Analysis of EUR/USD, GBP/USD July 30th 2013
At first glance of the EUR/USD this morning we have a first push to the downside but when I do a pip count of the range being only 55 pips we have to question the conviction in the move. Since we have had these tight range days the average daily range is tightening up and if they continue we will be considering them as pushes but not quite yet. Having said that I will have a small bias for the short but will be surely open for a long at yesterdays lows around 1.3237 watching for any conviction to the downside with the hourly close below. The best level we have for the short is at 1.3270 but if the Asian range it tight as I expect I will want to see them play the breakout traders at both sides in order to take the short from a stop run to the level. Otherwise if the range can widen up with an attempt at the lows this morning then the short at 1.3270 has a higher probability of success without breaking the lows first.
On a side note the only realistic explanation for the lack of conviction on this pair is we are kind of fighting two fronts. With the potential for a Bernanke taper coming down the pipe and the situation for European banks getting worse making talk of a third LTRO coming from the ECB. The problem here is that the taper from the Fed is a well known USD positive while even though it is back door printing from the ECB the LTRO is Euro positive. The reason is that the LTRO is not really seen as diluting the Euro like the Fed purchases are for the USD. Its seen more as saving the banks in trouble therefore giving them more time to straighten things out and the systemic risk of a major bank failure in Europe will be averted. Therefore positive for Europe, the markets and the Euro. The clincher here is as a member pointed out in a comment to Fridays commentary last week. Europe cant really have the Euro that strong as it hurts exports (Germany) so they are also between a rock and a hard place.
With the ECB sharing the same predicament that the Fed is in, the way I see it is they will work together as the Fed does a little taper trick first so the ECB can do another LTRO without driving up the Euro too much. We are probably in for some choppy price action on this pair for awhile.
The GBP/USD has made the same push down with the correlation to the EUR/USD keeping rather tight yesterday meaning that they were trading off the USD more than the Euro or GBP so if this keeps up and the GBP/USD makes the second push as I expect today then it will drag the EUR/USD with it at least to some extent. Having said that this will be the pair I pay more attention to with the bias for the short. Having seen more conviction to the downside with the 85 pip push and daily close at yesterdays lows after the pullback it actually has a chance of running off with out me today if they don’t try to manipulate to the upside first.
The best level I see for the short is around 1.5358 but with Fridays lows just below and a breakout level yesterday just above it could be anywhere between 1.5355 and 1.5363 that we see the trapping going on. I will be open for a long but only if I see them play the breakout traders to the highs then lows of the Asian range first.
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Forex News Today
As I look at the scheduled events for today I have to wonder how in the heck I mistook todays news for yesterdays. That’s what I get for using my backup internet that was supposed to be ten times faster but has proven to be even slower. Oh well, that’s one of the trade offs of living in the Philippines. Below is the repeat.
There are only a few releases of note today and none of them high impact but could produce some opportunity for them to manipulate if they miss big. First is the German GfK Consumer Climate expected to rise slightly. Since this is released before the London session opens we could get some movement on a large deviation from whats expected. Later is an Italian 10yr auction and as usual will only be paid attention to if it goes badly. Lastly at the New York open is the German CPI data. With the low figures as of late I doubt there will be much reaction unless it spikes above 2% on the yearly data which is unlikely.
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