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GBP/USD Stops Push Down – 4/5/16 Daily FX Forecast

EUR/USD Wrapped In Tight Range

The ADR on the EUR/USD has been rapidly shrinking over the last few weeks. Yesterday’s price action definitely contributed to that fact as the overall range was 55 pips from high to low. This makes our analysis rather simple as nothing changes from yesterday’s forex commentary and today’s. I’m still continuing the open directional bias and the same levels from yesterday will remain in place today. The only change that I’m making is the addition of one upper manipulation point. I do favor a move to the downside as the EUR/USD is rather extended and has broken into fresh highs. Even if we are going to eventually continue to the upside, it will likely only come after some retracement to the downside. With that being said, I’ve been a bit more aggressive with my upper manipulation points in an effort to catch that move down if in fact it does occur. Like always, a directional bias is not a reason to enter a trade and we need to get a valid stop run of one of the high probability manipulation points before a trade can be taken. 

EUR/USD Chart - April 5th 2016

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Pound Fails To Give Second Push Down

Yesterday I was looking for a second push to the downside on the GBP/USD. Today’s price action is a great example of the protections that are built into this day trading strategy to keep us from taking a loss when the market is pushing against the expected direction. As I wrote in yesterday’s market commentary, we did not have a valid upper manipulation point to start the day. After we made a push down at the beginning of the European session that changed. Based on the rules for the selection of a new manipulation point the Asian high would have been valid when we came back into them just prior to the start of the NY Session. As you can see we simply blew through this point without producing a valid confirmation down and therefore the result was a no trade. While there is no such thing as a short term trading strategy that filters out all bad trades, only taking trades on a valid confirmation entry will filter out many otherwise negative setups. For today I do still think we could be holding a valid cycle but we have enough to raise valid questions. As a result I will go back to trading with an open directional bias. Should we get the second push to the downside today then I will look for the third push down the following. 

As far as our listed manipulation points we do have some very solid levels to work with and we will start the day with one valid upper and one valid lower manipulation point as seen in the chart.

GBP/USD Chart - April 5th 2016

Forex Market News For April 5th 2016

UK Services PMI 4:30 AM Eastern: This month 53.9 is the expected number. Up until the last few releases this had a pretty good track record of following through in the direction of the spike when a good size deviation was hit. That has changed as of late, with last month making a push against the deviation. With that being said the market had started reversing in that direction and therefore the news would have had to have changed the short term trend in order to follow through. 

US ISM Non-Manufacturing PMI 10:00 AM Eastern: When we get a full 2-3 point deviation from the expected number this typically has very good follow through in the direction of the deviation. As a result I would not trade against the spike on a previously valid stop run. Anything under a full 1 point deviation is a coin flip as far as continued follow through and I would not have a problem using the news for a pullback on a previously valid confirmation. 54.1 is the expected number this month.



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