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January 31, 2013 EUR/USD, GBP/USD Daily Analysis

It didn’t take long after the London session open yesterday for the EUR/USD to break above the 1.3500 level and make the nice hourly close above showing us they didn’t intend to do the reversal. I would have been happier if they tried to push out some of the longs and run it to the Asian lows before they made the push but as you can see it came right down to the break out level I mentioned in Wednesdays commentary and gave a nice manipulation candle pattern. However it never did give me the pullback for the entry so I watched it run off without me. I have to admit I wasn’t too concerned since I had caught the EUR/JPY long during the Asian session that was running up on my take profit for 72 pips just before the set of legs formed on the EUR/USD. I will cover that trade in much more detail during the live London training session today.

Now we are in extended pushes so the reversal could come at any time but my bias is for the long today even though its light. As you can see on the chart below there is some significant daily resistance sitting around the 1.3617 level. This is what I call proven resistance as its a daily high that tested a break out level so it could be strong. To be honest I have my doubts with the GDP news from the US yesterday being much more negative than anyone expected. If we can get the break and daily close above this level there is a lot of room to the next daily resistance at 1.3810. 

Today I will be looking for the manipulation around the Asian lows again first where ever they happen to fall today. Next will be the 1.3532 level of support during the start of the NY/London overlap. This will be my preferred place to see the trapping formations but I will be open to the Asian lows if the set up is nice and clear. 

1 hour chart of the EUR/USD on Jan. 31, 2013   

The GBP/USD made the second push as expected. It even tested right into the level of 1.5739 mentioned in yesterdays commentary. However again there was no pull back nor was that clear manipulation. It wouldn’t surprise me if some our more advanced and aggressive members took the long after the 15 minute pin bar but to be honest I haven’t checked the text in the Skype group yet this morning. What makes this an advanced possible entry (I did not take it) is as you look at how they played the break out traders popping above the Asian highs first then running it down to the Asian lows for the stop run below 1.5739 and actually hitting the stops below the 1.5730 hourly support level from Tuesday. To be honest this is a trade I will always miss because my trade plan requires a pullback and I am fine with that. 

Today I will be expecting a third push to the upside to test the daily highs of 1.5850 or possibly even the next daily high of 1.5890. It will depend on where the push starts from. The more likely scenario is the pullback to Tuesdays highs of 1.5771 or just a bit higher at 1.5781. Since we do have the 1 hour 200 EMA that has found good resistance it wouldn’t surprise me if they run it down to 1.5771 to try and clear out some of the weak holders before they break to the upside. The manipulation will have to be clear at the levels above.

1 hour chart of the GBP/USD on Jan. 31, 2013


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Forex News Today

The European Calendar is light today with just a few releases from Germany of note. Since the going mood in Europe is everything is fixed when its not my thoughts are that German Retail Sales, and Unemployment figures will be largely ignored baring a big miss. Both are expected to be negative with retails sales dropping into negative territory and adding 2k to the ranks of the unemployed but that’s really not so bad since everything is better these days right? 😉 Later in the day German CPI figures roll in also. With expectations of a small drop in the monthly figures I doubt this will be too eventful baring a large miss that I don’t expect.

The UK has Nationwide HPI but this will most likely be a non event since their housing data needs much more improvement to even start to consider a recovery is in the works. Just like the US.

The US has weekly Unemployment claims expected to add 20K to the number of unemployed. Since the Fed has the employment mandate and set a target of 6.5% unemployment a large miss to the upside could effect the Unemployment rate on Friday so that will be USD negative if we see it. Later the Chicago PMI figures come out expected to rise slightly to 50.5 above the revised figure last month of 50. As long as it remains above 50 it will be good but I have my doubts it will be good enough to create USD strength with NFP tomorrow.

Happy Trading


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