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Analysis of EUR/USD, GBP/USD for October 28, 2013

October 28
03:33 2013

This week we start off with nothing clear on the EUR/USD. The daily level at 1.3828 held nicely and there was a nice short for 40+ pips I saw some members got last Friday. Good job guys. In a case like that with the probability of the big boys having no clear bias and week end flows combined with all the trapping going on at Thursdays highs it gave a great entry. The best way to manage the trade is to get out with twice the risk due to the probability of them having any conviction to break the lows is just as low as them breaking the highs.

Today I will be treating this pair with the same open mind on direction. Since it is the beginning of a new week and they have pushed NFP off until next week my thoughts are they will try and pull it back to maintain this ceiling through the NFP data but there is still the possibility that they price in more Fed QE and do the break to the upside of which I see is a little bit more probable since if they want to keep the party going they will have to add eventually. Once it breaks above 1.3857 it has all the way to the 1.4185 before it comes into any significant previous selling.

The best levels I see for a long are 1.3791 and 1.3774 preferring the latter due to the push below 1.3791 on Friday. Having said that if we can get the push up to test Fridays highs the 1.3791 or even the Asian lows at the psych 1.3800 come into play. We will have to wait and see what they do. As for ant potential short the stop run to the highs would be best so we can get a lower risk entry and watch to see if they show conviction to the upside. Otherwise the Asian highs will be valid but much more risky and I would prefer to see conviction to the downside first.

EU 1hr chart

When I look at the GBP/USD only three words come to mind. What a mess! However this dos give me the opportunity to give a quick lesson on the hourly conviction close. basically this shows the one main rule of when we see there is conviction beyond a significant level, that conviction shows mainly that they will test the next level. In this case it broke the level and tested the next in the same hourly candle. The conviction was not all that great considering the pin bar but even if it did close higher it still does not mean it will break the next level just behind it. of course if it did close on its highs the chance of the break up gets better but we would still need to see the manipulation at Thursdays highs or just a bit lower at 1.6212 in order to take the long. having said that considering a no clear direction Friday the probability of the break is very low and not worth the risk even if it did set up nice. the last thing I will mention is that candle was also during the Asian session and was the fake out rather than true conviction which is why I always question them on these pairs when they happen during Asia. Hope that helps.

As for today the only clarity I can get out of the mess is potentially two long term pushes to the upside inside this range, however the way it made these pushes concerns me a bit with seeing the two intraday pushes inside them get rejected hard during the London session. I will have a small bias for the long but the potential levels aren’t all that great. Of course Fridays lows would be best but as long as we get a decent run up during Asia Fridays close is a good level or even the Asia lows if it stops here and chops the rest of Asia. If the range does widen up nicely I will consider the middle of the range but only if they play the breakout traders to the highs first. I don’t really see much potential for a short and the levels are even more questionable. The range between 1.6212 and 1.6221 has potential but will need something screaming at me in order to change the bias. Otherwise if I miss the long the best place to short during the New York session will be after it completes the push.

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GU 1hr chart

Forex News Today

The calendar is very light today with nothing worth mentioning during the London session. The US session only has US Industrial production and Pending Home Sales and I don’t expect much from either considering we are in a market focused on if or more likely when the Fed will increase the QEternity.

Happy trading


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