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FX EUR/USD, GBP/USD Daily Commentary October 2, 2012

Yesterdays price action on the EUR/USD was not part of the plan. The 130+ pip pullback I did not expect. There was the news that Spain is getting ready to ask for the bailout and was confirmed by some sources but I didnt see that until this morning. To be honest when Spain does request the bailout the Euro is going to run up pretty hard for a few days or more at least. However the party will be over when the Troika gets in there and sees just how bad the books have been manipulated so far and see that the ECB may be buying bad Spanish debt just like they did Greece. Only cementing them in as the lender of last resort. To back that up there was also confirmation that Greece will get its next pile of cash regardless of previous failures to fulfill promises made. Does this tell us anything? To me it says that they cant cut Greece off because the money they are giving them is going to pay off the ECB. If thats not a circle jerk I dont know what is. 🙂

Anyway there really wasnt an entry during the London session. I do see a small trap move during Asia but for me its a bit more risky to trade against a first push during the Asian session but I did see that of couple of our Asia trading members caught it. I did manage to stay up late and catch the 1hr stop run at 1.2921 during the US session and now have my stop to break even. I did also take the short on the earlier 1hr pin bar but that one stopped me out at break even as it broke through the hourly 200ema.

After the move up yesterday direction is a bit more unclear. It does show the topping formation holding but that large of a move leaves questions on where the smart money is heading with this pair. The probability does favor the short at this point and the best place to take a short will be the hourly 200ema during the London session. I will be keeping an open mind on this pair though. If what we see during Asia is the push up there is a good possibility for the manipulation to be a down move and we see another push up today. Seeing manipulation and a clean set up at the support level at the 1.2875 level will be the best opportunity for a long position

The GBP/USD was clearly the weaker pair yesterday as the EUR/GBP went on a tear blowing out its ADR by 12 pips which usually dont happen with that pair. As it stands now the probability is that we will see the next push down but taking the short in the middle of this range is more risky. Plus being still just a first push down we have to keep an open mind for the long at the bottom of this range at Fridays low of 1.6111. There is a possibility for the manipulation to occur at the lows of the US session yesterday but a long there does carry more risk. I would prefer to see an hourly close below that level and a pullback up for the short but the market rarely does what I want. 🙂

Forex News Today

With China being closed today we are seeing a unusually low volume Asian session so we may not see much until London opens.

Scheduled releases are light with only the medium impact Spanish Unemployment from the Euro Zone and later from the UK we have their Construction PMI figures. I will be watching the GBP/USD leading up to the PMI release for a nice set up. There is also a 10yr bond auction from the UK but I have doubts there will be much excitement there.

Today I leave you with a notable Rick Santelli video talking about the probability of inflation caused by the QEternity we are getting from the Fed. Enjoy

Happy Trading


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