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FX commentary EUR/USD January 19, 2012

Its always nice to see a prediction of price movement come to fruition. However yesterdays price action on the EUR/USD was nothing less than a whipsaw. When I see days like this I can help but think the Smart Money has differing opinions of direction and are dueling it out right in front of our eyes. There has been more conflicting reports on the Greek debt deal. CNN has now reported that Charles Dallara the director of the IIF and representative of the investors in the deal has said. “It’s not entirely clear” how close the parties are to a deal.”I wouldn’t say I’m confident, but I’m hopeful we’ll reach agreement,” Dallara told CNN International’s Richard Quest in a phone interview from Athens.

This is more or less an admittance to what I have been saying for awhile and the hold outs are being a pain in the hind end and hindering any deal. The fact is they are running very short on time and even with full cooperation the sustainability of Greek debt is in doubt any way. The fuse has been lit in my opinion and now its just a question of how long that fuse is. This could explode any day now.

Today should be interesting considering the news releases today. Its fairly quiet during the London session with the ECB monthly bulletin and Current Account numbers. I have doubts either will be market movers as the data is released unless there is something surprising from the Monthly Bulletin that wasnt let out during the ECB press conference. Other than that there is unemployment numbers coming from the US today. A negative surprise will most likely see the rise in the Euro and drop in equities. If the numbers surprise positively then most likely the opposite will happen given that the decoupling theory will kick in again. US equities will rise and Euro drop.

Getting to the charts today I see the daily has had a bullish close above a short term trend line and nicely above the resistance at 1.2820 and the 1.2860 level that was rejected last Friday. I somewhat expect a retrace down to 1.2820 before a move up to 1.2900 and maybe beyond but as Asia is getting warmed up the retracement hasn’t started so its possible it wont considering how bullish Asia has been lately. Looking at the 15 min there are 2 levels that Asia could do a stop run below to accumulate some position before a move up. If there is a clear stop run at either of these two levels then the retrace to 1.2820 is less likely. As i type it looks as one of the levels has been breached and if it confirms the stop run I will enter long soon after.

Be careful out there guys


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