COT Report Showing Further Euro And Pound Selling – October 13th 2015 Fx Analysis
Looking at the latest COT (commitment of traders) data we see continued selling pressure in both the Euro and the Pound. It is important to remember that COT data is showing buying or selling in a single currency and as a result should if the USD was extremely weak as well you could see the EUR/USD and GBP/USD rise despite further selling. This stresses the importance of not blindly following COT data. Entry is still needs to come from a valid stop run entry setup.
Another point to mention is the USD/JPY. COT data is starting to show some potential buying pressure in the Yen which could bring the USD/JPY to the downside and finally show a break of the extremely tight range we have held for the last month. If you didn’t read last weeks October 8th FX Market Commentary then I would recommend clicking that link and checking it out for further information on what the USD/JPY range break could mean for US equities. We are nearing the end of the price compression pattern and a break looks to be very close. I would be very surprised if it didn’t occur this week.
Euro Testing Daily 200 EMA
On the daily chart the 200 EMA is a very strong floating support/resistance level as so many traders use it. Over the last two trading days we have seen the EUR/USD test this point and get rejected slightly. To this point the market has failed to show any aggressive rejection away from that level so I think directional bias to start the week is still undecided. As I mentioned in the opening paragraph the COT data does continue to show some weakness but nothing overwhelming. We do have some nice quality levels to trade from to start the week so we will let any valid stop run from one of the manipulation points make the decision for us. Remember, this is the first full volume trading day of the week so we will continue to get further clarity as the week progresses.
GBP/USD Testing Key Resistance
The Pound is testing key resistance and at this point continues to hold it. Looking at the COT data the asset class is still holding one of the largest net short positions we have seen in the Pound with the exception of late 2011. I do feel like continued downside is the higher probability but to be honest I think market direction is at a bit of a tipping point. If we see the equity market rally and push towards new highs then I suspect further downside in the Euro and Pound will be more difficult. On the other hand should the USD/JPY break lower along with equities then we are likely to see further downside. To start the trading week (Monday was a holiday) I will treat the Pound the same as the Euro and take any valid setup from any of the listed manipulation points.
Forex News For October 13th 2015
UK CPI Y/Y 4:30 AM Eastern: The last 3 times we have seen CPI deviate by .1% +/- we have seen a strong spike followed by a very nice continuation in the direction of the initial move after a small retrace. If history is any indication of future price action, then I would not recommend trading against the spike on this specific piece of data.
German ZEW 5:00 AM Eastern: This is one piece of news today that I have mention in the past but it has lost focus in a big way. I would not mind carrying a trade into this news as it has not been able of spiking the price more than 15 pips on any release over the last 6 months.
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