Draghi Dovish Comments Weaken Euro Nov. 24, 2014
Draghi Weakens Euro, China Rate Cut Sends Equities To New All Time Highs
Mario Draghi used the only tool he has left in the form of verbal intervention last week. Since he must have Germany on board for any QE purchases of sovereign debt he will surely keep up with the talk in order to weaken the Euro when he can. Notice he all but mentioned the big D word. Im sure he will be saving that for the next time the Euro appreciates to levels hes not comfortable with. Any talk of deflation will send the Euro tumbling since that is what they fear most right now. However with a glaring example of how deflation takes hold in Japan one would think that they would get a clue that doing the same thing the Japanese are doing is NOT the answer. At this point I have my doubts.
On the other hand China has stepped up to help push US equities to all time highs as well. Isn’t it nice of them to help the rich get richer as well? Needless to say we will be seeing more of this in the future. I cant remember who it was because the call for the Dow Jones getting to 65,000, what many called an absurd number at the time actually seems more realistic now that its official, all central banks are just going to take turns easing monetary policy, raising stock prices while the majority of populations around the world get poorer. Like I have said many times before this will likely continue for quite some time and it WILL work. That is, until it doesn’t, or more pointedly it will work until the people get fed up.
EUR/USD 200+ Pip Drop
With the EUR/USD run to the downside along with the gap open to test the overall lows there is a good chance they pull it back before considering a push to break the monthly lows. I will be waiting to see if they hold the Friday close during Asia this morning before I look for any short on this pair today. The best level is up at 1.2395 if they do hold it down this morning while a break above will most likely test up to 1.2426. Otherwise I will also be open for the long at the 1.2363 level to catch the pullback but wont be holding for a longer push since the probability of closing the inefficient move is low considering the continuation after the London close last Friday.
GBP/USD Dont Make Third Push
With the GBP/USD feeling the USD strength after Super Mario had his say last week we have no clear direction to start the week today. At this point the better entry looks to be the long considering proximity to current price along with the small chance they run the third push today. I have my doubts they will but testing the highs from the gap low would be a nice trade. What they do here at the Friday close will give us more information. Otherwise there is potential for the USD strength holding today but I will be cautious needing a nice trap either up at 1.5677 or potentially at the Asian highs if they hold price below Fridays close and leave the Asian box closer to the lows without giving the entry long.
EUR/JPY Runs With Weak Euro
The EUR/JPY did set up nice this morning for a long from Fridays lows. Anybody that caught it should have the stop at break even by now just waiting for it to finish out. At this point its safer to be open on direction but the probability for a pullback after Fridays move is pretty high. As long as they push above the 146.00 psych level they will probably test up to 146.41 before it finds much resistance. It will need help from the USD/JPY to break any higher than that. I will be open for the short at 146.41 or 146.68 during the London session as well, however in order for it to get rejected they will be pushing the other Euro pairs with it.
Forex News Today
The calendar is slow today with only German IFO Business Climate during the London session. Expectations are for a small drop so the chance for a bigger miss to the downside is better than a surprise upward. If it does manage a better print then the Euro should strengthen as Draghis hopes for getting Germany on board fade but if it disappoints the Euro weakness should create a sustained move downward.
The US does have Services PMI data early in the NY session but baring a very large miss we wont see much movement besides a potential fake out. With all eyes on the ECB now they will be looking for them to make a move to back Draghi – or not.
MY APOLOGIES FOR THE BROKEN VIDEO OF INSIDE JOB IN THE COMMENTARY. I DIDNT THINK I WAS COPY WRITE INFRINGING WITH AN ITALIAN VERSION ALREADY ON YOUTUBE. HOWEVER YOU CAN STILL WATCH IT AT THIS LINK. STILL A MUST SEE!
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