US Dollar Index Tanks – 2/4/16 Daily Forex Analysis
Range Finally Breaks On EUR/USD
Yesterday I mentioned that if the US Dollar index did hold the previous range then that would support a move down for the Euro and Pound. Obviously that range did break when correlates to the range break in the EUR/USD as well. At this point I will be watching the 96 level in the Dollar index. Should be break and hold below that level then a further wave of Dollar weakness could ensue. Its interesting to note what started this move down in the Dollar index and thus the bullish momentum in both the Euro and Pound. More often than not a stop run will precede a large move and that is exactly what happened here. If you look at the Weekly Dollar index chart below you will see stop run of the previous highs before this latest weakness. This is something I talked about in the December 4th market forecast.
For the EUR/USD today, I will only have one upper manipulation point listed to start the day. Anytime there is a move that is so far outside of the current ADR the possibility of a reversal is high. As many frequent readers of the Day Trading Forex Live Blog have heard me say before, this is what we term as an inefficient move which tends to be retraced. In no way shape or form is that a reason to short these moves, but it is a reason to keep directional bias open.
Pound Continues To Surge
The GBP/USD continues to aggressively surge to the upside. It will be very interesting to see what he Commitment of Traders report looks like this week. Unfortunately we will have to wait yet another week to get today’s data included in the report as Tuesday was the cutoff for what will be reported Friday. The long term asset class has been heavily bearish on the Pound and seeing how they respond could give some insight into the power of this move. The Pound is very similar to the Euro in the move we had today. Its the type of move that makes me keep directional bias open and unfortunately it is the type of move that leaves us with very few manipulation points from which to take a valid stop run. To start the day I have one upper and one lower manipulation point.
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Forex News For February 4th 2016
UK Interest Rate Decision 7:00 AM Eastern: More than likely this will be a non event. With that being said, any change would create a massive move. For this month everything is expected to remain unchanged.
BOE Carney Speaks 7:45 AM Eastern: Normally this is where the fireworks happen. When everything is left unchanged traders look to the speech to give some indication that they were leaning to one side or the other which is why the whipsaws happen so often during interest rate speeches. As always I would not carry going into this release and you should only consider trading this if you are well versed in them.