Huge Weekly Pin Bar Short On Euro and Pound? 9/2/15 Forex Market Analysis
We have a very interesting setup occurring on the EUR/USD, GBP/USD and USD Index. On all three charts we see a huge weekly stop run candle past a significant manipulation point. Its important to understand that I don’t trade weekly stop run candles personally, but regardless of time frame the same principal holds true. The stop run is a search for liquidity or a test of liquidity above/below a certain price level. Most major market moves show a stop run on the large time frames before a shift in direction takes place. My concern with the stop run on all three of these charts is how extended they currently are.
With that being said how would I look to trade it. Personally I wouldn’t look to “trade it” in the traditional sense of putting on a long term trade and letting it ride. I will however definitely favor the continuation down on the EUR/USD and GBP/USD after we have some short term movement up. Remember trends don’t move straight without letup for extended periods of time. Both the Euro and Pound have fallen aggressively vs the Dollar over the last week and a little pullback would be nice before any further continuation occurs. Like always any entry would be from a stop run of a valid manipulation point.
EUR/USD Price Is Compressing
I talk a lot about market ranges and why I like ranging markets. This may seem strange when so much of the market hates a range bound market. A range bound market gives you one very key advantage. Ranges compress price action and thus is compresses liquidity. Right now we are seeing a compression of price on the EUR/USD from a short term perspective. If your looking at the 1H chart you can see the consistently higher lows getting closer and closer to the stable highs. This gives us a very good idea of where the short term liquidity is located and thus a quality stop run point. Another key is it gives us a clear starting point for the current short term trend in the market. I did a video a few years back titled Forex Chart Pattern Analysis that you can check out for more information on the subject.
Today I still remain open on direction with the EUR/USD as nothing ground breaking happened yesterday. As this point I think you still have to favor the move down but we may see a deeper retrace of the previous move down before more continuation occurs and thus why I have the open bias. Any valid stop run from a pre-selected manipulation point will be valid.
The GBP/USD Begins To Break Daily Lows
The Pound has officially moved into the most recent daily chart low and broken it. Based on how aggressively we have seen the GBP/USD drop you would think I would only look for a short but the size of this move with no retracement gives me enough concern to at least leave the long option on the table if a quality lower manipulation point comes along. At the current time (as you can see in the chart) I do not have a valid lower manipulation point. It is possible we see one form during the day but that would be the only option for a long to setup. If that does not occur and we are left with only what is seen in the chart then the only option we have at present is a short from one of the upper manipulation points.
I would caution everyone on these two pairs to not get so biased on the short that you stick with a bad trade thinking it “has to go down”. The market has to do nothing other than what it wants to do and you losing a lot of money will not change that. Typically markets like to make very strong breakouts and then retrace enough to stop anyone out who shorted the break. Because we have not seen that retrace I do have some concern that it is still coming which is why I mention it.
Forex News For September 2nd 2015
UK Construction PMI 4:30 AM Eastern: This news is definitely a big enough mover on the spike to where I would not carry a trade into it personally. With that being said it has a poor history of showing much follow through beyond the spike and often the market moves the opposite direction. The expected number is 57.5 and any deviation of .8 +/- from the expected number will create a sizeable spike of 15 pips or larger.
US ADP Employment Change 8:15 AM Eastern: US ADP has seen a big increase in the size of the spike over the last 6 months and is another major market mover. Tomorrow’s number is expected at 200K and any deviation of 30K +/- from the expected number will create a sizeable spike of 15 pips or larger. The EUR/USD spiked close to 50 pips last month on deviation of about 30K and the GBP
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