Daily Analysis of EUR/USD, GBP/USD June 20, 2013
Bernanke Disappoints!! I almost laughed this morning when I woke up and looked at the charts. Of course I start scouring my news sources to see just what big Ben had to say that freaked out the big boys. Come to find out it wasn’t the taper issue but what I mentioned in last Fridays Analysis as I scrutinized the “mouthpiece Hilsenraths” reasoning why there was the talk of the tapering. The bold letters is my take on the whole mess.
1) Money markets are out of whack for
technical (manipulation) reasons. Really ya think? 2) The market is pricing in a stronger economy, which it in turn expects to prompt Fed rate increases. Stronger Economy? What data supports that? 3) Investors are starting to doubt the Fed’s commitment (ability)to keep short-term rates down
Many market participants say it is the latter.
Well Bernanke finally admitted it was the latter. Not in so many words of course but when he has to admit he and the gang are a bit baffled by the rise in interest rates when they are pumping 85 billion a month it shows that the control they thought they had was just an illusion. They are not in control at all. However I have to admit it did look good for awhile. The problem with living in a fantasy is while its all great while it lasts we all have to face reality sometime. The only thing is will the reality check be a slight tap on the shoulder or a shocking kick to the groin? Im kind of thinking the latter here too and this is definitely one of those times I surely hope and pray I am wrong.
The charts. Oh the charts, where do I start? In a normal situation I would be thinking a pullback is in order to retrace at least some of this inefficient move but in this case I am not so sure. Its been a long time since I saw such a sharp turn in the hourly 200 EMA and it seems to be holding along with the daily low around 1.3300. This will be the first place I look for the short but I will be very cautious. The next level is 1.3321 which I see as a bit higher probability since even though this is likely to continue they still should want to push out some of those shorts before they push it down again.
With this 150 pip move down there is the slight possibility for the long today also but I will want to see the stop run to the lows to take it while watching the hourly close of course.
The GBP/USD treated me rather well yesterday. I intended to take the day off and did take care of some of the hunny do list but when its raining cats and dogs every hour or so, watching the charts out of habit comes to mind. I’m glad I did as I took two trades for a total of 97 pips between them. The first was during the London session with the manipulation into the manipulation box and 15min 200EMA. It was just too pretty to pass up when it gave the pullback. Since I was not going to watch it and being Fed day I set the take profit just above the hourly 200EMA and came back a few hours later to the 45 pip profit. Later during the US session I have to admit I let aggressive Chad out of the box a bit and when I saw the nice NY reversal candle at 8:30 I waited around to see if they would give the pin and sure enough 4 candles later they did. I have to admit is was risky with the Fed meeting coming up later in the day so after it moved off I tightened up the stop to just above the highs and went to bed. All in all a nice day even though I missed the big move.
Today we are looking at a probable 2nd push trade but it has moved 300 pips from the highs so that along with the very inefficient move down makes me cautious for the pullback first. The good thing is we do have the 1.5500 daily close below and about 100 pips to go until we see daily support. What I will be watching during the live London session today is how price acted during the Asian session and if we get the test of the lows and then the stop run to the high of the Asian session I will be willing to short there. The only reason for the 5520 level being marked is the 20 since the next best level is 15564 and I have my doubts they will push it that far, however it is possible. The same goes here with the possibility for the long but it will need to be very pretty for an entry and I wont be holding it for more than a pullback for 40-50 pips if I do enter.
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Forex News Today
The forex calendar is a bit busy today starting with French, German and EZ Manufacturing PMI figures all expecting a modest rise. The kicker will be if the German and EZ figures can pop above 50 showing some expansion and with the better than expected news from the EZ of late it is surely possible. That would probably give the deeper pullback on the EU while the GU gets a hammering due to the EG. Otherwise a miss to the downside would have the opposite effect. The GU rise and get a pullback while the EU and EG gets hammered. There is also a Spanish 10yr bond auction and with rates going up everywhere this could go bad which will be nasty for the Euro.
Not long after that the UK has their Retail Sales figures so that could be interesting. Expectations are for a small rise but without a large miss in either direction I doubt there will be much reaction.
The US has Thursday Unemployment Claims, New Home Sales and the Philly fed data. These are all expected rather close to the previous figures and barring a big surprise we probably wont see much reaction. On top of that considering the market still digesting the news from Ben so its going to take some big deviations in US data to create any sustained move.
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