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Forex EUR/USD, GBP/USD Daily Commentary June 22, 2012

We were correct with the small downward bias for the EUR/USD and GBP/USD yesterday. However the timing of the trade was off and I took the 20 pip hit on the GBP/USD. We had a nice set up but the Smart Money had a bit more manipulation to do and I got caught in it. I did catch the GBP/JPY short during the US session that has now run off 80 pips in the money. I am planning on holding this trade for the next day or so for the weekly turn to the downside as I feel I have caught the top of the weekly reversal. I have protected some profit but being the GBP/JPY is a more volatile pair its not much.

The way I am seeing the EUR/USD at this time is the topping formation has obviously held and we should be seeing the next move down today. Having said that the last first push did fail and we went back up so a deeper pullback may be in the works again. The fact that we have the lower close on the hourly chart below does tell me that this time the odds are even more in our favor. I will be looking for the manipulation to occur around the hourly 200ema or the highs of the Asian range.

The GBP/USD is in pretty much the same position as the Euro showing a clear break below the 3rd push on Wednesday. I do remember saying in the forex commentary June 21 that I don’t like the fact that the third push was created on news spikes but the topping formations were holding nicely so even though it wasn’t the clearest signal it was correct. For this pair today I will be looking for the manipulation up also. However it is closer to its 200ema at this point and may have the deeper pullback in store. If the 200 doesn’t hold then the daily lows just above it will be where I look to see the trap move for the short.

Forex News Today

The scheduled news for this Friday are light with only German Ifo Business Climate that is expected to drop slightly again. However with the ZEW Economic Sentiment dropping drastically earlier in the week this has potential to disappoint and surprise to the downside also. We also have the ECOFIN Meetings going on today where we could see some more tape bombs on how they are getting a plan together to start planning to have a plan to save Europe again and again. However it does seem like investors are getting the picture more and more that there is no clear plan and these political elites have no clue what is really going on and there is nothing that is going to save the day. Later during the New York session there also is the Belgium NBB Business Climate but being late on a Friday I dont expect too much from it. If there is a big disappointment any down move will most likely continue into the close.

The Goldman Corzining Effect

I looks as though I am not the only one that thought Goldmans convincing rhetoric on how the Fed will print at this weeks FOMC Meeting was a farce and I have found the long recommendation they gave. I just had to chuckle when I saw this on Zero Hedge

Goldman’s Stolper Sets New Client Corzining Record

We opened on Monday a long NZD/$ recommendation, partly on the basis that the Fed would ease monetary policy today with additional non-conventional measures. At the same time we pointed out that New Zealand’s economy looks relatively well protected against cyclical weakness. During the week both hypotheses were confirmed with much stronger GDP data in New Zealand than expected and the extension of “Operation Twist” by the Fed.

At the same time, however, long NZD/$ exposure is also strongly correlated with overall risk sentiment. The continued weakness in US macro data, as illustrated by today’s Philly Fed index and deteriorating political news flow from the Eurozone, led to a sharp deterioration in broader risk sentiment.

With much of the macro rationale for the recommendation now past and in line with our short SPX recommendation earlier today, we cut long NZD/$ exposure for a small potential loss of 0.7%.

Im sure you are probably having a bit of a laugh right now too. However be sure to keep in mind that now Goldman has recommended a short on the S&P 500. That dont make me feel better about my GBP/JPY short but I figure that Goldman has to get it right sometimes. Or at least not be Corzining their clients all the time.

Goldman Goes Short The S&P 500: 1285 Target

“We are recommending a short position in the S&P 500 index with a target of 1285 (roughly 5% below current levels) and a stop on a close above 1390.”

Happy Trading and have a great weekend

Chad

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