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Daily Forex EUR/USD, GBP/USD Commentary August 29, 2012

August 29
00:10 2012

At this point in time with the combination of the summer slow down and the financial crisis even the smart money is trading more off the news than following their manipulation plan. Its always easier to Monday morning quarterback such things since we arent privy to alot of the information the big boys have so Im not going to do that. I will say that with the Jackson Hole meeting along with the ECB getting together next week there is a lot of potential for a few more choppy days ahead as the markets look for anything hinting at more QE from the Fed next month or the ECB starting up any bond buying program. With the rather awesome bond sale from Spain yesterday I would have to say they are thinking Draghi is going to have first dibs on dropping more hopium on the markets. I still think there is going to be a big disappointment but as I have said before nothing really surprises me with the markets these days and more so the lengths these guys will go to trying to keep the status quot.

Considering just the price action on the EUR/USD yesterday I am thinking we have to look at it as back in potential chop and play the more significant support or resistance levels until we get something clear on the easing or bond purchase situations. Without that I highly doubt there will be a break of the highs from last Thursday as nobody wants to be the tall blade of grass that gets cut first. Its possible that we see a stop run above the highs yesterday that coincide with Mondays highs. however if we do get anything hinting on action from the Fed or ECB it will be off to the races heading north. The best place for a long today will be at the support found at Mondays highs that held after the breakout yesterday. I will consider a short on a stop run to the 1.2575 level but would prefer last weeks highs of 1.2588.

The GBP/USD has seen a rather clear first push to the upside at this point. As I was mentioning in our live forex training room yesterday is was possible that we had the 3 pushes down but they were well short of the 90 pips we expect from them. having said that there was something I neglected to take into consideration. You can see here that I added our Average Daily Range indicator. Notice how over the last 14 days it has shrunk well below 90 pips. Since the 90 pip pushes are based on the average daily range of the pair we are trading I really should have known the possibility for the reversal was there. My bad guys. The thing is I have been so used to seeing the ADR 90 pips or more i didnt even look.

Today the higher probability is for the next push to the upside but i wont discount the short either. If the Euro is going to fall from these highs the likelihood of it dragging the GBP with it are good and with clear manipulation we can make nice pips trading against the first push. I would prefer a stop run to the highs for a short or manipulation at the hourly 200ema at the 1.5780 level for a long.

Forex News Today

Being the end of the month its been slow on news. Today is no different with only a couple that are noteworthy. We have German CPI data trickling all day which could be a game changer for the ECB. With the Germans all hyped up about inflation keeping them at the neck of the ECB if CPI data shows that inflation is subdued (which I doubt) then they have the potential to lighten up on Draghi. However if inflation is higher it will have the opposite effect. It is expected to drop so the way I see it is it has a bigger chance for the surprise to the upside.

Next is the US GDP figures expected to rise to 1.7%. Even though this is still enemic growth I would find it hard to believe that the Fed would see need for more QE if it does come out as expected. If we see a disappointment then the hopium of more QE will continue. later in the day is Pending Home Sales expected to get into positive territory. With the dismal previous release there is a chance for disappointment here and will do more for QE hopes also.

Happy Trading


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