Daily FX EUR/USD, GBP/USD Market Analysis November 26, 2012
As I look at the EUR/USD this Monday morning it does look to be a clearer yet still not the greatest set of 3 pushes as you can see marked on the chart below. I definitely like the accumulation periods to be better than we have seen over the last 3 days. Having said that, instead of getting the stop run to the Thursday highs we got the hourly close above that level showing conviction to the upside rather than the intent for the reversal I expected.
This is important to note when the bias is not strong. These hourly closes above/below significant levels can be crucial to changing ones bias for the day when initially I was slightly bias for the reversal. When the market shows that sort of conviction it is telling us we are wrong. We still have to wait for a clear entry but adding a stronger bias in the other direction like that should give you more confidence in direction even if its against your initial bias. Check out this live trade from Nov. 1 for more understanding of this.
Today I will be slightly bias for the reversal again but since the accumulation during these 3 pushes is not clear it is possible that we could see a next push to the upside also. The next daily level of significance is the 1.3020 daily high from October 31. If we do get the break of that then the chances we see the next set of daily highs at 1.3080 are good. Depending on the price action during the Asian session the first place to be looking for the short will be the Asian session highs but I will prefer a stop run to Fridays highs to me more confident in the reversal.
If they do plan to take it up from here I will expect to see them hold the 15 minute support at 1.2954 during Asia and then do a stop run below that level for the London session preferring to see the trap into the manipulation box.
The GBP/USD went on a rampage Friday with a nice 120 pip push to the upside. I do think the risk appetite was more so caused by the news that the ECB and IMF are coming to grips that they will eventually need to take the loss on at least some Greek holdings in order for Greece to have any chance of getting its debt to a sustainable level. I wonder if they read my commentary Friday 😉
Friday they came within 8 pips of testing the daily 200EMA so this does add some credibility to the reversal today.(correction: thats the daily 800EMA not the 200. My Bad) This would be one of the sloppiest 3 pushes I have seen in awhile. Since it took 7 days from the lows and is only clear on the 4 hour chart makes it rather sloppy. However we play the hand we are dealt and this is the clearest view. Therefore we should see some sort of reversal even if they intend to keep pushing upward. They will want to shake out some of the weak long positions at the very least.
Since we have a set of hourly reversal legs at Fridays highs I would expect a test into them with a clear trapping formation to take the short here. The Asian highs today may be all they push to but the closer we get to an hourly stop run at Fridays highs of 1.6049 the higher the probability for a nice 50+ pip profit on a short position. I should also point out that the move to the upside Friday was rather inefficient and there is a good chance to test the 4 hour 200EMA at 1.5979 even if they do intend to keep running it up.
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Forex News Today
In short there is nothing high impact scheduled for today other than the Euro group meetings on Greece. There is GfK German Consumer Climate expected to be the same as the last release so the meeting will most likely be what is watched the most for statements when they finish.
My opinion is that they will have some sort of agreement they will be eventually have to take the public sector hair cut on Greek debt. the numbers they are floating around is 2015 for the potential write off. I would also figure they will free up Greece from paying interest on the debt the Central banks are holding right now just to make the markets feel all warm and fuzzy for the time being. The thing is in order for the ECB and other central banks to take the hit there will have to be treaty changes. Most notably the one that governs the ECB. This will take years to get sorted out and it wouldn’t surprise me in the least to see it take much longer than 2015 if they deal with it in the same manner they have the crisis in general.
Having said that there have been statements made saying that they are unlikely to reach a decision on Greece today and that goes along with our potential for the reversal. however they have surprised us before. If I do manage to get in a short position I will be keeping a close eye on the tape bombs when the statements start rolling in.
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