USD Strength Continues To Drag On EUR/USD & GBP/USD – 8/28/15 Forex Analysis
Overall another very active day in the currency market. Before we get into that I want to touch on the US equity market again today. The reason I want to bring this up today is we are approaching the retracement point I mentioned in the commentary titled Global Markets Seeing Heavy Risk Aversion from August 24th 2015. Since that commentary the market did set a lower low and therefore the 50-70% retracement area has to be revised. I have revised the S&P 500 chart and you can copy over to the DOW if you so choose. Historically this retracement almost always comes and here it is. The next question is how do you trade it?
Could equities run to 25,000 on the DOW? Well, anything is possible in this rigged market. The question you have to ask yourself is what outcome is more likely. If your able to capture +90% of the greatest bull markets in history is that good enough. Sometimes trying to be greedy is what ends up costing people the most. Remember this….bulls make money and bears make money, but pigs get slaughtered. If it was me personally, I would wait for a bearish daily close and I would get out. This could be a huge pin bar somewhere in the retracement range shown in the chart or maybe a bearish engulfing candle down. Once this occurs the safest position is no position in my opinion. The ultimate decision is however yours and yours alone to make.
EUR/USD Breaks Below The 200 EMA
In my opinion there is not a more accurate moving average than the 200 EMA. This is especially true when it comes to the 1H, 4H and Daily 200 EMA placement. With that being said we have now broken below this on the hourly chart and it is now set to retest it from the backside. Historically the if the backside test holds you will see a further push in that direction. Therefore if we come back into that level and then work away from it I would expect further downside.
Today the EUR/USD came very close to setting up a valid long trade from the first lower manipulation point but did not satisfy the rules of a valid confirmation entry. If your a member makes sure to watch tonight’s daily market preview that I just uploaded. It covers this invalid trade setup in depth. Overall today nothing has changed in regards to direction as I will still be happy to trade either direction if a valid setup occurs from a listed manipulation point.
Pound Begins To Slow
Is the Pound set to take back some of its recent losses? At this point I do favor a long setup on the GBP/USD but we still have to see a valid trade setting up from one of the pre-selected manipulation points in order to take a trade. The last week has really been boring the GBP/USD. All trading strategies will have market conditions that are more favorable to producing trades. The forex bank trading strategy definitely favors a more range bound market. One reason a heavily trending market is less favorable is because you often see the move for the day start without seeing a stop run. Another reason a heavily trending market is less favorable is because our trades are often from a market extreme and heavy trending markets have a higher probability of breaking those levels and thus either not setting up or setting up and stopping us out.
Its important to note that a normal trend is not what I’m talking about…I’m talking about the extremely aggressive moves like we have seen on the Pound. The good news is that type of market condition is the rarest of them all. Historically all markets are range bound 70% of the time or more. Even in the latest down trend over the last year, look at how the market stays in a range and then has 3-4 days of movement in the direction of the trend and then goes back into a range for a few weeks. Therefore a strategy that favors a range is statistically speaking far more likely to be profitable. The trouble is range trading is not as “flashy” as catching a big 300 pip move and therefore people discount it.
Anyway, enough about that. For the GBP/USD today I will only have one upper manipulation point I would look to take a short from. Really this is the only level that is clear within the Pounds current average daily range. Also, if the move up does occur I don’t want to have to fight a bunch of upper manipulation points. I will have two lower levels today as seen on the chart. The last lower level is a major daily point. I would be happy to go long from either level if a valid trade setup occurs from one of the points selected.
Forex News For August 28th 2015
UK GDP q/q 4:30 AM Eastern – This economic data really doesn’t have a great deal of deviation from the expected number so its hard to get a feel for what to expect. Last month we had deviation of .1 worse than expected and the market spiked about 20 pips, made a complete retrace and then sold off for the rest of the day. Today .7 is the expected number and any deviation at all will create a sizeable move.
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