FX Daily EUR/USD, GBP/USD Commentary May 3, 2012
Well with the across the board negative European PMI data yesterday the stops above the 1.3300 level in the Euro didnt seem so attractive and we have had a decent 2nd push from the highs and expecting the third today. I am a little concerned that first of these pushes is less than 90 pips however the average daily range is tightening on the Euro so I am not that worried about it at this time. I will be happy to see some manipulation to the upside to short today but we do have some big news today and tomorrow also so it may just chop around until after that. At this point I will simply stick to my plan and trade what I see.
The GBP/USD is in a similar situation as the Euro with 2 clear pushes to the downside so here I will be looking for the short also. It has already tested the hourly 200ema from the top of which coincides with the daily support from April 27th. This was the pair I traded yesterday as the news proved me wrong about the GBP/JPY and pretty much everything else ran off with out providing an entry for me. When it pulled back on a UK news event I took the short from 1.6222. It proceeded to make the drop for 60+ pips and given the probability of the next push I decided to protect just under 20 pips above the psychological level of 1.6200 and during the US session it came back and got me at +18. Not too bad but could have been much better for sure. Up coming news could keep this pair range bound also but still biased for the short.
Forex News Today
The European news starts with Nationwide HPI and Services PMI from the UK. With the UK construction data yesterday being much better than expected the HPI data will likely follow suit and at least meet expectations. Since the UK is a service based economy any improvement there will be a plus for the GBP so I will be keeping an eye on that.
Later in the day there is a French 10 year bond auction that even though shows as a low impact event may prove to be otherwise. If there is any uptick in the yields here will cause ripples across the more troubled countries like Spain and Italy. After the big manufacturing disappointment the chance does increase that the markets feel less optimistic on French debt and if so Spain and Italy will be in bigger trouble. The big one for today is the Rate decision from the ECB and press conference. As I mentioned above I expect the speech to be somewhat less of the typical Euro pump and when the questions start the markets will be looking to see how well Draghi can sidestep the fact that things are looking terrible for any sort of recovery from the crisis. We will ahve to just wait and see.
The US data has Unemployment Claims, Prelim Nonfarm Productivity, Prelim Unit Labor Costs, ISM Non-Manufacturing PMI. The bigger ones here are of course the Unemployment figures which if they have a surprise to the upside then the ADP Nonfarm disappointment will be looked at as a closer resemblance to tomorrows Non Farm Payroll and will be bad for the USD. If there is a surprise drop (of which I doubt) then NFP tomorrow has a chance of at least coming out as expected. The ISM PMI will be watched also for any improvement. It is expected to drop slightly so any surprise up or down will have an effect on the USD.
I did find an interesting video of an interview with Charles Biederman from Trim Tabs and I have to say I totally agree with his views here. I do think his timing for the European implosion may be a bit off as I think the politicians and banksters will drag this out a bit longer than 12 months but never the less it is an inevitable outcome. To be honest I expected it sooner but now that I realize just how much effort they have put into the kicking of the can I have reevaluated my opinion and it wouldnt surprise me in the least if this farce lasts another 2 years. Time will tell on that one. Enjoy
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