Forex Market Commentary EUR/USD, GBP/USD May 23, 2012
It would seem that the Smart Money had no desire to make the third push I expected yesterday and just continued the drop that started in Asia for the better part of 150 pips. Right now it has pushed down to the previous daily lows around 1.2640 and is making the bounce. We also have some monthly lows from January right below at 1.2626 so I would expect some loading up and effort to squeeze some shorts before this breaks. The break of these yearly lows will be an open invitation to test the next bottom around the 1.20 area of course with a few hesitations along the way. Most notably the 1.2550 break out.
I do expect this 1.2626 level to be defended for this reason. Since the 3rd push didnt materialize I will be treating this as the rejection of the 1st push up and only looking for the manipulation and confluence to take trades in either direction today. The Euro will most likely chop here for awhile as the Euro Zone has their usual do nothing meetings to try and figure out what they are going to do. However any negative surprise may be a cause to break this. We will have to wait and see.
The GBP/USD has been held up due to the EUR/GBP sinking at a good clip and is also testing some daily support from may 18. This level is not as strng as the monthly level on the Euro and has a higher chance of breaking. Along with the drop in inflation figures and even the IMF saying that the UK should do more QE this pair has good potential for a move to its lows around 1.5600. This ill be the pair I look at most today as it does have some catching up to do with the Euro.
Forex News Today
Scheduled news releases are fairly busy today starting with the Euro Zone Current Account figures. Expected to have a sizable increase from last month showing the EZ has stepped up some exports. A surprise to the downside will be Euro negative and I expect the increase is priced in for the most part. Then Industrial New Orders later and will have the same effect but is expected to be negative again showing the recession is taking hold. Ihe icing on the cake today is the Economic Summit which has the possibility of trumping all news releases during the London session. The key here is Germany is expected to be put on the hot seat for Euro bonds. Even though they are expected to hold their ground any easing of the rhetoric will be Euro positive. I would have to agree with what I see in articles I have read today that eventually they will have to give in but it wont be today and more likely after Greece votes next month. The fact is they are being pressured on all sides on the issue and wont be able to hold out for ever.
From the UK there is the MPC Meeting Minutes. Any mention of more Asset Purchases and the GBP will be hit hard I expect. I will be waiting for a clear set up before the release. Retail Sales figures are expected to go into negative territory also and will push the UK toward more QE also. A surprise to the upside here will more than likely be a chance for the SM to manipulate or will be muted by the Meeting Minutes. Later in the day MPC Member Bean Speaks and the release of CBI Industrial Order Expectations comes after. This is expected to be negative also which will add even more chance of more QE.
The only high impact news we have from the US is New Home Sales. If this release is positive it will help show the US recovery is real and a disappointment will be USD negative. However the market reaction is up in the air. A negative number may cause risk off and the Euro drop while it could also make the USD weak. I am thinking there wont be much reaction as the potential move before this release on other data could be substantial.
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