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Forex Commentary EUR/USD, GBP/USD June 28, 2012

The optimism in the Euro never came about yesterday as it would seem that investors are in wait and see mode rather than anticipating that there will be anything actually worked out in the EU Economic Summit that starts today. I guess they are getting smarter faster than I thought. The first sentence of this article says alot toward the case for investors sitting this out while the plunge protection team props up the market.

Equities Ebullient As Rest Of Market Pauses

Another interestingly odd day. One of the lowest (non-holiday) volume days of the year but a big pick up in average trade size as the S&P 500 e-mini futures shrugged off Treasury strength, USD strength, and Gold’s somnambulism seemingly led by an energy sector focused on only one thing – the bounce in WTI.

Interesting indeed.

As for today the EUR/USD is still chopping around in the third push and considering that alone we would be still looking to see the reversal. However with the EU Summit starting up today the markets will be reacting to any statements that come from the meeting to see if there really will be a massive effort to save the Euro. I have serious doubts but what I can just about guarantee is there will be some fancy statements of how close they are to agreement and will at least try to put up the facade of all is well just like they have done so many times in the past. This does agree with the reversal scenario but without Germany giving in to Euro bonds, a banking license for the ESM- EFSF or a back stopping depositors insurance program. Any bounce here will be short lived without Germany giving in.

I do still have a slight bias to the upside today but will be keeping an open mind and a close ear on what comes from the EU Summit and would prefer to see the manipulation at the bottom of this range for a long or the top for a short. Keeping in mind that if there the expected Euro pumping “we have the grand plan” that a break of those highs will likely continue for today anyway.

The GBP/USD is in a bit different situation with what seems to be a failed first push to the upside after the 100+ pip drop yesterday. I will be treating this as the third push chop and be looking to short from the highs or go long at the lows for the safer trades. The fact is that during this sort of price action the market could break either way. The way I will be looking to trade this pair will be some clear manipulation with some heavy confluence if not at the highs or lows.

Forex News Today

As I mentioned above most everything will be overshadowed by the EU Summit today but there are a few releases of note to at least be aware of. The big one being a Italian 10yr Bond Auction. If yields soar then that should have a negative impact on the Euro but like I said if Germany gives then this will be over looked. The EZ also has the German Unemployment Change earlier in the session.

The UK has Nationwide HPI, BOE Credit Conditions Survey and Final GDP q/q. Unless there is a big surprise from the HPI figures the market reaction should be mild and Credit Conditions may be different if the BOE sees credit tightening for UK banks and if so the chance for more asset purchases are on the table (GBP negative). Lastly the GDP is expected to show the decline again and show that the UK may be headed toward another recession. Any surprise to the upside will push further Asset Purchases down the road and will be GBP positive.

Lastly from the US is Unemployment Claims expected to slightly slow and Final GDP expected to remain at 1.9%. There is a chance for a surprise drop but I dont expect it and and surprise up will push further QE down the road and be USD positive. Later in the day there is some Fed speak from member Pianalto.

Today I leave you with a video with Ian Bremmer and Nouriel Roubini where they discuss how we are living not in a G20 world but more like a G0 as every time they get together for the big photo shoot there seems that the picture of them all being happy campers is all the world gets from the meeting. Sometimes truth is better than fiction.

Sorry I had trouble embedding the video but here is the link. Definitely worth the view.

Happy Trading


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