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Forex Daily EUR/USD, GBP/USD Commentary November 21, 2012

When the market chops for a whole day and stays well below the average daily range it takes away some of the bias on direction. The EUR/USD still has an upward bias today but the longer it stays in this chop we have to consider that the smart money is up to something that has potential to be a big surprise. Maybe not, at this point we will need more information.

We didn’t get the tape bombs I expected from the Euro Group Meetings yesterday. There was only talk of lowering the interest rates that Greece pays on its bailout money. It seems to me that they are doing their best to keep their mouths shut at this point. I think everybody sees the writing on the wall but they are doing their best to keep their backs to it so they don’t have to admit what everyone else already knows. Its like my 3 year old that will sit there with his underwear on his head and think that because he cant see me….I cant see him 🙂

Which brings us back to the J.C. Junker phrase that has been re-quoted several hundred times in articles, “When things get really bad you just have to lie.” Well now with that cat out of the bag and nobody believing a word from any of the politicians or un-elected technocrats, they resolve to acting like my 3 year old wearing his underwear on his head. Picture that in your mind for a good laugh. 🙂 

I will be expecting the next push to the upside today. However there is still the possibility for the short. The only way I will feel comfortable taking the short will be with an hourly stop run to the highs. Otherwise the potential manipulation points for the long are the lows after the London close of  1.2795 to begin with, however there is a more significant level just below at 1.2785 which will be much closer to the hourly 200EMA by then. 

(Correction below since we have had a tape bomb during the Asian session)

1 hour chart of the EUR/USD on nov. 21, 2012

The GBP/USD has had a longer chop session covering almost 2 days. In that light I would say that direction is even less clear if it wasn’t for one thing, that one hour close above Mondays highs. That close tells me there is some conviction to the upside. Therefore the probability is higher for the long position today. Anytime I see these choppy price action days I look to see where we have the hourly close showing some conviction. Once we have that close above/below a significant level we have a clearer view of where they are most likely to push price. 

What I will be looking for today will start with the lows of the US session which also coincides with the hourly 200EMA . We did get the daily close above the 1.5912 level I mentioned in Tuesdays commentary so a test of that today is probable before the next move up. There is still a chance that they do a stop run below the psych level of 1.5900 so if the trapping formation is not clear I will wait and see if that level shows the manipulation. To learn more About the trapping patterns visit our bank trading glossary.

1 hour chart of the GBP/USd on Nov. 21,2012

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Forex News Today

News releases are light again today with only a few worth mentioning. I could have swore that the Euro Group meetings were going on today also but I don’t see it listed anywhere. Maybe they got it all sorted haha.

Correction: The Euro Group meetings did extend into this morning and the result was no decision on Greece yet. As you can see it threw everything off for the day so I will most likely be leaving it alone today. I still like the long to retrace the inefficient move but will wait for more information showing the trap.

The UK has the MPC Meeting Minutes that could make a stir. It will depend on the talk about how the asset Purchase Facility is looked at. If they talk about adding more then it will be GBP negative. I would expect there will be something about the growth downgrade from the Inflation Letter recently but how it will impact more asset purchases is questionable. There is also the Public Sector Net Borrowing expected to drop significantly. I can only assume that most of this is priced in but even if it is and its comes out as expected the implications on UK growth are negative to say the least.

I’m not even going to mention the German 10 year Bond Auction because these have a history of being non-events. 🙂

The US has Unemployment Claims a day early due to Thursday being Thanksgiving. This is expected to drop a little over 20K and will have the usual effect with a large deviation in either direction. A significant drop and we see USD weaken and with a surprise increase potential USD strength. It is getting harder to predict what the market will do with deviations on Unemployment Claims. Flash Manufacturing PMI is released a bit later and is expected to remain above 50. As long as it maintains that we probably won’t see much movement. However once it does drop below we will see USD weakness as the thought of ramping up the QE comes in.

Last is Revised University of Michigan Consumer Sentiment expected to drop slightly. This event hasn’t made much waves lately and I don’t expect that to change without a large miss.

Happy Trading


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