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January 17, 2013 Analysis EUR/USD, GBP/USD

The EUR/USD has gone into a chop for a full day holding a 70 pip range again. This does increase the chance of the first push being false but my bias is still for the short today. If the Euro strength was going to hold out I would have expected the EUR/GBP to show the false push and it hasn’t  It has only gone back to a 3rd push chop and not made a higher close on the hourly chart. I wont say a long position is out of the question but I would want to see a clear hourly stop run to the lows yesterday of 1.3255 in order to take the risk. 

The levels I will be happiest looking to short from today will be the high during the US session at 1.3310 or just above at the London high of 1.3323. Having said that there is also the 15 minute 200 EMA rather close to the 1.3300 psych level. As long as that can hold during the Asian session and we get a clear trapping formation there I will be willing to take the more aggressive short with an entry as close to the 1.3300 level as possible. 

1 hour chart of the EUR/USD on Jan. 17, 2013

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The GBP/USD is quite a different story with three clear pushes to the downside and today I will be expecting the reversal. There is the chance that we get an extended push here but I expect they will at least pull it back first. The reason is the hourly close below the 1.6000 level. I would have preferred the daily chart close below it but it didn’t  Having said that there really was not much as much support as I would have expected if the reversal was imminent. What I will be watching is how the Asian market acts and whether or not that support comes in today. If they break and hold below the 1.6000 I will be more open for the short from a test of the break out level of 1.6006 since it has already been proven resistance. If we get the hourly close above 1.6012 then the reversal is most likely on and I will wait for the pullback and manipulation at the lows yesterday of 1.5973 or possibly the 1.5980 level.

1 hour chart of the GBP/USD on Jan. 17, 2013

Forex News Today

Scheduled releases start off with the ECB Monthly Bulletin. This most often reflects the earlier statement from Super Mario during the Rate Statement but it will be watched for any small changes in the economic outlook. As I have said before nothing has really changed in Europe but they do seem to be in a state of denial so if they keep that up it may paint a rosy picture when we all know better. However what the market does with that info is a different story.

There is another Spanish bond auction of 2 and 5 year notes and if this goes as well as last weeks it will be Euro positive. however since Spain pretty much used up its entire Social Security fund to get the previous results they may not be willing to go that far in the red on it to produce another great auction. I will be watching for the results closely.

The US starts off with Building Permits and Housing Starts both expected to rise with Housing Starts getting a bump of several thousand. Even if these do come out as expected the way I see it is there needs to be substantially more to be convinced there is a recovery in housing. There is still a large chunk of inventory out there even though some states are improving more significantly than many others. Next is the Thursday Unemployment Claims expected at 365K . If we do get the surprise upward like we have seen of late we will probably see some USD weakness depending on how bad it is. A miss to the downside will have the opposite effect as they think the QE may just be working. I don’t understand why since QE hasn’t worked 3 times before but maybe its the 4th time that’s the charm 🙂

Last of the big US news is the Philly Fed Mfg Index expected to improve a couple points from the revised figure of 4.6. It wouldn’t surprise me if this comes close to expectations. With the last several big misses (some up and the others down) I think they may be getting closer to getting it right but you never know. 🙂 As usual a big miss up and we see USD strength. Down and we get weakness.

Happy Trading


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