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Forex Daily Market EUR/USD, GBP/USD, EUR/JPY Commentary May 15, 2012

The fact that the EUR/USD could not come back and close the 16 pip gap on Monday goes to show just how weak the Euro is these days. I feel sorry for the gap traders out there as 2 Mondays in a row have failed to close their respected gaps. They did make a valiant effort to close the 70+ piper from May 7 but still missed the mark by almost 20 pips. What this tells me is that there is more weakness to come but I still am open to long positions if they set up nice but my bias for anything longer term is short for now. The fact is this move down will have to retrace at some point but the way I see it is we will only get small corrections until we start to see the market focus somewhere other than Europe. Which wont happen any time soon.

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 forex 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


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