposite when they expect the price to fall. Since the price of oil is negatively correlated to the USD (oil rises=USD fall) usually. This does fit in with our bias to the upside potential for the EUR/USD and GBP/USD as long as this release is as expected.

Sorry guys no good funny videos today. I was glad to hear from the members who enjoyed the last one. Its always nice to get a good laugh every once in awhile.

Happy Trading

Chad

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The GBP/USD was pretty much the same set up but wasn’t quite as clear on the entry. It had hit its previous days low and the risk added a couple more pips but it was still a nice entry. This one I didnt take as the markets were still in level 3 and that adds more risk also. However good job to any members who caught either one of these trades.

Today we will be looking for a push up to level 2 and most likely a test of the daily 200EMA on the EUR/USD at 1.3454 and the recent daily highs on the GBP/USD at the 1.6085 level.

There is only a couple news releases to watch today with the GfK German consumer climate which is supposed to increase and with yesterdays IFO consumer climate better than expected it may just do the same. Then there is UK CBI realized sales expected to drop again and finally S&P housing data and Consumer confidence numbers from the US. I expect these to be used more as a manipulation tool than market movers today.

Happy trading guys

Chad

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This EUR/USD trade is about as pretty as they get for level 3 trades. Especially in the middle of the level 3 price action. The first thing I want to point out is the market has moved almost exactly 90 pips from the Asian session highs. You can see this in the video when I bring in the 90 pip range tool. Then we get the Smart Money manipulation to the downside seeing 3 intraday levels outside the Asian box and the break down just over 50 pips from the Asian range which is typical for the manipulation phase. At this point there is alot of information coming together and it only gets better. Price is coming up on the hourly 200EMA and the lows from Friday that are only 10 pips apart.

As the first pin bar is formed we know the support is there and directly after an inverted hammer pin. Then followed by a doji as they just hold price there accumulating the last sellers down there before the next candle and the shift away is on. As it makes the 3 levels up after the entry I was considering an exit at 50 pips but then Bernanke opened his mouth and we were off to the races. Once I realized he had hinted at more QE I was scrambling to get my TP moved when it was hit. I missed an extra 70 pips but any day with a trade that gains almost 4 times my risk is a great day. Enjoy the video. I hope this helps your trading guys.

Chad

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The GBP/USD is pretty much in the same boat but does have a little clearer topping formation. Trading either of these pairs I will be happiest shorting from the highs of the day with any of the signals that the Smart Money plans to as least hold this consolidation or make a break to the downside. It sure looks like the stop run has already occured  here with the hourly pin on Friday so this would be my preferred pair to trade today but want to get a nice entry.

The news today is extremely light with German IFO Business Climate of which for some reason is expected to get slightly better. This makes me wonder if these guys were out to lunch last week when every Flash PMI from France, Germany and EZ as a whole disappointed. Then there is  some Bernanke speak later in the US session and US pending Home Sales which is expected to drop. Maybe its just me but shouldnt that be rising if the housing market is in recovery? Maybe I missed something LOL

In my reading over the weekend I did find a couple articles that were note worth along with a funny video I thought was worth sharing.

First was an article that annotated a letter by I believe the Dallas Fed Fisher where he was stating that the “Too big to Fail” banks really should be broken up if this so called recovery is ever going to gain speed. He is one of two Fed Officials that has said something to that tune lately and I tried to find the article to get you some key parts of his letter but the article has mysteriously disappeared from Zero Hedge. Go figure. I was sort of happy to see more than one of these guys have the guts to say such things but as I started reading some of the comments that joy was pretty much squashed when a reader notes that these guys do and say such things (just like politicians) to get the spotlight off them for the moment and once the light moves on its back to business as usual. As much as I would like to believe he meant what he said in the letter. We all know words are cheap and we will have to wait and see if they are backed by any action. I have my doubts but I do have hope.

Next was a video interview that Chris Martenson did with well known Wall Street author Gretchen Morgenson in which they too address the “Too Big to Fails ” and how they have a different set of rules than the rest of us since they have the politicians  by the short hairs and none of then have the nerve to stand up to these guys. The reality is the Goldman Alumni are peppered throughout the government which will make any real efforts to break these guys up much harder. Here is the video its well worth the 20 minutes.

Lastly was this funny one on the thoughts of a true Greek and how they set this crisis up all along to snare Germany. We all know that Greece wasnt the beginning of this mess but it sure does sound similar to how many feel that China is doing to the US. Of course different stories but using financials and markets to weaken the enemy rather than guns. Its a funny video but I should warn you there are some expletives so you may not want your kids around. Enjoy.

Warning: Some “Adult” Language 

I hope every one had a great weekend

Happy trading

Chad

*Correction that was 150 pips Daniel booked

Looking at the picture today we have had the break down on the EUR/USD but it has gone back into its level 3 price action. I do expect another drop today but again it may have a deeper stop run to the upside as I expected yesterday that never came. We will have to just wait for the stop run to see.

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The GBP/USD looks even better since it has broken down and closed outside its level 3 PA and we will be expecting level 2 long term today once the Smart Money finishes their accumulation phase.

The news is very light today with only UK Mortgage Approvals during the London session and US New Home Sales for New York. Unless of course we have any tape bombs dropped today the markets should be moving solely by the manipulation of the Smart Money. Should be a fairly easy days trading today. We will see.

How about an end of the week rant?

As I look around my favorite news sources I see an article by my favorite gloom and doomer Graham Summers at Phoenix Capital discussing why Europe will fail at saving the Euro. As you all should know I have a little more faith than he does but I have to admit he comes up with a hard line that is difficult to deny. Do I think we are in for a long hard haul? Yes I do but the fact is I thought it would have already happened and was surprised to see how the banker cronies are throwing everything including the kitchen sink at the mess and I have my doubts they will stop until they have run out of sinks. The data is mildly improving and if it does speed up we do have a chance.

Here are a few points Graham makes that strikes me as hard to deny.

 Fact #1: EU Banks as a whole are leveraged at 26 to1.

 This is, of course, based on the assets the banks are reporting. According to independent sources, the leverage levels are in fact far, far greater than this (though 26 to 1 is already bordering on Lehman Brothers’ leverage levels).

 Indeed, as far back as September 2011, PIMCO’s Co-CIO, Mohamed El-Erian (one of the most connected of the financial elite) noted that French Banks were running REAL leverage levels of almost 100-to-1.

 El-Erian said French banks are a particular cause for concern, noting that “credit markets now put their risk of default at levels indicative of a BB rating, which is fundamentally inconsistent with sound banking operations.” He adds that bank equity now trades at a 50% discount to tangible book value on average,while the ratio of market capital to total assets has fallen to 1%-1.5%, compared with 6%-8% for “healthier banks.”

The reason this seems totally credible to me is the fact that most all of the European banks are underfunded and the shadow banking sector is not even covered in the 26-1 leverge they admit to so  Mohamed El-Erian is most likely correct with his assessment they are leveraged at 100-1. What gives more credence to this is the fact that Deutsche Bank just sidestepped the US new rule for bank capitalization for US subsidiaries of European banks by changing its business structure.

This from Zero Hedge

Deutsche Bank AG changed the legal structure of its huge U.S. subsidiary to shield it from new regulations that would have required the German bank to pump new capital into the U.S. arm. The bank on Feb. 1 reorganized its U.S. subsidiary, known as Taunus Corp., so that it is no longer classified as a ‘bank-holding company’. The technical change has important consequences. Taunus—which at the end of last year had about $354 billion of assets and 8,652 employees, making it one of the largest U.S. banking companies—won’t have to comply with a provision of the U.S. Dodd-Frank regulatory-overhaul law that essentially forces the local arms of non-U.S. banks to meet the same capital requirements that American banks fact. A provision of the Dodd-Frank Act was going to require Deutsche Bank to infuse Taunus, which for years operated with thin capital cushions, with what executives feared could be as much as $20 billion. Taunus is no longer a bank-holding company and won’t have to comply with the tougher capital rules, even though Taunus still houses Deutsche Bank’s U.S. investment bank.

So far there has been only one country in Europe that has recapatalized its banks and that was Ireland. Once they did it was only weeks until they needed the bail out from the EU. Even the largest economy (Germany) in the EU has not recapitalized its banks because they cant. The Feds USD swap lines started earlier this year were most likely due to the fact there was a European bank that would have been closed for business the next day if the Fed did not step in. Plus now we have the LTRO which gave some breathing room to these insolvent banks but the air is already running out. Now lets get back to Graham.

 Fact #2: One Quarter of the ECB’s balance sheet is PIIGS debt 

As part of its moves to “save the system” the ECB has gorged on PIIGS debt. Today, one quarter of the ECB’s balance sheet is PIIGS debt. Care to take a guess at what these assets are valued at? I guarantee it’s nothing near their real market values. 

The ECB managed to swap out its Greece debt into new debt that would not take a hit should Greece default. But it won’t be able to do this with the remainder of its PIIGS’ debts. Indeed, it’s not even going to try. Instead, the ECB plans on shifting any of the losses from these debts onto the individual EU national banks:

ECB Balance Sheet Jumps Above €3 Trillion

The mix of bond purchases and loans has exposed the ECB and the 17 national central banks that make up the euro to losses in the event of defaults or bank failures. Last month, the ECB was forced to swap its €50 billion Greek bond portfolio for new bonds to shield the banks from potential losses in the event of any forced write-­?downs.

If banks that have borrowed from the ECB can’t pay the money back and the collateral they have posted falls in value or becomes worthless, the ECB would be on the hook for losses. Most of these losses would be spread across national central banks according to their size, meaning Germany’s Bundesbank would face the largest exposure.

What this tells me is that not only are the European banks in trouble but so are there respective central banks and therefore the ECB. Of which was reported before the LTRO last year to leveraged at 25-1 then. I dont even want to think of what that leverage is today. At the time the reports said the ECB only had to take a hit of a 7% loss to the assets to wipe out all the available cash on its balance sheet. ( I could be off on the # but not far) Now the question to ask yourself right now is why would the ECB do something that has such potential to damage the bond markets such as subordinate bonds and change the rules as they please? Well for me the answer is simple. They couldnt or they would have went bankrupt that same day. We have all heard the saying. If it quacks like a duck, walks like a duck and looks like a duck. Its a dam duck! Right? LOL

Last is what Graham says about the Fed running to the rescue. They cant without causing civil unrest around the world. Interesting take on what a QE3 program could do.

Fact #3: Even after all of its inteventions and purchases, the ECB is far too small to contain this mess (ditto for the Fed)

I know many of you are thinking “the ECB or Fed could just print money.” That answer is wrong. If the ECB chooses to do this, Germany will walk. End of story. They’ve already seen how rampant monetization works out (Weimar).

And if the Fed chooses to monetize everything to hold things up, then the US Dollar collapses, inflation erupts creating civil unrest, interest rates rise killing the banks, US corporations and the US economy… all during an election year.

Good luck with that.

Remember, the Fed’s QE 2 program which was a mere $600 billion (to bail out Europe the Fed would need at the minimum $2 trillion) pushed food prices to all time highs and kicked off riots and revolutions around the globe. Imagine what $2+ trillion would do.

So there we have it. Some food for thought over the weekend. Like I said I am a bit more optimistic and if the US can somehow pull its head out of its butt and get back to some decent growth then we may just pull through. Although I admit that none of the presidential prospects other than Ron Paul seem to be seeing any light these days. Time will tell. Interesting times we live in.

Happy trading all

Chad

I took the aggressive entry as usual and the market pushed of 50+pips before popping back up. Just as it was push back to the upside I was in the process of moving my stop to protect some profit and price moved rather quickly to the point I was planning to put the stop so I closed manually for a 25 pip profit.

Happy Trading guys I hope this helps

Chad

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Having said that there was a nice long to be had for those who trade the US afternoon. As you can see on the chart below price had run over 100 pips top to bottom and came up on not just the hourly and 4hr 200EMAs but the previous days low is just under also. Once it showed the trap there was a clean 40+ pips with a conservative entry. Of course I was in bed but if I did take this trade I would be out now since although we can trade level 3 both ways the higher probability trade is the reversal and 2-1 of my risk is a great profit.

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The GBP/USD is still chopping around in its 3rd level price action and has yet to break. having said that the reversal is the higher probability trade and with already having the stop run to the highs and lows yesterday they will most likely not let any longs see profit and the stop run today may not even get above the Asian highs. I will be waiting for a clear trap candle pattern before shorting this pair today.

We do have some decent news releases today with Flash Services and Manufacturing PMI numbers from France , Germany and the Eurozone as a whole. The ones I will be looking at are the German Mfg. Mainly because they are a export nation and manufacturing is key to exports. Also they are teetering at the 50 level of expansion/contraction. Any surprise below 50 will be Euro negative. Later in the day the Industrial new orders are released also and expected to be a 2.0% drop. If this surprises to above negative there will be a pop in the Euro but it will take a significant number above zero to change any negative sentiment that might be in the market from previous releases.

Other than that we do have Retail Sales from the UK and Unemployment claims from the US which could make things interesting for New York traders

In the video below I start on an hourly chart of the EUR/USD and move to the 15M. Since this video I have begun to show the chart and time frame in the upper right hand corner for easier reference. Please make the video full screen for clearer viewing.

Notice the accumulation through Asia followed by the bottoming stop run reversal formation that we mentioned many hours in advance. When you understand what cycle the banks are in your can predict their next move with a high degree of accuracy.

This email below was a response from one of our new members. Its encouraging to see new members already understanding the principals of Smart Money and benefiting from it.

Understanding HOW Smart Money tends to drive the price is the key to knowing which direction they are going to move the market. This is how we knew well over 14 hours in advance how and when the banks were likely to drive the EUR/USD, USD/CHF, and GBP/USD.

Does this mean that we need to know or will know what EVERY move is going to be? Of course not! With that being said it is not necessary to know and predict every move! Those who caught this mid week reversal had access to well over 250 pips. Lets assume someone managed half of that as a few members did…

If the original trade was taken with a 20 pip stop and 2% risk, what would the percentage gain be on that trade? On a +125 pip profit that would be a 12.5% gain. How many of those does a trader need in a month to turn this into a full time career? Many in equities would kill for a profit like that on a monthly basis, let alone on one clearly identifiable trade setup.

Yes we will still have losses but the R/R and high probability setups the banks give can produce consistency like nothing else. Remember 10 banks control well over 50% of the volume in the forex market. If you know what they are doing, what other information does a forex trader need?

So can someone learn to trade forex with a full time job. I think the video above and the many examples we see in the members forum answer this clearly. Happy Trading!

-Sterling

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As I noted in the March 20 Commentary we were looking for the reversal and both the EUR/USD and USD/CHF showed a nice topping and bottoming formation respectively and I took a small position short the Euro and long the Swissy during Asia after the Asian market showed me the SM was holding prices at certain levels. My entries are circled on the charts. Notice how they did move 3 intraday levels down/up before the reversal during the NY session. Once they made the move in my direction I cycled my stop down and eventually got hit at +20 on the Euro and +7 on the Swissy. Not a great day but not bad either.

Here are my orders for this week.

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As of this morning it looks like there is some risk sentiment coming back into the markets. The S&P and Dow futures are rising along with the EUR/USD that has just punched through its weekly highs and doesn’t seem to be looking back. I am half thinking that this is just an effort to take stops above the 1.3300 level but could be a continuation of the short term up trend also. Just have to wait and see.

As for the GBP/USD. It has still been holding firm in its 3rd level chop so I will be just watching that pair today to get a firmer direction. With the EUR/GBP coming into its 4hr 200 EMA it will be interesting to see if the EU reverses and the GU rises if the EG finds decent resistance there.

We dont have many major news releases today other than from the UK with their MPC meeting minutes, which could surprise, Public Borrowing and their annual budget. Other than that we do have Bernanke testifying before congress which should be interesting to see how much pressure he gets on QE3 and any hints he is considering it. There seems to be less reasoning for it at this time and he did say recently that there are no plans. Other than that the US existing home sales will be a good chance for some manipulation depending on if it surprises.

Looks like we have a boring day ahead.

Happy Trading

Chad

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The GBP/USD is a little more diffacult to read. As we see here its possible it has had a 3 level rise but the red level 1 is in whats known as level 3 price action but has made a 300 pip run up from the bottom over 3 days and could be in for the reversal. However its also possible that the black scenario is true and it could have a 3rd level up still. My opinion is the black is correct since it fits more habits of the Smart Money plus its looking like the EUR/GBP is hammering on a break of some daily lows. This could very well be a day that the EUR/USD and GBP/USD run in opposite directions.

We do have a few scheduled news events today that the Smart Money will most likely use to manipulate the markets with. First is the German PPI m/m then UK CPI, RPI and CBI Industrial Order Expectations and lastly during the US session there is US building permits and housing starts. I have doubts these releases will be much of market movers but keep an eye out for them since any deviations will be manipulated.

There was really nothing noteworthy from the news articles other than a report of Greece may be better off than we all think. LOL I dont think so.

Happy Trading

Chad

I was kind of kicking myself Friday for missing the long on this pair since I did have a small bias short but did catch 25 pips of the move after the hesitation expecting the 3rd level of intraday rise. Not bad but 100 pips is better that 25 any day of the week LOL

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The GBP/USD is not quite as clear but still looks darn good for the long today. It has broke out of some level 3 price action and made a clear level 1 push up and gone into consolidation. I expect the same movement on this pair today also. Just remember that level 1 trades are less reliable. Having said that it does have an intraday 2 level rise from the bottom of the level 3 and does go with the long trade scenario. just be cautious of a longer stop run here also.

The weeks ahead

As you guys know I read up on events most all week not just because I am bored out of my mind but to get informed on what may be coming down the pike in the future. Of course then I relay what seems the most important at the time to save you the time and trouble of keeping up on the news. I do not trade off these ideas as since we are day traders the news (unless its a tape bomb) should have minimal effect on the Smart Money trend. One thing I was discussing with Sterling last week was given the fact that these big boys have government officials in their back pockets giving them info on what will happen with laws being passed and so forth that will effect companies and sectors alike so they can trade off this inside information. It leaves little doubt in my mind that these guys have insiders at the official data collectors offices that send them news release information long before the actual release so they can load up and run the manipulation game around the release. Interesting thought huh?

Whos next

In previous commentaries I have speculated who will be next in the line of dominoes that is Europe to fall so once I saw these two articles this week I thought I would lay them out for you and let you decide. There are plausible arguments either way. The first is on Portugal from the Telegraph.

Mohamed El-Erian, PIMCO’s chief executive, said Portugal will need a second rescue as the original package of €78bn (£65bn) falls short, setting off a political storm over EU rescue costs.

Please consider these snips from The Fool’s Game: Unraveling Europe’s Epic Ponzi Pyramid of Lies by Zero Hedge:

If we just take the newest figures for Spain, which were released this morning, we find an admitted sovereign debt of $732Bn and a touted debt to GDP ratio of 68.5% which is up 10.7% from last year. In a report issued on 2/29/12 and apparently ignored by everyone including the ratings agencies, Eurostat reports that Spain has total sovereign guarantees of “other debt” which is 7.5% of their total GDP which would total around another $72.2 billion in uncounted debt. Then if we consider [all] the “known” debt we find: In the same Eurostat report, by the way, of 2/29/12 we also find that Belgium’s sovereign guarantee of “other debt” is 21.3% of their GDP, for Italy it is 3.6% of their GDP and for Portugal the number is 7.7% of their GDP. This does not include any guarantees of bank debt which would also have to be added in to the totals to reflect some sort of accurate fiscal picture. Consequently, as investors, we are not in some murky place but smack dab in a carefully engineered plan of outright Fraud where we are given manipulated and inaccurate numbers in the hopes that we will fund based upon them. Not only are published GDP figures a lie, so are published debt figures. The result is a complete farce in debt-to-GDP accounting. Meanwhile Spanish banks continue to plow into leveraged debt on their own bonds, with Spanish unemployment over 23%, with youth unemployment of 49%, with widening regional debt problems, with massive unrecognized housing sector losses, and with more austerity measures coming that will exacerbate all of the previously mentioned problems! This Ponzi scheme cannot last, which means it wont. Spain will implode. Indeed its a wonder it hasn’t already.

I will leave the rest up to you. I will be watching both for the time being. My money is on Portugal in a gentleman’s bet with a friend.

Happy Trading

Chad

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The GBP/USD is still a bit messy and has been rejected by the hourly 200EMA again. This pair hit my BE stop yesterday. I will most likely be leaving the GBP/USD alone today.

There is not much on deck for news releases until the US session today with  CPI numbers, Industrial production and consumer sentiment being the highest impact releases. I dont expect to much reaction unless these have large deviations. Mainly the Core CPI numbers. If this surprises to the upside then Bernanke will have to delay any QE3 further and if it somehow drops for some crazy reason then the chances of Ben firing up the presses a bit sooner come into play.

The European fiasco continues.

The good news is there was not a bunch of Bizzaro talk from the Europen elite which is refreshing. However in sifting through articles this morning I found this one from Phoenix Capital. I really like how bluntly Grahm is but I am not quite such the gloom and doomer he is even though he could be 100% spot on and his arguments have merit. Here is an excerpt from his The Big Greek Lie article and how this relates to Spain. Good stuff and repeating what I posted in my commentary recently.

Spain’s official Debt to GDP is only 64%, but its private sector debt is at an astounding 227% of GDP. And the Spanish banking system is leveraged at 19 to 1 (worse than Greece).

 Moreover, the country is already experiencing an economic Crisis with an unemployment rate of 20+% and an economy that has been contracting since mid-2011 (in fact Spain’s GDP just actually went negative in the first quarter of 2012)…

 Indeed, Spain’s recent efforts to tell the EU to “shove it” have put a crack in the Eurogroup power over individual EU members that can quickly widen.

 Spain’s sovereign thunderclap and the end of Merkel’s Europe

 As many readers will already have seen, Premier Mariano Rajoy has refused point blank to comply with the austerity demands of the European Commission and the European Council (hijacked by Merkozy).

 Taking what he called a “sovereign decision”, he simply announced that he intends to ignore the EU deficit target of 4.4pc of GDP for this year, setting his own target of 5.8pc instead (down from 8.5pc in 2011).

 In the twenty years or so that I have been following EU affairs closely, I cannot remember such a bold and open act of defiance by any state. Usually such matters are fudged. Countries stretch the line, but do not actually cross it.

 With condign symbolism, Mr Rajoy dropped his bombshell in Brussels after the EU summit, without first notifying the commission or fellow EU leaders. Indeed, he seemed to relish the fact that he was tearing up the rule book and disavowing the whole EU machinery of budgetary control.

 http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100015432/spains-sovereign-thunderclap-and-the-end-of-merkels-europe/

 The EU rejected this (of course) and Spain has since agreed to meet softer budgetary requirements. But it’s clear that a shift has begun in how EU members will deal with the Eurogroup as a whole.

He actually goes on to say that the probability of Spain and Italy considering default rather than do with the austerity program. I have my doubts on this one but nothing that comes out of Europe these days would surprise me.

On another note I cant help but enjoy this picture coming from the Muppet fall out from Goldman Sachs. They get a visit from Michael Bloomberg. Check out the look on his face. A picture is truly worth a thousand words. He dont look very happy at the moment. LOL

Happy Trading

Chad

To start off todays commentary I want to briefly discuss the New York Times article by Gary Smith and his decision to leave Goldman Sachs for ethical reasons. As we in the financial world already know Goldman has been seen from 2 different perspectives. Either you want to be them if you are another financial institution or you down right despise them and know them as the Vampire Squid. Having said that I have to commend Gary on writing the piece for the NYT. One does have to wonder why he took 12 years to do so since Im sure he made millions on the way up the ladder at Goldman. Maybe because he knew that the big bankers and their cronies could easily screw him as well just like they did Mark Mensack when he tried to blow the whistle on Morgan Stanley for taking hidden fees from its retirement-account customers. Get the full story here on how the crony system has worked for him.

Normal Market

Well we have held out for another day on the decoupling theory. The Dow Jones held up with the rally as the EUR/USD slid. The longer we hold this the more I will be convinced but it will be some time before I would be willing to hold my breath. If the European crisis shows up again via Portugal or Spain then we will be right back to the risk based market. I do find it refreshing that the Japanese Yen has finally started to weaken as it should have long ago. I find it hard to believe that Kyle Bass and a few others are the only ones to know that Japan is teetering on the edge of a cliff. The weakening of the Yen is really their only hope of pulling out of their hole and even that probably wont be enough.

News Today

The scheduled news releases are light for the EZ with the ECB monthly bulletin of which I expect to be a small event. What could move the markets on this is if there was a lot of talk about inflation during the meeting but I have my doubts. Next up is the US PPI numbers which is expected to increase from 0.1 to 0.5. If there is a surprise to the upside then the $ should get stronger as the the chance for more QE gets pushed further down the road and helps bring closer a tightening from the Fed. Unemployment Claims are expected to drop slightly but will be watched closely for any surprises. The TIC Long term Purchases is expected to rise and show that foreign investors are buying into this rally which should also add to $ strength. Last but not least is the Philly Fed Manufacturing Index which is expected to rise and show that manufacturing in the Tri State area is getting better and should add some strength to the $ also. All signs point to the probability of the USD continuing the run even if we are at daily support on the EUR/USD and a quadruple top on the DX. If these levels do pop expect a quick run as stops are triggered.

Looking at the hourly charts of the EUR/USD and GBP/USD. The Euro I can see 3 levels of drop and it has potential for a reversal considering the Smart Money trend but with decoupling and the $ strength potential the SM trend may get trumped here by fundamentals its hard to say. I will of course be looking for the a clear trap move with a small bias to the downside.

The GBP/USd is a bit clearer and has a more bearish tone with the recent daily close just below the level we are at right now and a hourly topping formation at the 1 and 4hr 200EMAs (blue and black lines). If I see the stop run to the upside during the London session I will be taking the short here.

Happy trading every one

Chad

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The Federal Reserve did mention inflation enough to hint that QE3 wont be anytime soon and yet the equities still rallied so the pricing in of another round of money printing may not have been the case. I do still think the rally in stocks could be a sucker move to try and lure investors back into the market. Remember stock trading volumes are still at decade lows showing that this rally has been perpetuated mainly by the big boys using free money from the Fed. To be honest I hope I am wrong and the US can pull its way out of this mess and it is possible but there are some definite head winds ahead.

The European Project

In the European Finance Minister meeting yesterday things seemed to go as planned but we did get a few Bizzaro statements. Just not as many as I thought we would get. The German finance minister said that “the probability that the crisis is behind us is about 50%”. Well I guess we could toss a coin on that one.

I do find it hard to believe that the crisis is even 25% over considering we are seeing the same thing that caused the crisis still being perpetuated. For example Germany not following its own rules of adhering to its own budget cuts.

 SPIEGEL reports this week that the German government didn’t reach even half of its planned savings in the federal budget. Only 42 percent of the spending cuts named by Merkel’s coalition government, comprised of the conservative Christian Democrats and the business-friendly Free Democratic Party, were actually not implemented.

Calculations made by the influential Cologne Institute for Economic Research indicate that only €4.7 billion ($6.16 billion) of the €11.2 billion in austerity measures stipulated by the savings package actually took shape in 2011.

The government is also falling behind on its targets for this year. Of the originally planned €19.1 billion in savings, less than half has been implemented. For the coming year, the concrete measures that have been agreed on so far cover just one-third of the announced amount of savings. Merkel’s cabinet is hoping to agree to the basic foundations of the 2013 federal budget in March.

On top of that here is an interesting picture that shows the tactics used in the Finance Minister meeting . This is is from the Telegraph on how Spain sort of jacked the meeting as the ministers conceded to relaxing the budget deficit target for Spain this year.

Please Enlarge This Video To Full Screen For Better Viewing:

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That is exactly what we got. Although the levels are a bit unclear right now the manipulation out of the Asian accumulation was quite clear. This gave us a strong indication that the banks were trading the GBP/USD short.

Happy Trading,

Chad

We did have the WSJ reporter who is considered to be the Feds mouthpiece write an article over the weekend steering away from any sort of QE and Bernanke did say last month that there were no discussions of QE3 in last months Fed meeting. What we will be looking for is any wording in the speech that has to do with inflation. If that word is uttered enough times then there will be no QE3 this year.

Now on to a bit more Bizzaro World. Last night we had this from Twitter.

EU’s Juncker says Greece won’t need a third bailout. So be prepared for the next Greek bailout LOL

This from Talking Forex, New Greek debt analysis says new debt-to-GDP ratio could fall well below 120% by 2020 if debt swap participation is pushed above 96% according to EU sources. Yea right when pigs fly some growth into Greece and stop the profuse bleeding of the economy.

Again from TF, The French finance minister says Spanish debt is relatively low. I beg to differ. Yes the public debt looks rather well on paper however Spain has an elephant in the closet. I got this from Things That Make You Go Hmmmm.

As manageable as Spain’s public debt would appear to be at face value, her private debt is an altogether different story – standing at a staggering 227% of GDP and, according to McKinsey, Spanish corporations hold twice as much debt relative to their output as US companies and, in comparison to Germany, that number goes up to six times (incidentally, Portugal – the PIIG that nobody cares about – has even worse numbers with public debt at 93% and private debt at an eye-watering 249%, – still as high as it was at the height of the GFC. Portugal is unsalvageable- it’s just that nobody seems to think it will matter. It will.)

Plus remember Spain just kinda told the EU to stick their deficit targets where the sun dont shine. But after some arm twisting and probably head bashing they did give in but so did the EU making some excuses for Spain. They still wont make the agreed deficit target but did agree to a smaller number than they announced last wee. How nice it is for a country that is a bigger threat to the EU if it goes down to catch a break that they would have never given Greece. Not that I think Greece deserved one but why does Spain? Maybe because the powers that be might actually be pulling their head out of their you know what and seeing that putting a foot on the throat of an economy doesnt help it pay its debts. however I have my doubts the proverbial head is out yet LOL.

Lets talk todays news. We do have a bit and some decent ones at that will be watched.

Starting with the EU Finance minister meetings Since they have already approved the Greek bailout. I expect a lot of Bizzaro talk from these guys again so we may have an entertaining commentary tomorrow LOL. This will most likely give the Euro a boost at least temporarily.

Next up is German and EZ ZEW economic sentiment which is expected to be much better than last months. I find it hard to believe that things have improved that much but stranger things have happened. If these come out just a little better than expected the Euro will rise also.

Then we have the ECBs Draghi speaking. (Euro Pumper)

Last but not least during the US session there is Retail sales numbers. We could have the Trifecta of better than expected news today which will most likely turn the risk sentiment on again and the Euro will benefit mostly. Along with a possible break and close above 13K on the Dow. Fundamentally there are plenty of reasons to be bullish today.

Looking at the charts the 1hr EURUSD has found support and made 3 intraday pushes up and is approaching the 200EMA on the hourly and 4hr charts so it will probably take the good news to break those to the upside. It is still unclear as to direction considering the Smart Money trend so I will be waiting to see what today brings.

The story is pretty much the same with the GBPUSD other than it is possible it has made the first level down but considering the potential for the EURUSD to move up today and drag it with too its a bit risky to take the short today.

What does look rather nice for a level 2 long trade is the EURGBP. It has made a nice 2 level rise from the lows and should see the third today. I will be looking for the trap move then take the long on this pair.

Happy trading to all

Chad

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For those that dont know what Bizzaro World is. When I was a child there was a Saturday morning cartoon we always watched called The Superfriends. It had all the people with super powers that got together to fight evil. There was Superman, Wonder Woman, Batman, Spiderman, The Green Lantern, and several more. Well several episodes over the years involved the Superman from Bizarro World and he was a bad guy. As matter of fact all the Superfriends from Bizarro World were bad guys. Ever since then anybody from that generation would use the term bizarro when referring to things that were the opposite of what they should. The comedy show Seinfeld also has some reference to it also. The younger generations may remember that one LOL.

Over the weekend in the weekly wrap up I posted. I figured people will be asking the question of whats next. As Im sure many of you are and in a short summary I gave my opinion along with a writer I agree with. So today as Im reading quotes from politicians and banker cronies of the past I realized that all we have to do is listen to these boneheads and what ever comes out of their mouth you can be rather sure that the opposite is going to happen. Here are a few good ones.

“There is no bailout and no “plan B” for the Greek economy because there is no risk it will default on its debt” – European monetary affairs commissioner, Joaquin Almunia,

January 2010

“I’ve always said publicly that a Greek default is out of the question.” At the time ECB president Jean Claude Trichet. April 2010

“There will be no [Greek] default.” – Economic and Monetary Affairs Commissioner Olli Rehn, April 2010

“Restructuring is not going to happen. there are much broader implications for the Euro Zone should Greece have to restructure its debt. People fail to see the costs to both Greece and the Euro Zone of a restructuring: the costs to its citizens, the cost to its access to the markets. If Greece restructures, why on earth would people invest in other peripheral economies? It would be a fundamental break to the unity of the Euro Zone” -George Papaconstantinou, Former Greek finance minister September 2012

And the one I love the best.

So here is what we can just about guarantee considering these recent quotes.

Wolfgang Schaeuble, the German finance minister, says the ISDA decison of Greek CDS won’t affect aid. He has also ruled out another restructuring like Greece, which will be worrying for Portugal, Italy and Spain.

So this means be ready for most likely Portugal restructuring.

Nicholas Sarkozy, I would like to say how happy I am that a solution to the Greek crisis, which has weighed on the economic and financial situation in Europe and the world for months, has been found. Today the problem is solved. A page in the financial crisis is turning.

And this means there has been NO solution has and the problem is only just beginning. There may well have been a page turned but this is still the first chapter and there are 10 more chapters to this book.

With that said I will leave you with a bite from an article published Saturday where Liam Halligan explained the level of confidence of the people who matter in this situation. The bond buyers.

(UK Daily Telegraph): A couple of weeks ago, I sat on the speakers’ podium during the opening panel of the Euromoney Bond Investors’ Congress in London. Together with leading industry experts, including senior ratings agencies’ officials, we engaged in a detailed discussion of the contentious aspects of the Greek debt debacle and the fate of the eurozone.
The audience was “top drawer; the room packed with 500 of the world’s biggest bond market participants; the combined assets under management measured in the trillion of dollars.

“Who thinks the upcoming Greek bail-out will be the last, drawing a line under the eurozone’s sovereign debt crisis?” asked the senior Euromoney staffer chairing the panel. “Put your hands up”. Delivered with a serious demeanour, this was exactly the right question. So deadly was the inquiry, and so germane, that the mood in the room grew uneasy, barely camouflaged by an outbreak of coughing. Scanning this ultra-influential audience, I saw rows of delegates cowed, keeping their eyes locked forwards but staring down slightly, not daring to look elsewhere. Not a single hand was raised. Not a single hand among hundreds of the world’s leading bond market practitioners was stirred to support a debt swap now presented as the key to the world economy shaking off the post sub-prime torpor and taking us into the sun-lit uplands of sustainable global growth.

As for the charts I am sticking to my original assessment in the weekly review from Saturday. Nothing has changed that abruptly in the last couple days to convince me otherwise.

Happy Trading

Chad

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So what is next?

At this point its time to watch the exposure the Greek banks have to the derivatives market and see if any of them go into default. Then we may see a cascading effect on banks around Europe but could be buffered by the LTRO but since the ECB has been already giving margin calls it may not be much help.

There are those and I tend to agree that the write down and loan from the Troika actually increased Greek debt. However the maturity is much further down the road so even so they did give the can a good boot this time but sure doesnt look like the goal of getting Greek debt down to 120% by 2020 is going to be doable. Especially considering the Greek economy actually shrank 7.5% rather than the first reported 7% so Greece is on a slippery slope and losing traction fast.

This is from  Mark Grant, author of “Out of The Box and onto Wall Street”

The Debt of Greece

The somewhat amusing part of this entire transaction is that the debt of Greece has been INCREASED.Greece and the EU handed private holders $138Bn in write-offs but with the addition of the new loan, $171Bn, the gross debt for Greece increased by $33Bn and this is if all of the legal challenges favor Greece. The total debt of Greece (sovereign, municipal, corporate and bank) has just increased from $1.20 Trillion to $1.233 Trillion and all accomplished by this brilliant plan that did nothing except to tag investors and ramp up the debt load for the country.

The IMF Contribution to Greece

The IMF has tentatively offered $17Bn for the next round of Greek funding while the EU expected $56Bn keeping the IMF ratio the same as in the first round of the Greek bailout. The IMF has said that it will not increase its position without a larger firewall and this is something that Germany has refused to do to date. I ask then where is the $39Bn going to come from then as no government in Europe has approved funds to make up for the deficit. Then as this morning the EU has indicated that any new funds may only be released in tranches we may find that the EU releases money to pay off their banks and other financial institutions but with only a paltry sum released to be used in Greece. The IMF/EU contribution may become quite fragmented and we may hear screams emanating from Athens soon.

Plus as I mentioned before next in the cross hairs will be Portugal and eventually Spain and Mark agrees there too.

The Next Continental Plays

Keep your eyes on Portugal. Very poor economics that are worsening and I think they may be back to the till quite soon. Then watch Spain as they are the first country to publically tell the EU to “Shove It” as they are sticking to their 5.8% deficit and refuse to adhere to the EU mandated 4.40% number as the maximum debt allowed. They have also refused additional taxes and additional austerity measures as several other European nations have cried “foul” and threatened to demand penalties and fines for the country. Then turn to the north and watch France as with elections looming on April 22, run-off on May 6, that Sarkozy appears to be the loser and the most likely winner, Hollande, supports economic and financial policies that are in direct opposition to the policies laid out by the German Chancellor.

The fact is the games have just begun in the EU and its going to be fun to watch all the politicians scramble with the big banker cronies to put the lid on the Pandoras Box they just opened. There have been several precedents set recently that have large potential to kill bond markets as they are not the safe financial vehicle they used to be considering a Central Bank can subordinate bonds and governments can enact retroactive laws to kill any bond contract issued by that government. Scary days for bond traders.

Getting to the charts. Man did I take the wrong day off last week. Both the EUR/USD and the GBP/USD have had failed 1st levels and the GBP/USD has plowed through its previous level 3 and closed well below it. This is a classic Smart Money trend reset and now has a much higher chance of continuing the downside movement. Given the Greek deal and better than expected Non Farm Payroll numbers the market seems to be in the decoupling mood again (the US decoupling from Europe) of which may send US stocks higher along with the USD for the time being anyway.

Next week I will be looking for the trap move after the Asian session and taking a short. The GBP/USD is most likely the pair to trade considering it has already made new lows.

Happy Trading

Chad

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We have 85% participation!

Are you nuts? The rumors floating around the market like crazy yesterday. Supposedly coming from some Greek “officials” then the real officials step up and say this. “Whoever gives percentage rates now is naive. There are only 4 or 5 people on the planet that know the percentage and those who claim to know are just guessing” They dont say “buy the rumor sell the news” for nothing.

The Dow has approached 13000 again. The S&P is feeling spunky too but I wonder if we can finally break and stay above the 13000 level on the Dow. Maybe this time will be different but in the past couple weeks the Dow has crossed 13K and been rejected at least 30 times. I suppose if the Greek deal goes through with just a small hitch then its possible for sure. However I have seen reports that even if the deal does get 95% participation. Considering how fast the Greek economy is shrinking the debt level goal of 120% by 2020 will still never be obtained and Greece will need a third bailout in the near future.

Although the LTRO has buffered the banks for now it is still a large possibility that once Greece is settled the market will turn on the next in line which is Portugal. However there was an agreement between the finance ministers from Germany and Portugal that they will be more lenient toward Portugal than they were on Greece but its what Mr. Market thinks that will determine how things will go from here. The fact is that in just 2012 alone the PIIGS have debt maturing to the tune of about 500 billion. With the majority of it being Italian and Spanish debt. Europe is not finished with this whole charade yet. The best we can hope for is some sanity to come back to the Central Bank cronies and they let the market correct but considering their actions so far they still need a few years of therapy. LOL

Both the EUR/USD and GBP/USD have pulled out of level 3 of the SM trend and have completed level 1 of the reversal from the lows. Today will be a great opportunity to catch the long trade after the trap move during the London session on either pair.

Considering reports of the possible postponement of the release of the percentage of participants in the Greek bond swap until Monday I will be trading these pairs today.

Happy trading guys

Chad

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It was nice to see a few members pointing this one out before I could get to it:) Good job on that guys, keep up the good work! Until next time, happy trading!

-Sterling

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Next is the ECB rate decision and Mario Draghis press conference later. I dont expect much movement until the press conference gets under way but all this will most likely be secondary until the release of the Greek PSI deal comes out. Then finally the Unemployment claims from the US and are expected to drop slightly.

In other news the Wall Street Journal reported on a possibility that the Federal Reserve may be considering QE3 again. What a joke. The fact is that QE3 has been discussed so much in the recent past that the chances of it mostly being priced into the market already is high. Of course there will be a pop in equities and risk sentiment initially but this will most likely be short lived. Especially with the European situation not getting any better and showing more signs of actually getting worse.

Getting to the charts. I never like to toot my own horn but when the market does exactly as you expect ya have to feel good about what your doing. And you dont have to tell me because I have already reminded myself “just dont let it go to your head Chad” LOL. The EUR/USD has gone down and ran a beautiful stop run, trap move at the lows from Tuesday just as I mentioned in Wednesdays EUR/USD commentary. The problem is it did it during the US session and I missed the trade. However I was happy to hear some students that trade the US session saw it and took advantage.

As usual with the massive amount of news coming out today the Smart Money will move the market during the Asian session and the EUR/USD has broken some resistance at the recent highs. If this manages to continue we will see the first level and be looking for more accumulation and manipulation for another long trade in the near future.

Happy Trading

Chad

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Most Greek pension funds holding Greek sovereign debt have agreed to take part in a bond exchange to ease the country’s debt burden but four have refused to do so, a Greek official said on Tuesday.

 The pension funds have come under pressure from workers’ unions worried the write down on Greek debt holdings will affect the viability of their funds.

 About eight or nine funds have agreed to take part but pension funds for journalists, police, the self-employed and hotel workers - which hold Greek debt worth 2 billion euros – have refused, the official said.

On top of that its looking like Bingham McCutchen  is adding members to their group of hold outs also. This comes from a Bloomberg report yesterday. Things are getting dicey to say the least.

 ”Investors in Greece’s Swiss franc bonds have formed a group to fight for their rights as the country seeks to pare about 106 billion euros ($139 billion) of debt as part of an international bailout. The group is concerned by the terms of the restructuring and is “exploring means to address its concerns and to protect the rights of holders of the bonds,” according to a statement from their legal adviser Bingham McCutchen LLP in New York. The group holds the 650 million Swiss francs ($708 million) of 2.125 percent notes due 2013.”

Its no wonder that the rumor of the PSI deal getting postponed for 3 days was floating around yesterday. Im sure they were scrambling for a way they could get more time to try and force these bond holders to volunteer to take the deal. How about that for an oxymoron. (Force them to volunteer LOL) The thing is thats exactly what they are trying to do as some bankers have said it feels like they have been treated.

This was the rumor floating around Talking Forex yesterday. When the bomb was dropped the EUR/USD plunged about 40 pips and the denial from a Greek government official had just about zero impact.

Market talk that Greek government is considering extending the deadline for the PSI deal from this Thursday to next Wednesday. Unconfirmed

And then about 35 minutes later

Greece finance ministry official denies any plans to extend March 8th deadline for investors to participate in bond swap

The fact is they cant extend the deadline or it would just about guarantee the default because if the swap is not done tomorrow there will not be enough time to get all the paperwork in order to guarantee that Greece will get the payment for the bonds that mature on the 20th. They have drug this out so long already that they will be working 24/7 and will more than likely just barely make it.

In the news today we have German factory orders but that will probably take a back seat to the ADP nonfarm payroll numbers during the US market today. If they are better than expected then my take will be decoupling theory will kick in  and the Euro will drop. Of course depending on any tape bombs released during the London session. If we do get some good news on the PSI deal and better ADP then risk will most likely be on and the Euro will rise. Considering the Smart Money trend has ended and I am expecting a reversal to the upside my thoughts are we will get something of that sort with rumors today. Even if the reversal eventually fails we should be able to make some nice pips on the move. I will be looking for the trap move as usual at or near the lows to take a long position.

Happy trading guys

Chad

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Now we are getting reports that the IIF and its members have all but 1 agreed to take the hit and agree to the PSI deal offered. As usual we have conflicting reports on just how big of a chunk of the Greek bonds they collectively hold. This is from the FT.

  ”A large grouping of private creditors agreed on Monday to take part in the multibillion-euro Greek debt swap in a significant step forward for Athens as the country struggles to avert a sovereign default. Twelve banks, insurers, asset managers and hedge funds in the steering committee of bank lobby group the Institute of International Finance said in a statement that they would take part in the bond exchange. Members of the IIF steering committee include BNP Paribas, Deutsche Bank, National Bank of Greece, Allianz and Greylock Capital Management. A spokesman for the IIF said this represented a “substantial” amount of the €206bn in Greek bonds held by the private sector that banks managing the swap are trying to involve. Analysts estimate that institutions represented by the IIF make up about 50 per cent of the private sector bonds.”

Now I dont know about you but when I hear the word analysists I get a little jittery thinking of just how these folks come up with their numbers and release this data without putting their name on the paper to take the fall when they are wrong. Of which quite often they are. It reminds me of the old “4 out of 5 dentists surveyed recommends Colgate”. Or was it Crest?

So all is well according to the FT. Well lets get on over to Bloomberg for some corroboration. This is what they had to say.

 ”Private Investors Holding About 20% of Greek Debt to Join Swap…The 12 members of the creditors’ steering committee that said today they would join in the exchange have debt with a face value of about 40b euros ($53b), compared with the 206b euros of Greek bonds in private hands, according to data compiled by Bloomberg from company reports.” 

And this is from Zero Hedge

As we said earlier today, everyone is now scrambling to get some color on how many funds are currently part of the Bingham group of ad hoc hold out creditors and how many bonds they represent. If the above is even remotely indicative of holding patterns 3 days ahead of the deadline, the PSI ain’t gonna happen.

For me being a Forex trader that only trades the manipulation of the markets. I am always skeptical of such releases of information. Since it is well known that the Smart Money will use these releases as a tool in their manipulation tactics. The last thing I want to do is follow the herd of sheeple. So lets look at the 2 releases a bit closer.

The FT said that the 12 banks and insurers hold about 50% of the outstanding Greek bonds. Ok that’s fine so if correct then they should hold roughly 100Bil Euros of the 206Bil outstanding right?

Then Bloomberg tells us that these 12 banks and insurers hold roughly 53Bil Euros of Greek debt at “face value”. What gets me thinking here is are we talking about current face value? Of which is roughly 50% or less than the full face value before the crisis. So here is my question. Which face value is Bloomberg going by? The implication is that they are using full face value since they are saying that it only represents 20% of outstanding bonds. However if they are using current face value of the bonds at 50% or less and then in reality the FT was correct and they represent 50% of the outstanding bonds of which is 103Bil Euros of the 206Bil. Seems strange to me at this point. I wonder if Michael Bloomberg has a Euro long position hes trying to add to. Two more days and we will have the answer.

Looking at the 1hr chart of the EUR/USD we have had 2 levels of drop and expect a third today considering the SM 3 level trend. I will be looking for the trap move when the Smart Money is trapping long positions and look for the short just as I was yesterday. My short went 38 pips my direction before hitting me at break even.

The GBP/USD 1 hour chart chart shows we have only reached level 1 of the SM trend and should have 2 more to go. It is possible that is has moved off to level 2 already considering the 3 level intraday push starting from the end of the day Friday thru Monday but with the nice pullback during the London session yesterday I feel this is the higher probability trade. This is the pair I will be looking to trade today since it should have a longer run to level 3.

Happy Trading to all

Chad

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There was some reports out over the weekend on the Goldman/JPM crony who is now in charge of getting the PSI deal done. Here are a few important points from Zero Hedge

 Petros Christodoulou, who is now actively threatening any Greek hold out hedge funds against doing what is in their LPs’ best interests (suing Greece and the EU and holding out for par recoveries) by advising hedge funds (which are actively forming ad hoc hold out committees as we speak)  that “there is just no money for holdouts…We are prepared for legal challenges but the risk here is that people are trying to be too smart.”  We wonder if Mr. Christodoulou learned such brute force negotiating tactics at one of his former employers: JP Morgan or Goldman.  And as a reminder, it was also Goldman who allowed Greece to reach to its catastrophic debt load in the first place by coming up with clever ways to disguise its debt. Yup: if there is anyone who can play not both, but all three side of the game (including be the referee) it’s Goldman.

And the NYT

Mr. Christodoulou declined to comment on whether the clause would be activated but he did underline that the consequences of a failed deal are dire not just for Greece but for bondholders too.

 The alternative, he said, “is too dire to contemplate.” He added that if this deal failed, the next offer bond holders would get would be far inferior, lacking the incentives that the current offer has.

 Mr. Christodoulou said that it was too early to get a sense of what the participation rate would be but that he said he was confident that at the end of the day enough investors would agree to the deal to reach the target.

 “We are targeting near universal participation,” he said. “We have spent a lot of time on this — now we are ready to implement it”

It seems interesting to me that a former Goldman/JPM employee would be put in charge of such things but this is the world we live in. Go figure.

It seems that the ISDA has also moved up the date of their decision on the PSI deal to March 12th and has indicated that only the activation of the CACs will be determined a default. The threat of using them to coerce the hold outs to participate dose not. Of which does make sense to me. Thursday is going to be wild guys so you may want to mark that on your calendar.

If the debt swap goes off without a hitch then all will be good but considering how the Hedge Fund hold outs have been doing their best to buy up enough stake in Greek bonds to collectively create enough percentage to stop the deal I have my doubts. However I wouldn’t be willing to stick my neck out and make a prediction. Stranger things have happened during this mess we call the EU debt crisis.

In todays news for the Euro we have Final services PMI, Investor Confidence and Retail Sales. With the Sentex Investor Confidence and Retail Sales being expected to improve from last month. If they are as expected we may see an up tick in the Euro but will more than likely be short lived as the market waits for Thursday.

The news for the Pound today is only Services PMI and is expected to get a small down tick from last month but is still well above 50 considered to be expansion so unless its a large surprise I dont expect much movement out of the GBP/USD on this release. This pair will most likely be dominated by risk and the USD the majority of the week.

Looking at the daily chart of the EUR/USD I see we have had the nice 300 pip run down and considering the Smart Money will drive the market in 3 pushes we have only seen 2 so far. However they have done a 300 pip push over 3 days so a retracement of sorts is possible before the third push down. I have marked a daily close resistance level at 1.3231 that may hold but considering the potential for optimism on the Greek PSI deal it may not stop there depending on what tape bombs get dropped today. Be careful today guys.

The GBP/USD has made an intraday 3 level push to level 1 longer term so should also have 2 more levels to the downside. However Fridays candle was a 150 pip move and its coming up on the daily 200EMA which its been fighting for some time so a retracement is possible here also. I will only be looking for a clear trap move to take these 2 pairs short today.

Happy trading guys

Chad

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The market has come off of a third level rise. Made a not so pretty topping formation and started the first level of reversal. Since we know the smart money pushes the markets in 3 levels I was only looking to short on this day. Once they hit the stops to the low of the Asian session and sucked in the forex breakout traders. As they often do they ran the market up to hit the stops of those that took the initial breakout. I would have preferred to see them break above the Asain session high but this does not always happen. What’s more important is to see the trapping of traders taking long positions and when it gave the candle confirmation we look for I went short.

Happy Trading,

Chad

As most expected the ISDA has determined that the Greece/ECB deal subordinating the Greek bonds held by private investors is business as usual. However given the fact that the official question was put to the ISDA for determination does show that someone thought there was a credit event. The decision was unanimous so it would seem that the anonymous fund or person who posed the question wasnt invited to the party.

Unlike some reports I have seen the Determination Committee wasnt there to decide whether the Greek PSI deal was grounds for triggering a credit event but rather the subordination scene between Greece and the ECB. The PSI haircut will be considered at a later date and will depend on how the retroactive Collection Action Clause Greece just passed is implemented. For now the CACs are just a scare tactic to get the holdouts to agree voluntarily and if they do then there will be no credit event in that case either. That determination is scheduled to take place March 30th after all is said and done when the bailout is finished. It will be interesting to see how that unfolds.

The scheduled news releases are fairly light today with German retail sales that are expected to rise slightly from the revised release last month of 0.1% (revised from -1.4%) to 0.5%. If this proves to be a disappointment it will show that Europe’s largest economy is feeling the pinch from all the austerity and world wide slow down so I will be keeping an eye on that one. Other than that the EU summit goes into its second day but with not much for tape bombs coming from the first day of the meeting I doubt there will be much today. Although nothing surprises me anymore in regards to the EU and the games that are played.

The EUR/USD daily chart has formed a spinning top for yesterday and the text books would tell you that means indecision in the market.  However the way we look at it is the Smart Money is loading up for a move. It did find support at the close from February 9th at 1.3285 but also closed below the high of that day at 1.3323.  At this time the direction is unclear so we will be looking for clues throughout the day today. Large moves like the one Wednesday have potential to skew the Smart Money trend so waiting is the best option for now.

Happy Trading

Chad

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I truly hope that this theory holds and the US can somehow push forward and start the process of digging a way out of our hole rather than dig it deeper but I still see cards that have yet to fall and will have to be dealt with in the near future. For starters who out there is aware that there is a commercial property bubble that is waiting to burst that has the potential to rock the credit world as bad or worse than the residential housing fiasco. The truth is they have been holding their breath on this one for 3 years and last year finally changed the rules back to where the banks have to mark to market these distressed properties and start taking the hit. The fact is commercial property defaults were snow balling just like residential properties until they changed the rules in 2010. However in mid 2011 the FASB finally had enough of the BS accounting and issued an Accounting Standards Update (ASU) that went into effect for all periods after June 15, 2011called Clarifications to Accounting for Troubled Debt Restructurings by Creditors. Essentially, if a lender is involved in a troubled debt restructuring with a debtor, including a forbearance agreement or a workout, the property MUST be marked to market.

This is from a recent interview with Andy Miller, cofounder of Miller Frishman Group, His company deals with distressed commercial real estate. This segment of his business was booming in 2009 and into the middle of 2010. Then magically, there was no more distress as the rules were changed to buy time.

“All of a sudden, right after Thanksgiving in 2011, the floodgates opened again. In the last six weeks we probably picked up seven or eight receiverships – and we’re now seeing some really big-ticket properties with major loans on them that have gone into distress, and they’re all sharing some characteristics in common. In 2008 and 2009, these borrowers were put on a workout or had a forbearance agreement put into place with their lenders. In 2009, their lenders were thinking, “Let’s do a two- or three-year workout with these guys. I’m sure by 2012 this market is going to get a lot better.” Well, 2012 is here now, and guess what? It’s not any better. In fact I would argue that it’s still deteriorating.”

Not to be a total gloom and doomer I am happy to see some things are getting marginally better but do you really believe things are so much better that the economy can withstand another default shock that may be larger than the residential housing collapse? Time will tell the story on that one.

In the news today the most important release I see scheduled is the EU summit. However remember that the ISDA will be releasing their conclusion on a Greek default due to the subordination of Greek bonds by the ECB. The meeting is set for 11am GMT and the release will be soon after. Other than that there is Unemployment claims and Bernanke testimony again during the US session again. Along with manufacturing PMI data. As long as these are better than expected then I expect the decoupling scenario to continue.

Looking at the charts the EUR/USD did pull a fast one on me yesterday. Of course I followed my plan and went long. All was well until Bernanke opened his mouth LOL. My long went 30 pips before coming and hitting me break even. The fact is even the Smart Money gets it wrong sometimes. The daily is looking very bearish after the 170 pip drop from the highs and now is forming level 2 of the SM trend. I will be looking for the trap on the 15 minute chart to the upside today to short from. Most likely around yesterdays NY lows. Of which also corresponds with the break out level on the daily chart at 1.3370 and is the daily low from Tuesday.

Happy trading

Chad

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The good news is though. The ISDA decided that they would give us a break and postponed the first hearing they will have to answer the question of recent events with Greece and the ECB constitute a default. Of course myself and many others feel it does however Zero Hedge has a different take and does make sense. If they can somehow squeeze these swaps between the ECB and Greece within the realm of being a legal transaction then they will and all will be good. NO credit event. For now anyway. They are not going to discuss the PSI deal until March 30th so as ZH expects the euphoria to continue on this it wouldnt surprise me in the least.

This from ZH this morning.

 For a while there it seemed that together with the LTRO and the Bernanke testimony, tomorrow’s event trifecta would be joined by ISDA, which it had previously been rumored would make a decision on whether a credit event (read CDS trigger) had occurred in the context of Greece, and specifically following the ECB’s stripping of its own bonds under some arcane exchange offer that only the ECB was privy to (this is not a determination whether a credit event has taken place related to the PSI – that will take place in late March). According to a just released PR, this won’t happen, and instead ISDA will hold the meeting at 11 GMT on Thursday, March 1, the day after the LTRO, and announce everything was voluntary and by the books, just to avoid overloading the algos with bullish news at the same time (recall that the LTRO announcement will take place at 11:15 CET). In this way, the upside love will be spread over two days, which should hopefully result in another 30 ES point, as the headline scanning aglos no longer care what the headlines actually say, as long as there are headlines. Remember: when dealing with a bipolar Atari 2600 – quantity trumps quality any time, especially when coming off the biggest short-term central bank liquidity infusion in markets in history.

Getting to the charts the daily EUR/USD has had another bullish close above yesterdays close at 1.3464 and above the closing price on December 1st so I expect this to continue. The wild card here is that its approaching the 200 daily EMA and may find resistance there but considering the risk on euphoria in the markets it is less likely. My 15 minute chart shows what we who trade with the Smart Money call a reset and therefore has upside potential out weighing the downside. Today I will be looking for the trap move on the lows after Asia close and take the long from there.

Happy Trading

Chad

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First lets discuss the LTRO. This round has potential to rock the Euro since it is the second and expected to be much larger than the first. Depending on the amount issued (if it is as large as many expect) its going to send a message to the markets that European banks are in far worse shape than they say. However if its small then the reaction in the market has potential to be muted as much of this should be priced in by now. If it does as I expect and the take up is large I expect an initial pop to the upside as the smart money takes advantage of the optimism that the banks are shoring them self up and will be well funded for the coming Greek default but then the reality of just how bad these banks finances are will set in and the credit crunch will get worse in the coming days or weeks. Euro negative. The fact is if you were a bank that took advantage of the LTRO because you are near bankruptcy why would you lend to another bank that used LTRO funds also? Not good any way you look at it.

The ISDA is in between a rock and a hard place right now. On one hand they have plenty of evidence that Greece has already defaulted by subordinating investor bonds to the ECB held bonds the swapped so the ECB didn’t get affected by the retroactive CAC clauses just passed by the Greek government and take a loss. Here is the question they will consider and the statement released yesterday. Here is the document from the ISDA.

Does the announcement of the passage by the Greek parliament of legislation that approves the implementation of an exchange offer and vote providing for collective action clauses (“CACs”) that impose a “haircut amounting to 53.5%” (MINFIN Announcement, 2.21.2012) that “shall bind the entirety of the Bondholders [of eligible instruments]” (First Article, Section 9), constitute a Restructuring Credit Event in accordance with Section 4.7 of the 2003 ISDA Credit Derivatives Definitions (as amended by the 2009 ISDA Credit Derivatives Determinations Committees, Auction Settlement and Restructuring Supplement to the 2003 ISDA Credit Derivatives Definitions, published on July 14, 2009) because (i) the European Central Bank and National Central Banks benefitted from “a change in the ranking in priority of payment”as a result of the Hellenic Republic exclusively offering them the ability to exchange out of their “eligible instruments” prior to the exchange and implementation of the CACs, thereby effectively “causing the Subordination” of all remaining holders of eligible instruments, and (ii) this announcement results directly or indirectly from a deterioration in the creditworthiness or financial condition of the Hellenic Republic?

LONDON, February 27, 2012 – The International Swaps and Derivatives Association, Inc. (ISDA), as secretary to the Determinations Committees (the DCs), today announced that a question relating to the Hellenic Republic has been submitted to the EMEA Determinations Committee.

In accordance with the Determinations Committee process, the EMEA Determinations Committee will decide whether to accept the question for deliberation or reject it and this decision will be made by5PM GMT on Wednesday, February 29, 2012.

Awesome! This release will coincide (or very close) with the LTRO. Isn’t that just dandy? What makes this such a rough spot for these guys is that they are a part of the crony group that the ECB and all other central banks belong to and most likely are feeling the pressure to NOT trigger a credit event. However if they dont trigger the event they are effectually killing the derivatives markets. At that point anyone who holds CDS or any of the other derivative devices will have to ask them self if the insurance is worth the paper its written on and this could and should create an event in that market. What a great financial world we live in.

As expected in yesterdays EUR/USD commentary the move was down. The problem was it didnt give me a low risk entry and I missed the trade. Oh well you cant catch them all. Today I expect more of the same as the levels around 1.3300 have potential to get tested. However the rumor mill is swirling and it may be a bumpy ride. I will be looking for the stop run above Asian session highs and look for the SM trap to short from. The wild card here is the potential for tape bombs and the proven support level at 1.3370 (yesterdays low)

We are in the process of a server upgrade and will have this done in the next day or two. Until then we will not be able to post picture attachments.

Be careful out there and Happy Trading

Chad

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I mention this because in just the second newsletter I received over the weekend they made a great analogy to the basic problems Europe has and how they go about fixing things as simple the flawed construction model of the Leaning Tower of Pisa. Saying that instead of fixing the root of the problem (the foundation in this case as with the Euro) They make small tweaks and adjustments along the way making everything look good for the moment but eventually the flaw which never left comes back to bite them in the butt. Its a very good read.

Not only that but they share much of the same view as I do about what is going on in the world and its refreshing to know your not alone with your thoughts. They also recommended to listen to an interview with Ben Davies of Hinde Capital of which I had already done and was well worth the hour it took to listen. I have no affilations with them but when I find something of value I like to pass it on to those that read this commentary. The newsletter is free.

Next I found that my thoughts that the US has the same (if a different scheme)  issues with its financial system of big boys who do what ever they want at the expense of either unwitting, corrupt or just over confident customers. I am referring to the reminder of the 2 year long investigation of Goldman Sachs for their role in getting Greece into the Euro by helping them fudge their books with a currency swap. Supposedly all legal but if a trader as myself can see that something underhanded was going on then those that are clearly way above my pay grade should have seen it. I am betting they did and didnt care. Check out this video on just how the investigation is going 2 years after the news on this loan disguised as a currency swap came out. In my opinion this kind of legal underhanded dealing puts some light on the fact that the US and most other western financial markets share some of the same types of structural flaws. The fact is this sort of thing started in the US way back with the Rockefellers when they lobbied (bribed) congressmen to change the laws governing business in separate states in the US from a business that has to be for the benefit of the people to a business thats sole purpose is to gain profit for the company. This was when we started to lose our morals and it has only gotten worse over the last 130 years.

In other news the G20 meeting over the weekend provided no real answers to the Greek farce since the countries with any chance of beefing up the IMF funds for Europe want to see the EZ do their own boosting of the ESM before any will contribute more cash to the IMF fund. Again Germany along with Finland are the ones refusing to pump more cash into the fund but did seem to lighten up a bit by the end of the meeting. To me the comments show that since they are worried about what the obligation might mean to their own creditworthiness. They are probably not as in as good of financial shape every one thinks. Just my 2 cents.

Getting to the daily chart of the EUR/USD. It looks to have broken a head and shoulder pattern but has a longer term H&S pattern that may hold also. Thats why I dont trade those patterns. The way I see it is the December 5th high at 1.3487 is holding and Fridays close was below the close from December 1st at 1.3460. The daily wicks there tell me there was a lot of selling. I am thinking there should be at least a retrace to test the 1.3400 level or a reversal from here but keeping an open mind.

Sorry guys no charts today. We are upgrading the server and it will be back to normal later this week.

Happy Trading

Chad

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Lets just pretend for a minute that all this does mean that all is well and to be honest I hope it is but as I mentioned in yesterdays Forex commentary there are quite a few things missing in the mainstream media that have a large potential to come back and bite us in the booty. The one thing I dont want to do is be a doom and gloomer but reality has to kick in at some point and these issues will have to be addressed.

The biggest question in my mind is when the printing presses around the world break down or some sane fool shuts them down what will happen to this “everything is just fine” rally?

As I was going through my news reports this morning I see that the ECB president Mario Draghi has again voiced his distaste for buying periphrial debt by saying ” the ECB does not provide monetary financing to governments”. I guess technically thats true but the ECB has done some back door QE and provided banks with the LTRO cash injection so the banks can buy up that debt and so far it has worked. However the chance of a credit crunch is only getting worse in the EZ and we will get a good birds eye view next week when the second round of LTRO gets underway. The estimates vary on the size from another 500 billion to 1 trillion Euros. What comes to mind is something I read in an article by Eric Sprott this morning. A very smart guy who runs his own asset management company. Here is the part that got me thinking.

What are the unintended consequences of repeatedly juicing the system? What are the repercussions of all this money printing? We can think of a few.

First and foremost, without continued central bank support, interbank liquidity may cease to function entirely in the coming year. Consider the implications of the ECB’s LTRO program: when you create a loan program to save the EU banks and make its participation voluntary, every one of those 523 banks that participates is essentially admitting that they have a problem. How will they ever lend money to each other again? If you’re a bank that participated in the LTRO program because you were on the verge of bankruptcy, how can you possibly trust other banks that took advantage of the same program? The ECB’s LTRO program has the potential to be very dangerous, because if the EU banks start to rely on the loans too heavily, the ECB may find itself inadvertently attached to the broken EU banking system forever.

That dont sound very good does it? Hopefully Im wrong but I kind of doubt it.

News today is light and the only release note worthy is the US new home sales. Since it was the housing market that created all the havoc in the world any good news from that sector will be positive for risk.

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Looking at the charts with the very bullish close and run past all the resistance I expected to hold yesterday. This run will most likely continue provided we dont get any tape bombs to the contrary. I expect a test of the 1.3436 area where there is a daily high from December 9th and where the market shows plenty of selling. I will be looking for a stop run to potentially test the London highs yesterday at 1.3341 before the long entry.

Happy Trading all

Chad

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The GBP/JPY trade was pretty much the same set up and I did jump the gun on the entry a bit and almost took the hit. I do give the GJ a few more pips on the stop because she is the “twisted sister” LOL Never the less I did get in a little early. The sad thing about this trade was once I moved my stop after the SM made the shift and protected some profit the darn thing came back and hit it by just a pip or 2 before running off to within a few pips of my take profit. Still a good trade though and that is how trading works sometimes.

For more information on our bank trading strategies you can check out the very informative article entitled learn to trade forex with Smart Money. This is a 3 part training series that we hope you enjoy!

Chad

The GBP/USD was in level 3 of the SM trend and as mentioned in our day trading course can be traded in either direction until it breaks and thats what I did here. The SM showed signs of trapping traders so I took the long at the 11:15 candle and it promptly proceeded to come down and miss my stop by just a couple pips and reverse so I added a position expecting another sign of short traders getting trapped that didnt happen so when an hour had passed after my second entry and the SM had not shifted price confirming the trap I just exited both trades. One with a 10 pip loss and the other break even. Not a good day but not that bad either. Price only moved 20 pips in my favor before it came back and eventually would have hit my stop.

If your interested in trading with the Smart Money you can check out our trading philosophy and keep up with this recent trades section. When your convinced just sign up for the day trading course and get live training twice a week during both London and New York sessions. Happy trading.

Chad

You know that things dont look so rosy when the US main stream media starts having articles titled “Economy in recovery? Not So Fast”. Talk about consistently late to the party. These guys are always seemingly the last to get it. The fact is the main stream media in the US is controlled or owned by the big banksters and those guys dont want the truth to be out until its so blatantly obvious that you dont really need the news to tell you. You can see it in the street by then. What strikes me about this article in particular from CNN is they will only mention the obvious again. The fact that gas is at extreme levels (well duh) , manufacturing is not going to save us (well duh, we destroyed our manufacturing base decades ago), and lastly China isnt going to save us (well duh, China isnt going to be able to save its self when anything like real economic numbers come to the fore). We just got a taste of how US numbers can be manipulated with our farce of a jobs report this month. China has never been very honest about their economic numbers so why would they start now?

What really gets me about this CNN article was they fail to mention the real reasons why this in NO recovery. The fact is the gauges most of the media uses to show the recovery is a farce. “The Dow at 13000″ Yes that nice to look at but they fail to mention the fact that this rally has happened on the lowest volume seen in over a decade which means it hasnt been driven by faith in the recovery but by the banks who have been flooded with a ton of cash, are pushing the market so it looks like a recovery. Im not even going to go in to the latest jobs report. Let me just say I dont believe it for a second.

Now having said all that, what does it mean for the USD? Well there are a few facts that need to be pointed out and they are the US does have the best chance of recovery and pulling out of the massive hole we have dug for our self. The reason is we are more free to innovate and create which will be key to building any recovery. The problem is we are not a free as we used to be but still better off in that respect than Europe or Asia. So the potential is there where in the rest of the world innovation is limited and will hamper recovery when Asia does slow down. Which is a story for another day. So what will most likely happen to the USD is the same thing that history has shown. It will get stronger but at a slower pace mainly because until an actual full blown recovery is underway the powers that be will try to keep it weak.

As for the news today there isn’t very much considering the Euro. We do have IFO business climate from Germany that is expected to rise again. if this number does disappoint then we may see the EUR/USD finally make the drop from the choppy chop we have seen over the past few days. There is also unemployment claims from the US and is expected to rise. If this rises much more than expected the Euro should drop. However if it is much better than this rally in equities will continue and most likely the Euro will rise but I have doubts it will break and hold the recent highs and I have even less faith in a break above the February 9th high of 1.3321. However stranger things have happened.

Looking at the charts of course we are in chop mode on the EUR/USD as we have 2 indecision candles on the daily now. It is quite possible that the Smart Money will try and make a stop run above the recent highs especially if the German news is good. However I suspect these supposedly indecision candles mean they are loading up on shorts and the pair has been in level 3 for almost 3 days now. I am only looking for shorts on this pair and should I catch the stop run will be holding for a longer term trade. Its possible it could test the 1.3285 level again but seeing the rejection there it may not. I will be watching the 15min for signs of them trapping traders and look to short then.

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How about some GBP/USD analysis?

Yesterday the GBP/USD had a nice move of 165 pips or so and still has more in it. I was in it short from Tuesday and you can see that in the recent trades section of the site here shortly. The move was sparked by the BOE minutes reports but the fact is the down move agreed with the SM trend and the cool thing is there is one more level to go. It was kind of a bummer because I planned to add to this short but the news kinda messed up my entry and it never gave it up. Oh well ya cant catch every pip can ya.

Chad

If your interested in trading with the Smart Money you can check out our trading philosophy and keep up with this recent trades section. When your convinced just sign up for the day trading course and get live training twice a week during both London and New York sessions. Happy trading.

Chad

Then I figured after the slow push down it would extend and I could get a possible 40 pips. It did go 20 pips down for me so I tightened up the stop a bit and lost the 15 pips on that trade. Once the US market opened at the 2nd grey box it was off to the races for 170 pip move. The reason I was looking at the long at first was this was the end of the SM trend and had a high potential to reverse up. That is what I get for going against the Smart Money on the second trade.

If your interested in trading with the Smart Money you can check out our trading philosophy and keep up with this recent trades section. When your convinced just sign up for the day trading course and get live training twice a week during both London and New York sessions. Happy trading.

Chad

Here is a small excerpt:

We ignore how a 66% participation rate is anything but a majority, let alone supposedly consensual. There is a bigger issue. And unfortunately by the Greek’s actions, it shows they are in process of abrogating even more contractual rights in the form of foreign (UK-Law) covenant agreements. Either that, or the country is about to pay par to all UK-law bonds, both outcomes that threaten to put the entire second bailout in jeopardy.

What I really want to cover today is something I found yesterday. There has been letters of “Greek default plans” sent to two large Wall Street firms. Not contingency plans but a schedule of sorts that outlines what will happen when the Greek default will be announced on March 23rd. Now we already know that the credit agencies have already told the media that they will consider Greece in default anyway and the powers that be are going to do what they can to mute the effect this has on the markets so it may not matter even though it should. The fact is as long as the ISDA (International Swaps and Derivatives Association) dont declare Greece in default it really dont matter what the credit agencies do because the Credit Default Swaps wont get triggered.

Having said that I was surprised how much sense this writers idea made. Saying that they have been planning for the default all along considering the “deal is done then its not” and how all the postponements have happened. They even have a scheduled date. This guy obviously has some connections in high places on Wall Street so I dont take it lightly but still trying to have an open mind. However my gut does tell me something is up. Check out the “Greek Default Exclusive” and make your own decision.

There is a slew of news out today with German, French and EZ Flash Manufacturing and services PMI data being released so keep an eye on that. Mainly the German #s because they have been revised down from last month and may dissappoint considering that. Otherwise the MPC Meeting minutes will be released for the GBP and if the EUR/GBP gets a drastic move it will certainly affect the EUR/USD

Now on to the charts. The daily has made a nice doji or spinning top (indecision) candle. (use which ever you like) However we as Smart Money traders know these are nothing close to indecision but rather the Smart Money absorbing orders when the market framework is correct. It has tested the close from Monday at 1.3242 and been rejected. During the London session I will be looking to see the stop run to the upside and short from there.

Well the IMF finally accounted for the state of disarray the Greek economy is in and now say the debt to GDP will be in the neighborhood of 160% in 2020 as reported by Ekathimerini today.

The baseline scenario in the 9-page report, obtained exclusively by Reuters, is that Greece will cut its debts to 129 percent of GDP by 2020, well above the 120 percent target.

“The results point to a need for additional debt relief from the official or private sectors to bring the debt trajectory down,» said the report, which is being discussed by euro zone finance ministers at a meeting in Brussels on Monday to decide on a second financing program for Greece.

“There is a fundamental tension between the program objectives of reducing debt and improving competitiveness, in that the internal devaluation needed to restore Greece competitiveness will inevitably lead to a higher debt to GDP ratio in the near term,» says the report, dated February 15.

“In this context, a scenario of particular concern involves internal devaluation through deeper recession (due to continued delays with structural reforms and with fiscal policy and privatization implementation).

“This would result in a much higher debt trajectory, leaving debt as high as 160 percent of GDP in 2020. Given the risks, the Greek program may thus remain accident-prone, with questions about sustainability hanging over it,» it said.

Lets all say it together again. GREEK DEFAULT! Now it sure looks like anything the Troika does Greece is going to default. I actually was trying to be a bit more optimistic but have been proven wrong on many levels so be ready come April would be my guess. In April the Greek elections are scheduled (for now) and I expect the people in Greece will be even more furious with the Troka if its possible and will elect a government that will trash the whole idea and start fresh . Its anybodys guess as to what that will look like so Im not even going to try.

I found it best summed up by Der Spiegel this morning in an article titled “EU should admit Greece is bankrupt” Noting that they should stop the bailout mainly because the money really doesnt go to help Greece but its creditors that are just as much to blame for lending to a debtor that cant pay as Greece for borrowing what they cant pay back. Its seems to me both should be put through the grinder for their roles in this mess. Otherwise the banks who know they will get bailed out by unwitting tax payers around the world and just keep on making bets that blow up knowing in the end they will get help while people suffer for generations to come. Here is a noteworthy excerpt from Der Spiegel

Sure, Greece will need help from the other European Union member states for years, possibly even decades, and Germany shouldn’t refuse that help. Europe will likely end up pumping far more money into Greece in the coming years than the fresh aid now being discussed in Brussels.

The mistake isn’t the size, but the construction of the bailout package. It isn’t geared to the requirements of the people of Greece but to the needs of the international financial markets, meaning the banks.

How else can one explain the fact that around a quarter of the package won’t even arrive in Athens but will flow directly to the country’s international creditors? The holders of Greek government bonds are to get some €30 billion as an incentive to convert their old paper into new bonds. The aim is to keep alive the illusion that Greece isn’t bankrupt — after all, the creditors are voluntarily forgiving part of the debt. The financial sector is cleverly manipulating the fear that a Greek bankruptcy would trigger a fatal chain reaction.

That leaves €100 billion. But that too isn’t geared to what Greece needs in order to get back on its feet. It’s linked to an estimate of how much debt the Greek economy can bear without collapsing.

News today is light except for the ECOFIN meetings discussing the Greek deal so there will be the typical tape bombs during the London session and I expect price action to be choppy at best.

The daily chart did run up and test the 1.3256 level and was rejected and the 15 minute has a nice topping formation after a 3rd level of rise so I will be looking to short after a break out of the 3rd level bottom or since price is more likely to chop through level 3 I will also consider low risk longs from the bottom of the range as long as the price action agrees. As i type this it looks like the Asian market may push into level 1 of a drop. If so i will be looking for the stop run up during Frankfurt open to short.

Happy trading all

Chad

When going through the events over the weekend I came across a very interesting article called. Ten Unanswered Questions About the Second Greek Bailout. A very good read. What struck me the most was the part where they describe just what its going to take in Euros to just get the debt restructuring finished. By their math calculations its going to take 93 billion Euros just to get that part of the bail out done. I am curious how they came up with that number but even if its close it really dont seem like there will be any cash left in a very short time. If we just add the 14 billion in bonds due on March 20th (many of them held by the PSI holdouts) they are down to just 23 billion to keep them afloat and this bailout is supposed to get them through the next 3 years. Even if they wiped that March maturity out it wouldnt do much good. There was also some reports not too long ago that the bailout package was quietly raised to 210 billion but if memory serves me Germany squashed the idea pretty quick.

Lastly there has also been reports that the IMF has been reworking its numbers trying to figure out where the Greeks will stand after the bailout and debt write downs and last I saw what they have come up with was their debt to GDP will still be above the 120% they figured should be sustainable by Greece come 2020. What gets me about this is not only did the percentage of projected debt to GDP numbers rise a little bit. (123%) But it also assumes that the Greek economy will get back on a path to growth and that just dont seem likely to me in the in the near future mush less further out.

There is not much news on the agenda today and the US is on bank holiday for presidents day so the move will most likely occur during the Asian session and is already under way. Once we get thru this accumulation phase I expect another push up but there is a good chance the market will chop during the London session.

Looking at the daily chart I see the nice gap and resistance coming up at 1.3256 then 3285. Its possible we test the highs just above 1.3300 in the next couple days but the chance of that level holding is good I think.

Take care and Happy Trading

Chad

As I check my news this morning looking for the reason for the huge spike of 180 pips from the lows on the EUR/USD. I see that the ECB has decided to swap their Greek bonds for new ones which will keep them from being exposed to the potential CACs that Greece has threatened to create to get the hold outs of the PSI deal to participate in the losses. It seems to me the ECB really had no choice since the fact they were refusing to take any losses on the bonds they hold would give them preferential treatment and create a precedence for any future bail outs and European bond markets would most likely crash as investors shun European sovereign bonds all together. So the day has been saved once again. I dont think so LOL

I tend to agree with the folks at Zero Hedge on this one and see it as the door for the Greek default getting opened a bit wider. Peter Tchir of Commerzbank explains it well and why this is just one step closer to the big default.

Firstly this debt exchange story is still that, just a story, and just doesn’t read right. It feels like either the reporter didn’t understand the source, or the source had some key detail wrong, but let’s pretend it’s true.

Well, early this week I tried to put some ideas down on what Greece should be doing. The key is ensuring that they have financing in place after a default. An operating central bank would be helpful and the ECB was on the list of groups that Greece needs to deal with. The exchange seems very favorable to the ECB. No notional reduction – which frankly seems greedy – why not just take a notional amount equal to the cost basis. Most importantly, it looks like the ECB is trying to segregate its holdings from the “private sector” bonds. This step would make it easy for Greece to default on old bonds and remain current on new bonds. Maybe that encourages greater participation, maybe it won’t. Why would Greece cut a special deal with the ECB that is so favorable to the ECB? Did they negotiate continued ECB support for its bonds as part of the exchange deal? I really don’t understand the exuberance over the story (which really does seem to be off).

On the other hand, maybe the problem is solved. Italy issued a 100 billion 30 year bonds with a 1% coupon. Banks buy these at 50 on the auction (since the ECB can’t participate in auctions). The banks then sell the bonds to the ECB for 55 .  The banks build equity capital quickly since 5 points on a 100 billion adds up quickly. The ECB then exchanges these bonds for new bonds with a 1.1% coupon. It distributes the 45 points of “profit” to the Italian central bank. Italy would owe 1.1% on 100 billion of debt due in 30 years. Italy would have received 115 billion from the sale of the original bonds and their share of the ECB profits based on the exchange. The banks will have made 5 billion on a single trade. Repeat this as often as necessary. Does this sound stupid? If so, how is it so much different than the bond swap story the market is so excited about?

To be honest this seems like just another use of the news by the Smart Money to push the market where they intended already. The next short squeeze is on the way it looks and we may actually be on to new highs for the EUR/USD. Just be ready when the hammer drops and the default kicks in. It wont be in March but will most likely be this year. My crystal ball is a bit fuzzy on that one LOL.

Technically on the daily chart the support at 1.3026 was firmly rejected and closed rather bullish and right in the 5 pip gap between Tuesdays close and Wednesday open. Man those guys are tricky LOL. At this point I would expect a pull back to test the 1.3080 level of support before the next push to the upside and possibly test the recent highs next week.

The news is light today with only German PPI numbers and Current Account figures from the EU. otherwise the US has CPI figures and is expected to rise a smidge so I will be watching for the typical rumor tape bombs and keep my mind open. However I am a bit more favorable of a long today

Essentially I identified a classic manipulation move out of the Asian accumulation. Once they showed a manipulation up it became very clear they were taking the stops out high and accumulating a short position. If you would like to learn to trade forex using our proprietary bank tracking techniques feel free to check out our forex trading course or our members forex forum.

Happy trading all.

Chad

Now lets get on to Greece again. Yes again LOL. The deal will get done I am rather sure. However the guy who has been one of the fiercest against the austerity measures is also the one who has the best chances of winning the elections in April or whenever they decide to hold them. 2013 was the original time frame but they may happen before that. Antonis Samaras is the guy I am talking about. He did just have a lackey tell the press yesterday that he is going to sign the document required by the Troika on the Greek austerity. I havent seen the news yet but I do expect it to happen. The issue I am conflicted with is if or when he does win an election on his stance of how the Germans and the EU have screwed Greece what will he do then? Well it seems like they think they have the answer. The Troika will delay the full loan to Greece until the elections are over in April giving them a bridge loan to cover the bonds due in March . Good job LOL.

So now the market will turn to Portugal whose bonds have just been downgraded to junk by all the credit agencies and showed a 3% contraction in its economy last year. However as I mentioned in yesterday’s forex commentary German Finmin Schauble has quietly promised to loosen the noose on Portugal after they get finished putting the boot to Greece. There is also some good news for Portugal (or not) on any restructuring of their debt like Greece. The fact is the overwhelming majority of bonds issued in Portugal are governed by English law. Sound familiar? See here. The holders of Greek bonds governed by English law are the ones held by all the hold outs that are not taking the haircut and those bonds in particular have been gobbled up by those hedge funds just for that purpose.

The only important news today is the ECB monthly bulletin when we will find out just what the ECB has been doing the last month. The rest of the market moving news is coming from the US session with building permits, unemployment claims, Bernanke speaking and the Philly fed index. It could be a choppy US session today.

The charts look rather bearish again with the daily closing close to its lows and well beyond the support I mentioned yesterday at 1.3080. I do expect some support to come in at the daily lows at 1.3026 but once that does break the next decent support I see is the break out level at 1.2968 if that breaks its a ways down to the next level at 1.2819. I will be looking for a stop run to the upside during London to short but trying to keep an open mind since the possibility of good news rumors to levitate the Euro temporarily is high. Temporarily is the key word!

Be careful out there guys

Chad

Anyway the more I think about the situation from a neutral perspective I realize that they (the Germans) probably dont want Greece to leave the Euro or EU but do want to make the example of what not to do in order deter any of the other fiscally troubled countries from following the same path that got Greece where it is today. However the fact is that with such harsh austerity and no real reforms to get the economy competitive it seems to me the the EU is shooting them self in the foot because with out some way for Greece to grow economically they will never have a chance to get back on their feet. Portugal is not far off and Spain and Italy are knocking on the door. Ireland is a special case since they have internal structures that has already set them on a path to growth. Greece has nothing of the sort and will be a powder keg ready to blow very soon. So there is the main problem. yes Greece the proverbial little liar down the block that got in the gang through being deceitful and took advantage of his position for years lying and cheating. However this is nothing short of the blood in blood out type of gang. Letting Greece out leaves too much at stake setting precedence and making the rest of the gang exposed and looking weaker. Neither Germany nor the rest of the EU will let this happen so finding the balance between whipping the the worst of the bunch to make an example and then getting him to go to rehab seems like the most logical course. Having said that I am willing to bet that Greece wants rehabilitation but in reality will need a lot more help to get them through it. More than Germany wants to give as the gangs leader. I sure hope I’m wrong but if I am correct there will just be more band aids put on the gaping wound that is Greece and the EU is in for years of trouble.

I read a great article a week or so ago that described the flaws in the German thinking of “be more like us and all will be fine”. That surely looks good on the surface since Germany is the economical powerhouse right now but the fact is if there was balance of competitiveness throughout the EU then Germany would be just another one of the boys instead of anything special and this is not in Germanys best interests. They want to be the big boy on the block so they do have more control but the situation they are in is what you get when you want to have your cake and eat it too. Lets hope Germany can suck it up and just be one of the boys. I have my doubts.

Looking at the charts the daily has made the roll over for the push down but found support at the January 31 close and then bounced to the gap open from Monday February 6th. If there is going to be a retrace I would expect it today. Having said that the intraday price action has provided many large pull backs in the last few days so we may not see a retrace of note on the daily chart. Im looking for it to remain choppy during the day and keeping my mind open on direction.

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Take care and Happy Trading guys

Chad

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Hope this helps guys.

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