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Forex EUR/USD, GBP/USD Commentary October 8, 2012

Looking at the EUR/USD this Monday morning we did not get the reversal we expected Friday but an extension  to the upside and the close above the support level created during the London session. Right now I am thinking this is a false push up created by the Unemployment figures release (what a farce)Friday. However I want some confirmation before I am convinced of the short. What I want to see is the 1hr close below those lows during the London session Friday.

Right now we are hovering around the 1.3010 level and still waiting for any confirmation to happen. I usually doubt that the Asian session will make a conviction move but we have been seeing more of those lately. Once we do have that hourly close I will be looking for the trap to the upside for the short. If we dont get the break and close below the 1.2992 level and we see the pullback to the upside then with a trap at that level during London will be good for a long. At this point the pushes are not clear so we have to keep an open mind.

The GBP/USD is a different story this morning with it bringing back its weaker currency status having the break below Fridays lows and now looking to have the close below even though there is still 10 minutes left to this candle. We will see. If this does happen then the most logical manipulation point will be the Asian highs of today. there is a possibility that we see the push through the Asian highs and get to the hourly 200ema but I see that as less likely. If we do keep seeing this push down during Asia and a break and close below the 1.6100 level then I will be looking for the manipulation at Fridays lows of 1.6120 during London. Otherwise the areas for potential longs are the 1.6100, 1.6080 but the one that has the best chance for a decent move is 1.6065. If I do manage to catch a short today that will be the first place I look to take profits. Now we have the very bearish close so that just boosted my bias for the short.

I should also mention that I did catch the short on the GBP/USD Friday. It was more of a news trade but the trap was also there along with the 1 hour stop run. They just dont get much prettier than that. As I always say when the fundamentals agree with the manipulation we see better moves. I did also see that there were several members who caught the trade and even booked more pips than I did 🙂 (I woke up Saturday to my 50+ pip take profit being hit. Good job guys

Forex News Today

there is not much for scheduled news today. With japan closed along with the US later the best chance for a move will be during the London session. having said that there are the Eurogroup meetings today so keep an eye out for the tape bombs. I do expect some Euro pump to come first but from what I have been reading over the weekend it could be crushed buy Germany or Finland. We will have to see. Also from the Euro Zone there is Sentix Investor Confidence and German Industrial Production but I expect the Eurogroup tape bombs will be the focus unless the latter disappoints miserably. Its already expected to be in negative territory so a big miss to the downside will be cause for manipulation.

Lets Be Optimistic

As i read through my news over the weekend I came across an article that stood out and made me think for awhile. This guy made alot of sense. The main point of his was why not look at what could go right with the fiasco we call the world financial system. After all being optimistic does effect a persons confidence and having said confidence is good for the economy when the folks in charge actually do something right and start getting us on the right track.

Late Saturday I also had an email conversation with one of our members. What he brought to my attention was an article about the efforts that members of the EU are pushing on the banking supervision and compared it to what happened in the US in the 1770s when Andrew Jackson took on the debt of the 13 states and put it on the government balance sheet. Of course my view was and still is that the situation in the 1770s was much different that what we have with Europe today and the US was just a baby as a country and was very much into making rules that created the sound US dollar at the time. Not the case with Europe today but lets not go into that and keep the setting on what could go right rather that what is going wrong. here is the article by Charles Hugh-Smith.

 What Could Go Right?

Some of you may think I am being jocularly dismissive in my list, but I am quite serious. Nothing good can possibly come from artifice, propaganda, misdirection and simulacra “fixes.” Something must break through the facade for good things to happen. OK, let’s get started:

1. The global contraction could pick up momentum, crushing demand for oil. Recall that the price of oil is set on the margins, so modest fluctuations in supply and demand have outsized effects on price. Price drops when demand falls faster than supply, meaning that global exports of oil could decline but as long as demand declines even more sharply than supply, the price of oil could plummet.

The price of oil falling in half would be a great boon for consumers around the world, and as we will see below, it even has a silver lining for citizens of oil exporting nations. Using 2008 as a recent model, we can expect oil to fall to $35/barrel once demand craters. Below around $50/barrel, oil-dependent regimes such as Iran and Venezuela cannot fund their militaries, welfare states and bureaucracies. As a result they will implode.

2. Mideast tensions decline as the Syrian dictatorship collapses and an attack on Iran is shelved by the U.S. There are too many long-standing tensions and conflicts in the Mideast to hope for anything but relative calm, but relative calm would be conducive to a slow normalization of relations and modest but steady improvements in the lives of residents.

The collapse of the Baathist dictatorship in Syria would be a major positive, as the Syrian grip on Lebanon would loosen, Iran would lose its key regional ally, and the Syrian people would have a chance (not a guarantee, but an opportunity nonetheless) to establish a government that was less oppressive and more responsive to their aspirations.

Notice what happens when you combine 1) and 2): the Iranian dictatorship also falls. The Iranian people have long suffered under a repressive dictatorship, and its collapse would give them a chance (not a guarantee, but an opportunity nonetheless) to establish a government that was less oppressive and more responsive to their aspirations. (Ditto Venezuela.)

Iran is already suffering from hyper-inflation, more from gross mismanagement of the economy than from Western sanctions, though the sanctions provide an easy target for the failed regime. Street protests are spontaneously arising as people’s already-limited wealth is completely and utterly destroyed by the regime’s cronyism and incompetence.

Following the SOP (standard operating procedure) of all dictatorships, the Iranian regime is responding to the impoverishment of its citizens with police suppression. The collapse of oil prices will provide the last straw.

Although you won’t read this in the mainstream media (MSM), the U.S. does not want Iran destroyed or crippled, as Shi’ite Iran provides an essential counterbalance to Sunni extremism. Those predicting an Israeli strike on Iran will be proven wrong, as the U.S. has nixed that as counterproductive to the Great Game.

Once traders finally “get it” that the Israeli war drums were largely domestic politics in action and the U.S. has ixnayed military action against Iran, the “war premium” currently priced into oil will dissipate.

As I have long suggested, a massive, sustained decline in oil is a “head-fake” in the bigger scheme of things, but in the near-term it will provide a catalyst for all sorts of incompetent, oppressive oil-dependent dictatorships to exit stage left, clearing the stage for more responsive and competent governments.

3. One nation exits the euro and the sun rises the following day on a healing Europe. It might be Greece, it might be Germany, it might be Spain, it might be Italy: all that matters is that somebody steps up and exits the euro and renounces all its debts, or in the case of Germany, renounces its promises to cover all the impaired private-bank debt that is crushing Europe.

Once people wake up and find the sun is shining despite the “disaster,” they will realize the real disaster was trying to pay unpayable debts and promises and staying in the euro. Life will quickly get better once one brave and resolute set of leaders renounces unpayable debts and exits the euro. Other nations will quickly follow and the owners of bad debt will finally be handed the losses that are well and truly theirs to absorb.

Renounce and restructure: there is no other way forward. What could go right is one nation declares the truth, renounces unpayable debt and exits the euro and the iron stranglehold of the European Central Bank (ECB)/Troika.

4. The U.S. dollar continues strengthening, making imports cheaper for U.S. households. No nation ever became powerful with a weakening currency. Non-U.S. holders of capital are moving their capital into the U.S. at a rate of about $75 billion a month, roughly equivalent to the Fed’s entire QE3 program. This is good news for households and the U.S. economy, despite the naysayers who claim the U.S. dollar’s rise is some sort of catastrophe for America.

Yes, exports may be pressured, but they’re going to be pressured by global recession anyway. A stronger dollar helps reprice money, debt and risk, all of which desperately need repricing.

5. Federal Reserve Chairman Ben Bernanke takes one too many hits of Ibogaine and suffers an unprecedented bout of inexplicable honesty, declaring on national TV that the Fed is a ponzi scheme, he has no control over employment and the Fed exists to preserve the banks’ wealth and power. The normally sedate Chairman apologizes to the American people for lying about the Fed’s real agenda and its illusory power to fix a dysfunctional, corrupt, fraud-based neofeudal economy.

OK, I realize this is unlikely, but history is replete with unexpected eruptions of truth and honesty by an insider who finally sickens of all the lies, prevarications, half-truths, secret bailouts, pay-offs, bribes and cronyism that is the Status Quo in America’s machinery of finance and governance. It won’t be Ben, but perhaps someone in the Power Elite will finally value his/her integrity above cash and status and deliver the truth to the public.

It’s a long shot, but we can always hope. Without truth, there is truly no hope.

Happy Trading


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