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Forex Daily EUR/USD, GBP/USD Analysis December 6, 2012

The EUR/USD didn’t quite make it to the 1.3134 level I thought it would test in yesterdays commentary however many members managed to catch the short from one of Sterling’s manipulation points he had listed. Good job on that one guys! The Euro did make a clear 3rd push for 80 pips so today I will be expecting more of the reversal depending on the price action during the Asian session. I am not totally convinced of a first push to the downside yet, mainly because it has only moved 68 pips from the highs. It does look encouraging with the hourly closes below Mondays highs but it would be better to see another hourly close below yesterdays lows. 

As I was talking to a member in the Skype group last night giving him take profit options on a short he took from 1.3118 I told him the safe bet would be to exit with the 40-50 pips but there was a good chance he caught the high of the reversal for 3 pushes down. The wild cards are what’s going on with Spain and Greece along with the US fiscal cliff talks. He ended up taking 46 pips out of the market and I don’t blame him one bit considering the news we have today. Good job Felix!

Since we are in a third chop scenario I will be keeping my mind open for a bias and looking at the price action during the Asian session. There is a good chance I won’t get a trade today though because there is a chance the market will wait for the big news later before it makes a move. I will be looking for a clear hourly stop run to yesterdays lows for a long to play the range back into yesterday’s high, or the hourly close below that level and a pullback to it for the short.

Update: We have the hourly close below yesterdays lows on the Euro and a good first push down so my bias is slightly short and I will be looking for the manipulation to take a short either at the breakout level or preferably the Asian highs today.

1 hour chart of the EUR/USD on Dec. 6, 2012

The GBP/USD is also showing signs of a reversal even though it hasn’t made a clear 3 pushes up. Even though I don’t believe in chart patterns much, when we do see a clear head and shoulder pattern at the top or bottom of what could be the end of the pushes we have to take it seriously because that particular pattern happens often before the reversal. It is also important to remember that Smart Money uses chart patterns to compress orders. Therefore a stop run of the neckline could result in a push back up to the range highs. For more information check out this training video on Forex Chart Pattern Analysis.

I would be more convinced if it had an hourly close below Tuesdays lows so I am keeping my options open considering the news we have today. For a long I want to see the hourly stop run to Tuesdays or yesterdays lows and for a short I will consider yesterdays highs but there will need to be clear trapping candle patterns to take either trade as always. The only other potential level to take the long would be Tuesday’s highs at 1.6057. 

1 hour chart of the GBP/USD on Dec. 6, 2012

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Forex News Today

Scheduled releases are not all that busy, however they could have a large effect. Starting with German Factory Orders, this show as a medium impact event but with Germany being the economic powerhouse of Europe it will have an impact if it misses big. Last months release was a big surprise to the downside and this one is expected as just a small rise, so a big miss here will at least get some manipulation going.

Next up is the UK with its Asset Purchase Facility, as well as MPC Rate Statement. The Official rate will be a moot point since we all know they are not going anywhere with it. I have my doubts they will be adding to the Asset Purchases but the statement will be watched close to see if they hint at future additions. If they do then of course it will be GBP negative.

Not long after the ECB releases its Minimum Bid Rate. No news there, but the ECB Press Conference later is always a kicker with Draghi doing the Euro pump to begin with and then the questions put him between a rock and a hard place. At this point I expect Greece and Spain to be what is focused on but what will be said is anyone’s guess. What will be interesting is if Draghi says anything about the guarantees Spain has asked for as conditions of them seeking a bailout. I just had to laugh when I saw that yesterday.

Lastly is the US Unemployment Claims expected at 378K and as before if/when we do see them pumping above 400K then I expect Bernanke will give in and ramp up the QE a bit higher which will be USD negative.

Just What Are The Politicians In Spain Smoking?

So yesterday I saw this news flash saying that Spain more or less wants to have its cake and eat it too. Saying that they would ask for the bailout tomorrow if the ECB would guarantee that they would put a floor in the spread between German and Spanish 10yr bonds at 200 bps (2%) guaranteeing Spain a drop in the rates they pay on their debt by around 3% right off the bat since Spanish bonds are at around 5% right now and Germanys are between 0 and 2%. Somebody is smoking something over there. However you never know they may be sharing with the ECB and they all just might be high enough to get it done 🙂 Nothing surprises me these days.

Here is the full release with the quote form a Spanish government source.

Comments made by anonymous government official

Spain ready to immediately ask for bailout if it gets guarantee that ECB would intervene in bond markets in amounts that would lower the country’s borrowing costs significantly.

Apparently the Spanish govt has sought, but not secured, guaranteed EU/ECB commitment to reduce Spanish/German 10 year govt bond spread by 200 basis points.

The official stated “This is why the Spanish government has these doubts, and is wondering what to do next. If they guarantee the risk premium would be kept 200 basis points lower, it (government) would ask for bailout tomorrow.”

Happy Trading


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