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Wild Start To FX Trading For 2015 Jan. 5, 2015

EURO Crashes, USD Surges To Begin The Trading Year

If the moves early today are any sign of how 2015 price action will be running we are in for a wild ride. There are several reasons why we have this particular move, the first being low volume trading early in the day along with events over the weekend as Draghi says the ECB is prepping for more aggressive moves to prevent deflation in the Euro Zone, Germany saying a Greek exit from the Euro is manageable then retracting a bit with these statements from the German vice chancellor Sigmar Gabriel

“The goal of the German government, the European Union and even the government in Athens itself is to keep Greece in the euro zone”

“We can’t be blackmailed and why we expect the Greece government, no matter who leads it, to abide by the agreements made with the EU”

The question I would be asking at this point is, how come they dont care that they were swindled by the Greeks and Goldman Sachs in order to get into the Euro Zone. If they really had any regard for the “rules” they would have kicked Greece out when they learned this. Its clear to me that the EZ rules dont matter at all, as long as the bureaucrats can hold power, lies and deceit are well within the “rules”.

In short, as these guys run out of cans to kick and lies to tell about how far it goes these moves will become more common just as they did toward the end of 2014. Having said that, along with the higher risk comes higher profit potential for us as long as we manage the extra risk with a good trade plan.

EUR/USD Gaps 50 Pips To Start The Week

This gap move to the downside dropping as low as 1.1900 is significant as we should see this hold below the level. If they cant manage to close the gap during the Asian session they may try during London today but I have my doubts they will be able to if price continues to drop and leaves the Asian box closer to the lows. The best level to short at that time would be the set up at 1.1954. If they do manage to break that then last weeks low at 1.2000 will be the next level I look to short. I will remain open for the long from 1.1900 or just above as well.

EUR/USD hourly chart 1-5-2015

GBP/USD Weaker After Gap Down

The GBP/USd shows more weakness than the EU this morning as the EUR/GBP closed its gap. I do expect this to continue as well even though it may not be today. We will have to see if its going to break the gap open price at 1.5300 either during Asia or London before I look to short at 1.5324. If the 1.5300 hold during Asia its valid for the short but I will be watching for any conviction above telling me they will more likely close the gap. The best level for a potential long is at the current lows of 1.5239 but if the gap open holds the higher probability is they will test the next daily level at 1.5208 before any bounce. The more aggressive long from 1.5266 is valid but does carry more risk.

GBP/USD hourly chart 1-5-2015

EUR/JPY Shows Risk Aversion Gap

The EUR/JPY risk aversion seems to be holding up for now. US Equity futures are dropping as well but I expect they will be supported leaving some doubt as to the risk aversion is true. As it stands this morning I will be looking for the short at 144.10 during the Asian session and as long as it holds with no set up the same will be true during London. Otherwise the lows at 143.62 are valid for the long with a significant daily level just below they didnt have the nerve to break this morning. If they do break the 144.10 to the upside then the probability of the gap close increases but they may only push to 144.36 if they do intend to push it down for the day.

EUR/JPY hourly chart 1-5-2015


Forex News Today

The calendar is light to start the week but has UK Construction PMI to start. Expected to drop a bit but still well above the 50 expansion I expect it will be close and not surprise big enough to make a sustained move. If it does then they will likely soak up most of the move in the EUR/GBP.

Later are German CPI figures that could get more weakness in the Euro going. With numbers hovering around zero a drop below would help Draghi in respect to more QE coming soon. Having said that we already know hes planning on it so a move below zero could already be priced in.

Interesting Read

I know some of you have seen this already but I am sure many have not. Over the break there was a few articles posted talking about the FX rigging that goes beyond the “fix rigging” they were talking about before. Make sure to check out the full article at this link but just to get your short hairs up here are a few exerpts.

The four banks in the Cartel controlled about 45 percent of the global spot-currency market, according to a survey by Euromoney Institutional Investor Plc, so information about their plans was valuable. Some days they worked together to push around the 4 p.m. fix, settlements with the banks show.

The Cartel chat room was started by Usher as early as 2009, according to a person with knowledge of the matter. Usher had risen quickly to the top of his profession. After joining HBOS Plc in 2001, he was hired by Royal Bank of Scotland Group Plc in 2003 and a year later collected an industry award on his employer’s behalf…. The four members of the chat room ribbed each other like high school buddies. Usher was referred to as Feston because he resembled an overweight version of British chef Heston Blumenthal, according to people who have seen the chats. Matt Gardiner, a UBS trader based in Zurich, was called Fossil because he was a few years older than the others. Rohan Ramchandani, Citigroup’s cricket-loving head of spot trading, was called Ruggy, while Chris Ashton, the last one to join, was dubbed Robocop.

Copies of messages sent to BP traders over the course of a year were provided to Bloomberg News by a person with access to the online conversations. The person, who redacted the names of banks sending the messages and dates of conversations, said they came from firms whose senior foreign-exchange traders belonged to a chat room called “The Cartel” that was set up by Usher and included dealers at JPMorgan, Citigroup Inc., Barclays Plc and UBS Group AG.

The information offered an insight into currency moves minutes, sometimes hours before they happened. The messages could drag the U.K.’s biggest energy company into a scandal that has enveloped 11 banks and led to more than 30 traders from London to Singapore losing or being suspended from their jobs. Last month six banks were fined $4.3 billion for passing along information about their clients and working together to rig foreign-exchange markets.

This was a great read literally proved by the main stream press of all places, what we have been trying to show and teach members for years. I have to admit its a questionable sell when its been held such a secret by the banks but now there is plenty of proof.

Now I know what many of you will say when reading this. “How will this effect our trading if they stop?” In short it wont. What this proves is that there was much more collusion by the big banks than we really thought there was. Once this is stopped (if it is stopped at all) the banks will still have access to order flow which shows most of the trades they have coming and going. What would stop is the collusion when they get orders for large trades that haven’t been put on the books yet. What these guys were caught doing was receiving the order then getting in the chat group and telling the group before the order was put on the books. No worries for us 😉

Happy Trading


EU levels: short- 1.1954 and 1.2000,  long- 1.1900

GU levels: short- 1.5300 and 1.5324, long-1.5239 and more aggressive 1.5266

EJ levels: short- 144.10 and 144.36, long- 143.62



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