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Daily Analysis of EUR/USD, GBP/USD for February 21, 2013

February 21
05:45 2013

There is nothing like the FOMC to come in and show us a clear false push up with the ensuing grand push down. Wasn’t that nice of them? I was pretty convinced they would have something USD negative to say since we are in the race to the bottom. However they did surprise not just me but the market in general considering the 160+ pip move to the downside. No worries we can deal with that. I did get a couple of emails from members who took the short against the first push at the Euro highs that booked 40+ pips respectively. I have to admit holding on to a trade against a first push going into the FOMC is risky to say the least so I hope they aren’t kicking them self for take the money and running. Good job guys. 

As for today I will be looking for the short mainly but it wouldn’t surprise me if some of our more aggressive members are long from the lows. there is a good chance they will try and close the inefficient move created during the FOMC but if you are long just keep in mind they could stop it at any of the daily low breakout levels. Of which is where I will be looking to short from today. The first being the 1.3305 level, the next at 1.3320 and lastly 1.3328. If it cant muster any movement up during the Asian session the small chance for a long is there with a clear stop run to the lows but I will be watching closely for the hourly close below and exit if I do enter a long position. 

1 hour chart of the EUR/USD on Feb 21, 2013

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My GBP/USD short trade turned out to be the trade of the year so far. I closed it for just over 140 pips after the BOE did their thing for almost 3 times my original take profit. It just wasn’t worth trying to hold for more with the FOMC coming up later in the day even though it gave another 150 pips. For me its much better to book the profits rather than take the chance of it coming back after running 140+ pips and knocking me out at 100. Which would have been the chance I was taking considering I expected more USD weakness from the FOMC. Still the best trade of the year so far so all is good.

Now with the 300 pip push down the potential for the reversal is there. There is a  bottoming formation starting with the pin bar to the lows yesterday but to be honest my thoughts are they will do a pullback before the next push to the downside. The reason is the push yesterday broke significant daily lows and closed below them showing us there was little concern for those levels holding. The next daily level to the downside is 1.5143. Yesterday the support came in at the daily low of 1.5232 and even though it has been trading below it for most of Asia it dont mean much since Asia is mostly used to accumulate orders.

Having said all that the levels I will be looking to short from are the 1.5232 but only if it makes a push down here during Asia or the beginning of London. The most likely level is the next daily low of 1.5266 or the break out level of 1.5282. Otherwise if I see the direct push down and get a stop run below yesterdays lows I will be considering the long.

1 hour chart of the GBP/USD on Feb. 21, 2013

Forex News Today

The European calendar starts off with Manufacturing and Services PMI figures from France, Germany and the Euro Zone as a whole. All are expected to be better than the last print and Germany is supposed to pop above the 50 expansion level. Why the heck not with the ZEW figures the other day blowing out expectations? The EZ figures are creeping up on the 50 level also so a surprise above that should be Euro positive. At least for awhile anyway. Who knows how long though.

Keep your eye out for the Spanish 10 year auction. With all signs pointing to the potential implosion soon this could be the trigger. If yields spike heavily the Euro will drop.

The UK only has Public Sector Net Borrowing that without a big miss will be over looked while the market still digests the BOE minutes yesterday

The US has CPI figures expected to drop slightly so barring a big miss this should be a non event. Next is weekly Unemployment Claims. A spike in the figures could create some USD weakness but with the way the FOMC minutes went it will have to be big to spark thoughts of more QE. Later the Existing Home Sales is released expected about the same as last month so without a big miss will probably be ignored. After that is Philadelphia Fed Manufacturing Index expected to rise above zero. A miss to the upside will be USD positive and a disappointment I think would need to be substantial to cause significant weakness.

Happy Trading


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