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Pound Breaks Out Of Inverse Trend Channel – July 23rd 2015

I read an interesting article today on two separate opinions that are very common in society today. This topic has to do with precious metals, but in general it has a WAY wider reach that really gets to the absolute core of investment decisions. The first opinion was written in The Wall Street Journal by a guy named Jason Zweig. The article was entitled Let’s Get Real About Gold: It’s A Pet Rock, and you can click the title to read the article. What’s interesting about the article is his comparison of gold to the Pet Rock craze of the 70’s (before my time). That might literally be the dumbest comment I have ever heard in my life. Did he forget about the 6,000 years of human history? Did he forget about almost all major civilizations through the last 6,000 years using gold and/or silver as a form of monetary payment? Did he forget that the dollar was also backed by gold until the early 1970’s? Why would the most powerful nation in the world back their currency with gold if it meant nothing? 

The simple truth is it took many years and small steps to dumb down the American people enough to where they invest in nothing more than non absorbent toilet paper. This really illustrates how people’s minds have literally been changed in their understanding of what true value is. The fact is when value comes from nothing more than faith that is not true value. Value is something more than simply faith or belief that it has value. Value can be reduced or increased but it cannot be eliminated completely. While the buying power of gold may go up and down….its value will never be reduced completely and not a single non-gold back currency can boast those type of results.

Here is the greatest illustration of how real assets preserve buying power. In the early 1900’s gold was worth $20 per ounce. During this same time you could buy an average automobile for around $500. Another way to say that is the average automobile cost about 25 ounces of gold. 25 ounces of gold X $20 per ounce = $500.

Right now gold has risen to roughly $1100 an ounce for even number purposes. $1100 per ounce X $25 per ounce = $27,500. While the price of a car varies significantly today, the average cost of a base model vehicle is around 30K. What this illustrates is that while the price may go up and down, the true buying power of gold remains the same. BUYING POWER IS THE KEY and nothing retains buying power and protects capital like gold. Saying anything different without facts to back it is simply ignorant and I would say Jason Zweig fits the category of ignorant quite nicely. As Peter Schiff said when talking about paper currency, “if they would just print it on softer and absorbent stock and put it on rolls, it might have some intrinsic value if we run out of toilet paper.” Well said Peter.

Euro Fails To Create A Second Push Up

The Euro was in a unique situation yesterday as it did not really have a good lower level from which I was looking to trade from. This ended up being a good thing as the second push never really came about. For those of you who were asking me about the stop run setup that occurred at the highs and whether or not it was valid. When I have a clear push and I’m looking for the next push I call that a directional market, and in that situation I only look to trade in that direction. Yesterday I was only looking for the second push up and therefore I would not have been taking that short. For those of you who were still trading in both directions from a valid level then yes that was a solid trade short that ran off and hit a take profit quite easily. 

Because the Euro did not give the second push up yesterday I’m going back to trading in both directions based on a valid setup from a potential manipulation point. The Euro could still be in a valid cycle but when it stalls for a day I like to leave my options open on direction.

EUR/USD Chart - July 23rd 2015

Pound Breaks Inverse Trend Channel To The Upside

The Pound produced a beautiful stop run reversal short from one of our levels drawn in the July 22nd 2015 Fx commentary. That was the only trade that was valid yesterday and it produced a nice move down for a full take profit. For members make sure to watch the daily market review video as I break this trade down in more depth.

Today I will be open on direction still. You might look at the Pound and wonder why I’m not looking for a second push to the upside. Overall the Pound is breaking above the inverse trend channel we had to the downside which does support a continued move up. The large retrace of the push up as well as the fact that we are still holding within the previous range gives me enough concern to at least remain open on direction and let the manipulation from a valid point make the decision on direction for me. Should we get a second push up today, I will then more than likely look for a third push up for Friday.

GBP/USD Chart - July 23rd 2015


Forex News For July 23rd 2015

UK Retail Sales M/M 4:30 AM Eastern: UK data has a bad habit of being the catalyst for a price reversal. Another words they will use the news to create a false push/stop run and then reverse the price. This essentially traps anyone chasing the news and makes for a stronger reversal. This specific news is expected at .4% and any deviation of .5 +/- will create a fairly sizeable initial move. With that being said unless your getting a .8 +/- or larger deviation from the expected number don’t put too much faith in trend continuation or trend reversal. In anything a smaller number will likely be reversed after the spike.

CAD Retail Sales M/M 8:30 AM Eastern: CAD Retail Sales is a tough indicator to get a feel for because it is generally attached to CAD CPI. This month things are a bit more simple and this is the only news coming out this time for the CAD. Initial expectations are .7% and similar to UK Retails Sales a .5 +/- deviation from the expected number will create a decent spike but don’t expect any long term continuation unless the deviation is large than 1% +/-.

USD Unemployment Claims 8:30 AM Eastern: This news is a dud and I would not expect much from it except for a quick blip in volatility and spread. The only exception to this might be on the USD/JPY or other Yen based pairs where US data often creates the largest move.


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