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Fx Daily EUR/USD, GBP/USD Commentary July 17, 2012

First I want to thank all of you for the well wishes for my father in law. It means alot and he is getting better so it isnt serious pneumonia but he is still in the hospital recovering and having more tests done.

The EUR/USD today has seen 2 pushes to the upside. Albeit on news but never the less there is 2 90+pip moves to the upside and we should be expecting a third today. I will be treating this with a bit of caution though. The fact is that the last push down was a 90 pip move also and only turned on the bad retail sales figures from the US yesterday. This tells me this move  is mainly due to the thought of QE3 coming soon and probably algo driven rather than risk appetite since equities didnt follow and neither did the USD/JPY. This could be short lived to say the least.

The places I will be looking to see the manipulation today is either at yesterdays high, the hourly 200ema or the 1.2300 for the short. These are all coming within a 20 pip range and this area will have to have commitment on direction to break. Im not so sure the conviction is there. If we do see the manipulation to the downside the 15min 200 and the break out level of 1.2440 will be where I will be looking for a long from.

The GBP/USD made the manipulation for the long trade yesterday just as I mentioned in the  July 16 commentary. However the entry would have been aggressive and just before the news so I dont blame anybody that missed it. I had just walked in the door and sat down at the computer just to see it start running off and wasnt going to chase it so I just watched it run off w/o me. Today we will expect the third push here also as we have seen 2 pushes from the lows but with the same concern we have in taking a long on the Euro. The smart money trend is up but these pushes have been on news which leads me to believe this could be a short squeeze.

The place I would be happiest to take a long from will be the hourly 200ema as long as we haven’t tested the highs from yesterday and see a rejection. As long as this small push in Asia dont test the high the chance of them loading up before the break are better. If we do get the test here in Asia and a clear stop run to the highs then I will look for the trap moves telling me to short and trade accordingly. Entries today will require some clear candle patterns.

Forex News Today

We have a busy day as far as news is concerned today. Starting with the UK CPI and RPI and later BOE Gov King Speaks and their BOE Inflation Letter. Being the higher than preferred inflation has been tolerated in the UK and the latest rounds of Asset Purchases have not been a driver of more inflation as of yet I dont think the figures will be that impact full but the King speech and Inflation letter will be looked at for any more clues on more Asset Purchases in the near future. Any mention of adding to them should be GBP negative.

The Euro Zone has German ZEW Economic Sentiment and EZ ZEW Economic Sentiment. While Germanys is expected to get worse the EZ as a whole is expected to slightly improve. I dont see how this could happen. There should be a surprise regarding these figures. The higher probability is a miss to the downside on the EU figures but there is the chance Germanys ZEW is better. I will be watching these close.

The US has CPI figures expected to be close to flat. I doubt these will have much impact unless we see a big surprise to the upside. Later we have  TIC Long-Term Purchases expected to increase substantially. If this is correct then it will show foreigners are buying US securities. What is questionable is why and what are they buying. If they are buying safe haven assets then its not good but if they are buying equities then that means they are investing in the US thinking they will recover from the malaise. I think its the former but we will see. We also have the Capacity Utilization Rate and Industrial Production figures but they are close to the time we also have Bernanke Testimony to the US Senate. Of course we will be looking to hear any hints of QE3 and IMO I think the market will be disappointed and we will see the drop but dont trade off that alone. I surely wont.

All Psychopaths. Well Most All

When I returned home Sunday and went through some news that came out over the weekend I ran across this article that describes the personality flaws in our power elite and why until we get rid of then majority of them and set some rules in place to make these personality flaws undesirable and unrewarded we will be doomed to have these people running all the large institutions and government in the US (and the world for that matter) and we will have scenarios like this crisis happen over and over again as these guys just get richer and more powerful. Its well worth reading the full article here but these are the parts that struck me most.

Why Don’t the Corrupt Players On Wall Street and In D.C. Show Remorse for Their Destructive Actions…And Why Don’t We Stop Them?

Scandal After Scandal, Lie Upon Lie … What’s Going On?

Many bankers, regulators and politicians have been caught in lie after lie and scandal after scandal.

Why haven’t they been shamed by all of the disclosures about their behavior, and chastised by the destruction their actions are causing?

Why do we keep falling for the same shenanigans over and over?

We’ll answer each of these questions one at a time.

Many of the People Running Wall Street and D.C. Are – LITERALLY – Psycopaths

According to psychologists and sociologists – many on Wall Street and D.C. are not like you and me. They are literally psychopaths.

Reuters reported Tuesday:

In a survey of 500 senior executives in the United States and the UK, 26 percent of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24 percent said they believed financial services professionals may need to engage in unethical or illegal conduct to be successful.

Sixteen percent of respondents said they would commit insider trading if they could get away with it, according to Labaton Sucharow. And 30 percent said their compensation plans created pressure to compromise ethical standards or violate the law.
A number of commentators think the numbers are low, because of self-reporting. For example, Richard Eskow writes:

I discussed the survey with a few other people familiar with the banking industry, and they had the same reaction I did: If anything, those numbers sound low. That makes sense. Admitting your criminal inclinations to a total stranger isn’t as easy as telling a them your favorite color or what kind of music you like.
As we’ve repeatedly noted, psychopaths caused the financial crisis … and they will do it again and again unless they are removed from power.

The March/April issues of CFA Magazine notes that the rates of psychopaths in Wall Street is much higher than the general population, and reports:

These “financial psychopaths” generally lack empathy and interest in what other people feel or think. At the same time, they display an abundance of charm, charisma, intelligence, credentials, an unparalleled capacity for lying, fabrication, and manipulation, and a drive for thrill seeking.

A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible. They flourish in fast-paced industries and are experts in taking advantage of company systems and processes as well as exploiting communication weaknesses and promoting interpersonal conflicts.

Bloomberg notes:

The “corporate psychopaths” at the helm of our financial institutions are to blame [for the financial crisis].

Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.”

As a result, Boddy argues in a recent issue of the Journal of Business Ethics, such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.”

How do people with such obvious personality flaws make it to the top of seemingly successful corporations? Boddy says psychopaths take advantage of the “relative chaotic nature of the modern corporation,” including “rapid change, constant renewal” and high turnover of “key personnel.” Such circumstances allow them to ascend through a combination of “charm” and “charisma,” which makes “their behaviour invisible” and “makes them appear normal and even to be ideal leaders.”

They “largely caused the crisis” because their “single- minded pursuit of their own self-enrichment and self- aggrandizement to the exclusion of all other considerations has led to an abandonment of the old-fashioned concept of noblesse oblige, equality, fairness, or of any real notion of corporate social responsibility.”

He says the unnamed “they” seem “to be unaffected” by the corporate collapses they cause. These psychopaths “present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings and investments, and as lacking any regrets about what they have done. They cheerfully lie about their involvement in events, are very convincing in blaming others for what has happened and have no doubts about their own worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.”

The Independent reports:

Mr Boddy is not alone. In Jon Ronson’s widely acclaimed book The Psychopath Test, Professor Robert Hare [the world’s leading expert on psychopathy] told the author: “I should have spent some time inside the Stock Exchange as well. Serial killer psychopaths ruin families. Corporate and political and religious psychopaths ruin economies. They ruin societies.”

A senior UK investment banker and I [were] discussing the most successful banking types we know and what makes them tick. I argue that they often conform to the characteristics displayed by social psychopaths. To my surprise, my friend agrees.

He then makes an astonishing confession: “At one major investment bank for which I worked, we used psychometric testing to recruit social psychopaths because their characteristics exactly suited them to senior corporate finance roles.”
Here was one of the biggest investment banks in the world seeking psychopaths as recruits.

A 2,200-page report by Anton Valukas, the Chicago-based lawyer hired by a US court to investigate Lehman’s failure … revealed systemic chicanery within the bank; he described management failures and a destructive, internal culture of reckless risk-taking worthy of any psychopath.

So why wasn’t Mr Fuld spotted and stopped? I’ve concluded it’s the good old question of nature and nurture but with a new interpretation. As I see it, in its search for never-ending growth, the financial services sector has actively sought out monsters with natures like Mr Fuld and nurtured them with bonuses and praise.

Take Sir Fred Goodwin of RBS, for example. Before he racked up a corporate loss of £24.1bn, the highest in UK history, he was idolised by the City. In recognition of his work in ruthlessly cutting costs at Clydesdale Bank he got the nickname “Fred the Shred”, and he played that for all it was worth. He was later described as “a corporate Attila”, a title of which any psychopath would be proud.

Isnt that just crazy?

Happy Trading


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