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Forex Commentary EUR/USD, GBP/USD December 20, 2012

We finally have the reversal on the EUR/USD after three extended pushes to the upside testing a highly significant daily level at 1.3282 and getting rejected. It actually made the test of the psych level of 1.3300 before it turned. However I consider the stop run above the daily resistance to be more significant. The daily chart shows a nice pin bar to the highs and there is good potential for the next two pushes to the downside to commence. The wild card here is the time of year. The holidays most often create the “Santa Rally” which has potential to make another run to the upside since in essence its a risk appetite scenario. Not to mention the US fiscal cliff issue that could create USD weakness on any news release.

This is my last trading day of the year so I will be cautious when looking for a trade today. The last thing I want to do is give anything back today. Yesterday I let aggressive Chad out of the box a little and took 2 positions short on the GBP/USD that are now around 100 pips in profits between them and I will be closing them out as soon as they look like it may turn. I have only had 3 trades so far this month so I want to keep as much of the profit as I can. 

My expectations for the EUR/USD today is a test of the break out level of 1.3236 before the next push to the downside. If it does manage to get the hourly close above 1.3250 it will most likely test the highs at 1.3300 again so I will be keeping an eye out for that. 

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

As I mentioned above I am short the GBP/USD with 2 positions one from 1.6294 and the other from 1.6300. The risk /reward trade I talked about in Wednesdays commentary failed with the hourly close above Tuesdays highs. Anybody who took that trade had ample opportunity to get out with a small hit or even a break even trade when it pulled back. I was out with the wife at the time and missed the entry. When I came back and saw the conviction close I figured it was off to the next daily level at 1.6307.

When I took the entry I was having a Skype conversation with a member who was already in the trade. I had mentioned to him it would probably test the 1.6307 level and I would have preferred a stop run above it that never came. However the pretty pin bar at the highs of the day on the hourly chart also had a nice set of reversal legs in it on the 15 minute chart lowering the possibility of seeing the stop run. As I was watching price on the tick chart I noticed the spread widening to the upside showing potential grabbing of orders so I took the first entry at 1.6294. then about 30 minutes later it pushed up to give me some price improvement and I let aggressive Chad have a little say and took the second entry. 🙂

Looking at the chart as of now I am concerned that even though it shows the first push to the downside it hasnt been able to get an hourly close below the supply level at the Asian lows yesterday. This would show me enough conviction to hold these positions through the day today. If it cant start to show me signs of that potentially happening in the next couple hours I will just close them and call it a year. 🙂

What I will be looking for during the London live training session today will be the test of Tuesdays highs of 1.6267 for a trap move to take a short. However there may also be an opportunity for a long position if it can break to the downside to test the break out level at 1.6224. Of course I will be expecting support at that level even if its going to break so if it does reach there I will want two sets of candle patterns showing the clear trap before I enter long on a pullback.

Update: I just closed my two short positions on the GBP/USD for a total of 76 pips. There is nothing showing me they intend to stop pushing it up from here during Asia so since I have to leave here shortly I just took the profits and most likely will be finished for the year.

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

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Forex News Today

Scheduled releases are light today starting with a medium impact release of German PPI figures. Its expected to drop a little showing producers are paying less for goods they purchase. I doubt this will have much impact as the IFO business Climate yesterday being positive shows that the potential for deflation is low since they feel business should be getting better. 

The UK has its Retail Sales numbers released today expected to improve from the negative release last month. Since it seems the focus is mainly on the US fiscal cliff talks right now this will most likely be a chance for manipulation more than anything barring a big surprise.

The US has weekly Unemployment Claims expected to rise by 10K+. At this point my thoughts are there is a bigger chance for the surprise to the upside rather than a drop. However that will depend mostly on people running out of benefits. If that is substantial and we see a big drop rather than the increase it may create some risk appetite until they realize just what caused the drop. Its hard to say. We also have Final GDP which shouldn’t be a mover without a miss. Later in the day there is Existing Home Sales and Philly Fed Manufacturing Index. the one that will get the most attention is the Philly Fed. The large surprise to the downside last month caused a stir and its expected to improve but still be below zero. If it can get into positive territory we will probably see some risk appetite and the Euro rise. A big miss to the downside there should be risk off but may also cause USD weakness and the Euro still rise. With a good chunk of the market already on vacation its hard to say so just be careful around the news today.

Happy Trading 


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