COT Data Shows Buying Pressure – FX Analysis 12/21/15
First I want to let everyone know what the schedule for the holiday market is going to be. For those of you who are members be sure to watch tonight’s daily market preview as I detail what we will be doing on the members side. For the commentary I will be writing a commentary for Monday, Tuesday, and Wednesday. For Thursday and Friday I will not be doing a commentary as it is the Christmas market. Next Monday, I will provide another update for the schedule for the final week of the year regarding market commentaries. Personally I will not be trading my own accounts for the final two weeks of the year.
Interesting COT Data
Generally COT data (Commitment of Traders) is pretty boring and doesn’t give a great deal of actionable information. This week gives a few interesting opportunities. First, the Yen is showing signs of potential strength. The main reason I point this out fact that US equities are also getting heavy again. Should equities continue to the downside then a Yen cross short starts to become very attractive. Next is the Aussie. The Aussie is showing heavy buying pressure over the past few weeks even though the market has been gradually sliding to the downside. For lack of a better word, that type of divergence between the falling price and underlying pressure often has consistent follow through. If I was trading the Aussie I would be waiting for a break above .7200 before following through with the long bias. A break and hold above .7200 would have me heavily biased long until the market works back down below that point. Off all the info in COT this week I think the Aussie is BY FAR the most promising.
The final point I have taken from the COT this week is the Euro short bias. As long as the price remains below 1.0900 then I would continue to be heavily short biased. A break and hold above that point should though that bias out. The COT data is supporting that short bias as well with the continued selling pressure continuing to show.
Euro Shows Potential Selling Pressure
As previously mentioned the selling pressure in the Euro can be seen in the Euro this week as well. Based on previous price action I would normally consider the EUR/USD as having a second push and I would look for a third push to the downside. The reason I’m NOT considering it a third push scenario is due to how the previous two cycles we created. As we were waiting on the looming Fed Interest Rate decision last week it could have been more short term positioning than our typical cycle criteria. At the end of the day if we are going to get a third push to the downside then we will still need to see a stop run reversal of an upper manipulation point to actually trigger the entry. At this point I will have only one upper and one lower manipulation point I would consider a trade from.
Pound Closes The Week Range Bound
The GBP/USD has a strong history of failing to push lower once a fresh low is hit. Typically after a fresh low is hit we then see a slight retrace or stall in the price before eventually moving down further. At this point I remained mixed based on market cycle. To start the week we have one upper and one lower manipulation point from which I would consider a trade. To start the week I think the 1.5000 level is really a key point or line in the sand. As long as we remain below that point I will definitely favor a day trade short.
Forex News For December 21st 2015
To start the week we have no scheduled data that I would worry about. Overall the major data we need to worry about starts Tuesday.