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FX Daily EUR/USD, GBP/USD Analysis November 23, 2012

I have to say I do believe we have seen the third push to the upside on the EUR/USD. It is definitely not as clean as I like but we cant have it perfect all the time. It is less than 10 pips shy of the average daily range so it does qualify in that regard. Today I will be looking for the reversal. I would be happiest taking the 1 hour stop run to yesterdays highs of 1.2898, however if we start the push to the downside and get an hourly close below the lows of the US session yesterday then we may only see the stop run to the Asian range highs today. It is Friday the day after Thanksgiving in the US and although the banks aren’t closed volume could be low today since this is Black Friday when everybody and their brother goes shopping for Christmas.

We did get the close above the daily 200EMA on the daily chart but its not so convincing that I am convinced it will hold and the reversal still has a higher probability. I should also mention that the 200EMAs from all the charts are crunching together at the moment so there is a possibility that we see a range bound chop today and get more of a clearer direction next week.

1 hour chart of the EUR/USD on Nov. 23, 2012

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The GBP/USD threw us a curve ball yesterday and pulled a reversal after the second push. I was talking about the clarity of the levels in our live training room and the only thing of concern about it was the time constraint. The fact that it had the chop for two days before the second push made it so the two pushes occurred over 5 days. This is unusual but we have seen it before where they complete the 3 pushes over 7 days or so but its not the norm. Once we had the hourly close above the Asian high I was rather convinced it was running off without me and the very next candle made the close below the Asian box showing even more conviction to the downside. (I did cover in detail, how to use the hourly close to your advantage in yesterdays London live session as well. So if any members missed that it will be posted later today) The good thing is there wasn’t any trapping candle formations at the Asian lows to get me in a trade and I stayed flat yesterday.

 At this point I think it would be pushing it to call this a first push down. Its close on the pip count but with it finding support at  the 1 hour 200EMA it does have a good chance for chopping around in a range. Therefore I will be treating this as a third push chop and look to trade from the extremes (highs/lows). Its also sandwiched between the 4 hour and 1 hour 200EMA’s so that adds to the probability of the range bound chop.

Warning: Anybody who is new to us. Taking trades in the middle of a range bound market is dangerous. In this situation it is recommended that only the clearest trapping formations at range extreme’s should be considered. Additionally it is wise to have both pairs in correlation as well, otherwise stay out and take a break.:)

1 hour chart of the GBP/USd on Nov. 23, 2012

Forex News Today

News is light with only one scheduled release of note being German IFO Business Climate. This is expected to drop below the 100 level which it hasn’t done for a very long time. Once again showing the Germany is sinking with the EU ship. We can only hope the bucket men are working overtime. However the reality that we see is they are standing around twiddling their thumbs. 

There is also the EU summit going through its second day of thumb twiddling. I assumed that since they put off the next decision on Greece during the Euro Group meetings until next Monday that they wouldn’t be talking much about it at the EU Economic Summit. I was wrong and we did get some talk of some agreements on the Greek debt but nothing that makes it sustainable like everybody wants.

Whats funny is these are supposed to be smart people who should be able to do simple math. I know the issue as a whole is more complex but even a high school drop out most likely knows that if you borrow too much money your situation must IMPROVE substantially to ever have the chance of paying that money back. If your situation just maintains where it is then there is no chance. Now throw in losing any and all means of improving your situation and all is lost. Thats why there is such a thing as bankruptcy. Its been around for a very long time and I think it may just be the word of this decade here in the near future.

Where They Stand Now

Its clear that the European flagship (Germany) is sinking because of the effects of this whole mess that started with Greece but just about every western country has the same problem. What they have done to remedy anything has only been to protect them self, their crony elite friends and maintain the status quot.  This sort of denial never ends well and only serves to make the end result much worse than it would have been if one simply decides to take their lumps and start fresh. Something the politicians and their cronies just wont do until its much too late and they are forced by outside forces. Guillotine anybody?

Here is a few excerpts from a Guardian article that sums it up pretty well in my opinion.

By now we should have grown used to thumb-twiddling in euroland. Even so, the failure of the eurogroup and the International Monetary Fund to reach a deal on Greece’s finances is disgraceful.

The basic problem is that the eurozone power group is groping for something that doesn’t exist. It wants a financing package that is small enough to maintain the pretence that the last bailout arrangements are proceeding swimmingly; but the ministers also want to make Greek debt sustainable.

It can’t be done. The stock of Greek debt is simply too high – as a ratio of GDP, it is forecast to pass 190% in 2014 as recession takes its toll.

The IMF’s stance provoked an outbreak of heebie-jeebies among EU politicians, who complain variously that a debt write-off would be illegal and would encourage the electorates of Ireland, Spain and Portugal to expect similar relief.

Well, yes, but the risk in failing to confront the Greek crisis is probably worse. As Marc Ostwald of Monument Securities puts it, there are no solutions other than outright default: “This will not change today, on 26 November or any other date, though the longer the various parties involved fail to face up to this reality, the higher the probability of a very disorderly default.”

One can only wonder if/when these guys will ever remove head from butt. 🙂

Have a great weekend


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