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Forex Market Daily Commentary EUR/USD, GBP/USD May 10, 2012

What a mess the market was yesterday with the EUR/USD doing absolutely nothing during the London session and the GBP/USD running off for what seemed no reason at all without even being good enough to provide me an entry. The nice thing is we can still find trades if we know what to look for. I managed to catch the stop run above the Asian range high on the EUR/GBP you can see by following the link.

The EUR/USD is showing potential signs of a reversal again. However with the fundamental picture getting worse by the day in the Euro Zone I am still more comfortable with a short than I am taking longs at this point. If a nice manipulation move does set up here at the lows today I will be happy to take the long but wont be holding on for a move more than 40-50 pips.

The GBP/USD surprised me by running off like it did yesterday considering as I said in the May 9th Commentary I figured it had more potential for the reversal of the two pairs. It just goes to show why we can never assume we know where the SM will drive price and simply look for the crumb trail they leave and follow them. Today when I look at the hourly chart I see a clearer 2 levels of push to the downside so the 3rd today seems the higher probability. however I will be keeping in mind that the bounce from the lows yesterday was off of a daily low and break out level so I expect there will be some loading up and pushing out of the weak holders before a break of that level so if I can manage to get the short then I will be looking to take profit at the lows yesterday.

Forex News Today

We have a busy day ahead for news releases today starting with French Industrial Production and ECB Monthly Bulletin. Of course the Ind. Production are expected to go negative and I doubt there will be much difference in the Monthly Bulletin than what was released in the ECB press conference so market reaction will most likely be muted for those and the usual tape bombs as of late will be drivers I expect.

The UK has Manufacturing Production, Industrial Production figures and also its Asset Purchase Facility along with the Rate Statement. I have seen talk of analysists  thinking they will not add to the Asset Purchase Facility but watch out for the surprise. The UK economy has slipped back into recession and they may want to throw in some more juice so to speak. I have my doubts also but like I have said many times nothing surprises me anymore. later during the US session the UK NIESR GDP Estimate will come out also and could be a GBP mover if it surprises. Its expected at .1% and may disappoint as did the official GDP did.

In the US there is Unemployment Claims that are expected to rise. If this surprises to the upside the market may go back to thinking Bernanke will throw more money at the market so keep that in mind if it does surprise to the upside. Later Bernanke speaks and the market will be looking for hints at more QE and if he gives it there will be some risk come back and the EUR/USD will climb. Since he did give a small hint at the last press conference I kind of expect him to step it up a bit this time even though I have doubts it will happen unless Unemployment gets much worse and stocks see a more significant drop.

Enlightening News

Every day I try to find and provide my readers with a good piece of information to spark some thinking or even entertain. Today I found a good one that really got me thinking of just how in the heck is the world ever going to get straight. I try to be optimistic but its getting harder with every passing day for sure. Here is an excerpt from an article by Bill Wilson. The president of Americans for Limited Government. This is good stuff.


By mainstream media accounts, the presidential election in France and parliamentary elections in Greece on May 6 were overwhelming verdicts against “austerity” measures being implemented in Europe.

There is only one problem. It is a lie.

First off, austerity was never really tried. Not really.

In France for example, according to Eurostat, annual expenditures have actually increased from €1.095 trillion to €1.118 trillion in 2011. In fact spending has increased every single year for the past decade. The debt there increased too from €1.932 trillion €1.987 trillion last year, just as it did every year before.

Real “austere”. The French spent more, and they borrowed more.

The deficit in France did decrease by about €34 billion in 2011, but that was largely because of a €56.6 billion surge in tax revenues. Again, there were no spending cuts. Zero.

Yet incoming socialist president François Hollande claimed after his victory over Nicolas Sarkozy that he would bring an end to this mythical austerity: “We will bring back Europe on a track for jobs, growth and the future… We’re no longer doomed to austerity.”

This is just a willful, purposeful distortion. What the heck is he talking about? Certainly not France.

If not France, then where?

In Italy and Spain, which have been dependent on tens of billions of cash infusions from the European Central Bank (ECB) to refinance their debts, cuts are hardly anywhere to be found either. In Spain, spending was cut by just €11 billion in 2011, a mere 2.3 percent reduction. In Italy, spending actually increased by €4.3 billion.

Both countries borrowed an additional €117 billion last year alone, raising their combined debts to €1.939 trillion. So, no austerity there. Just debt slaves.

Hollande might have been referring to the budgets of debt-strapped Ireland, Greece, and Portugal that have depended on over €290 billion of refinance loans from the European Financial Stability Facility (EFSF) and the International Monetary Fund (IMF).

But even there, the cuts are rather miniscule. In Greece, spending was cut by just €6.3 billion from 2010 levels. In Portugal, just €4.8 billion. Ireland only trimmed €2.2 billion off its 2009 levels, discounting its massive bank recapitalization in 2010 that blew up its budget by €25.7 billion.

The real point is that none of them even came close to balancing their budgets, with over €47 billion of combined deficits for 2011. More debt slaves.

Yet that is not stopping pundits like New York Times columnist and economist Paul Krugman from claiming otherwise, who said recently, “All this austerity is actually self-defeating. We’re seeing countries slash spending and drive their economies into a ditch.”

What austerity? These countries are all debt addicts. They’re not addressing the root of the problem. So, what should they do? Just borrow more?

Now I have to ask myself the question. What is really causing the financial turmoil then? The simple answer is. People and/or governments living beyond their means. Anyone who has done that (myself included when I was young and stupid) knows how this turns out. Eventually it catches up with you no matter how rich or poor you are. Of which reminds me of a funny/sad video posted below. This stuff can not end good. That I can guarantee.

Happy trading all


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