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Analysis of EUR/USD, GBP/USD December 12, 2013

December 12
02:58 2013

As we near the end of the trading year its typical that we get moves that are much harder to interpret and make any sense of. There are a few factors at work here that explain the moves but it don’t make them any easier to predict. This is a large part of why most traders take these last weeks off if not the entire month of December for some. First off we have the year end flows of any large businesses that hedge their purchases with currency so they don’t take too big of a hit by simply repatriating funds. We also have the large institutions including the big boys closing trades to close the books for the year. Not to mention all the crazy crap we have had go on in recent years that don’t take a break just because its the end of the year. The US Budget that just got kicked to 2015, Europe insolvency problems, World economy in the tank just to name a few.

The EUR/USD today has another small push to the upside with no real conviction. Given the move was mainly during the US session along with the S&P dropping like a stone. Although it seems like a risk off situation if that were the case the Euro, EUR/JPY and USD/JPY should have followed. Therefore it makes more sense that large players were pulling money out at the highs of US equities for the end of the year booking profits. It has also reached a daily level at 1.3809 that although is not the overall recent highs the daily candles are only wicks above. I will be keeping an open mind on direction today just in case they want to test the overall highs before the end of the year but I will prefer a short if I am going to hold on for a larger move. Of course the safer entries will be at the high or low of yesterday but we may also get clear trapping around Tuesdays highs or the Asian range highs for the short today providing the range widen. The only other place I will consider a long besides the lows is 1.3756 but will need to be very clear and get a good entry.

EU 1hr chart

The GBP/USD did prove the push up was false yesterday with the 118 pip move back down in the chop it left Monday. I will be open on direction with a slight bias to the downside today. Having said that the support at the 200 ema also shows an unwillingness to let it go much lower. Since we already have a wider Asian range this morning the Asian highs will be considered for the short but with nothing else there for confluence it will have to be really convincing or they are more likely to push to the 1.6400 before running it down. The best place for a long is the stop run to the lows but I will also consider the Asian lows with the right price action and playing of the breakout traders.

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GU 1hr chart

Forex News Today

Today should be interesting from the start with a Mario Draghi speech talking about the ECB Annual report coming out later in the day. We have a good chance of some wild swings during the opening of the London session due to this so we will need to be cautious for at least the first hour of the London live training session today. Once he is done since there isn’t more high impact events we should see it calm down.

The US has weekly Unemployment Claims along with Retail Sales data released at the same time. With the sales data expected pretty much flat and Claims expecting a rise to 320K I think it will take a larger surprise downward on unemployment to make a sustained move but even that is somewhat doubtful with unemployment getting somewhat ignored these days.

Something to Ponder

It has been awhile since I had a good Rick Santelli video to share but saw one this morning that made me chuckle. I mentioned the US Budget deal above but this video goes into more detail and makes it sort of laughable how the US congress has booted the proverbial can out of the park and wont even open the doors to look at it until 2015. One would think the US is sooo screwed right? Not so fast. Yes I have to say I agree but that does not consider that the whole world is on the print fest high also. Of course there is Japan and even the Swiss have done it recently but what I wanted to point out is the elephant in the room (China) has out done them all. For those that think China will somehow be the next world top dog has another thing coming. Check out the chart below the video and if you want more information check the article here.

Print Fest











Happy Trading


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