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March 19, 2013 EUR/USD, GBP/USD Analysis

It would seem that the EU has opened a can of worms they might just be wishing they never tried to touch. The Cyprus deposit confiscation has backfired so far and dont look like any form of stealing a percentage of savings deposits will pass in the Cypriot government. They are having a second bank holiday today to try and sort things out. Trying to figure out how they can get to the Russian dirty money with out hitting the worker. It seems like a good idea on paper but I will be the first to admit that what works on paper rarely works as planned in the field. Been there, done that and have the T-shirt, hat and many other souvenirs to show for it. 

Now we sit waiting for somebody to cave while they have already been warned that two of the major banks in Cyprus will fail if they opened their doors today. Somehow I have a feeling they wont be opening their doors for a few more days at least and if they cant get a deal, maybe never. Its anybodies guess what will happen next so it might be futile to try. However if history is any example the ECB is going to ride in on their white horse and save the day. Of course somebody will have to pay but I am relatively sure they will find a way for it to look like somebody is paying while in reality nothing will be anywhere close to fixed and we will see the same scenario played out down the road. Sound familiar? Greece ring a bell?

The big question is if or when does it cause the bank run? If this does happen it will be the beginning of the end of the Euro as we know it. This scenario I wont even attempt to guess on. Mainly because one never knows how far the powers that be will go to protect their cronies. Any reasonable man saw the end coming long ago and was proven wrong time after time so to think they wont pull something out of their hat now just don’t seem plausible. In the end it will be the major bank run across several countries that will be the straw that will break the camels back.

On to the charts. The EUR/USD did manage to retrace half of the gap down yesterday but with no fix in sight Im thinking this gap will take some time to finally close. Its showing third push chop price action with no clear direction and tested and got rejection at the 1.3000 level  with a stop run during the US session. The safest way to treat it is trade the clear manipulation from the H/L of this chop. Mainly because one could argue there is also a first push up.  The level I will be looking for a long is 1.2923 and the possible short levels are again the 1.2977 along with yesterdays high of 1.2995.

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EUR/USD 1 hour chart on Mar. 19, 2013

The GBP/USD had held in its third push chop finding the resistance I expected at the Asian highs in yesterdays commentary. Too bad the manipulation wasn’t clear enough to enter a relatively safe trade from my perspective so I remained flat yesterday.

As it moves on today and holds in this chop the probability for the reversal does go down but I will be keeping the small short bias today. having said that if I see the hourly stop run to the lows around 1.5073 I will be open for a long position. Otherwise I will be looking to short from either the Asian highs, the 1.5123 or 1.5140 levels. It will mainly depend on where price leaves the Asian box today and whether or not we get an hourly conviction close during the London session.

GBP/USD 1 hour chart on Mar. 19, 2013

  Forex News Today

The calendar starts of with UK inflation figures. They have monthly and yearly CPI and PPI data being released early in the London session. With expectations mixed I doubt these will have much reaction baring a large miss. I would expect a larger miss to the downside to have more reaction since they have been tolerating higher inflation for the last couple years so a drop would be more significant to the possibility of more asset purchases and GBP negative.

The Euro Zone has German and EZ ZEW Economic Sentiment expected to drop in Germany slightly and rise a bit for the EZ. Go figure. My thoughts are the bigger chance of a disappointment for both and will be Euro negative. Baring a big miss this will probably be over shadowed by the Cyprus crap so keep an eye on tape bombs there.

The US has building permits and housing starts. Both expected to rise. If the housing market can actually start to improve beyond a million a month then things may start to look better for the US on the horizon. I do have my doubts but it is possible.

Happy Trading


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