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Forex Market Commentary EUR/USD, GBP/USD June 5, 2012

There seems to be more optimistic views for the EUR/USD than I expected as it just started on a slow rise during the London session yesterday and then made the large pop triggering stops above Fridays high before settling around the 1.25 level. My theory is that there is something expected at the ECB meeting tomorrow along the lines of more LTRO to help European banks.

We have seen 2 intraday pushes to the upside from the lows at this point and I am expecting the third today and a chop for most of the day Wednesday before the rate decision and press conference.  This can also be seen as the 1st clear push from the 3rd push chop but as there was no clear chop at that level I feel the more accurate count would be from the lows. Either way we are looking for the long today. I will be happiest seeing the pullback to the hourly 200EMA but it may not get there with a large push up during Asia. So I will be looking for a stop run of sorts to the downside During the London session to go long for the 3rd intraday push today.

The GBP/USD held a 70+ pip range yesterday and has formed a decent bottoming formation. This was due to Euro strength as the EUR/GBP made a 60 pip run up. This also adds to the thought that the Euro move is on prospects of the ECB making a move on Wednesday and is not risk related since equities didnt move along with the EUR/USD in this case. There is also thoughts of the BOE adding to their Asset Purchase Facility soon which would weaken the GBP. This pair is still in a 3rd push chop and has just a slight probability for the move up. The fact is if the EUR/USD makes its 3rd push up today it will drag the GBP/USD along with it but more to the likes of yesterdays price action as the EUR/GBP moves up also.

Forex News Today

Today is not that busy with scheduled releases with the UK on holiday again today so movement during the London session may be slow again today.

The Euro Zone has Final Services PMI, Retail Sales and  German Factory Orders. The PMI figures are expected to be the same as last release and I doubt there will be much movement there. However Retail Sales and Factory orders are expected to go into negative territory showing more slow down for not just the EZ but Germany also. If these releases disappoint even further then the ECB will be under even more pressure to do something.

The US has ISM Non-Manufacturing PMI expected to improve slightly. A disappointment here will add to the fact that the decoupling theory is rubbish and the US is slowing also. There is also the G-7 Meetings that start sometime during the US session so keep an eye out for the tape bombs coming from there.

More on who will blink first

Yesterday I received an email from a member with his opinion on who would blink first. The ECB (Germany) or the Fed and I couldnt agree with him more. Like I said the Fed is inbetween a rock and a hard place but he pointed out that the Fed cant really push longer term rates any lower with full blown QE3. The fact is the Fed already owns a large chunk of the longer term treasuries with Operation Twist and pushing down interest rates has already been accomplished to the point of the 10yr treasury yield is at levels not seen since the Great Depression of the 1930s.

That leaves the ECB and Germany with the ball in their court. With the pressures mounting on the Germans they will most likely be the ones to give in. However they want to ensure that this situation does not happen in the future and I cant say I would think any different. I have seen many articles where the fiscal pact among other big ideas are getting closer to a better union in Europe but none of them think they will be able to get the job done before its too late. Considering the foot dragging that has gone on thus far I would have to agree. Things are going to get worse before they get better.

Here is a short skit to watch for a laugh on how bankers and how they have bought the US political system. I got a good chuckle. Enjoy.

Happy Trading


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