Equities Short Squeeze On Evans Comments, FOMC Minutes Jan. 9, 2015
Fed Member Evans Admits What We Knew All Along, The Fed Can NOT Raise Rates
At this point what was seemingly a pump from the Plunge Protection Team on Wednesday was backed by the Fed meeting minutes but more so by the comments from the Fed member Evans that the Fed can not and will not be raising rates any time in the near future. One could say its a sure tell when they say “raising rates would be a catastrophe”. As we have noted several times, there is no mathematical way that even a one point rise in interest rates wouldnt seriously hurt the US governments ability to just service its debt much less pay any principal. Thats not to say that the end is near using Japan as an example so we should be expecting equities to keep chugging to the upside for now any way. Having said that there are several other potential catalysts out there that have potential but I expect they will be doing more of the same”save the status quo at all costs” so again we should see higher highs in stocks anyway. Take a look at the chart below to see how every bounce was set up by the Fed and take note that the dips are getting shallower and shallower when they see the need for verbal intervention once again. Good job guys 😉
EUR/USD Makes Second Push
The push down on the EUR/USD yesterday is cleaner looked at as a second push even though the possibility of there being three is there if we count the gap drop during Asia Wednesday as finishing the first push. However since that is typically not how they operate and the daily close below the yearly lows of 2006, the probability they will make the next push down is much higher going along with the third push scenario. Right now the best level for the short is at 1.1817 but with the Fed comments and risk appetite it has caused the chance they run to 1.1846 or just above is pretty good as well. I will consider a long from yesterdays lows if I miss the short but considering the added risk of trading against a second push there will need to be enough data there to convince me this was actually the third from Tuesdays highs.
GBP/USD Conviction For Extended Push Fails
I have to admit I feel a bit tricked on the trade I took during the live London session yesterday. The conviction was clean and set up nice for the bacside entry but once the Fed starts stepping in it was all over. I did hold it through the UK rate announcement thinking the chance for something disappointing was higher but once it couldnt hold the shift down there was no reason to hold it through the NY open so I closed it with a seven pip hit and went to bed.
At this point there is nothing clear on direction again so I will be waiting for a test of yesterdays highs at 1.5115 for the short or 1.5034 for the long. The daily low at 1.5053 is valid for the long but a weaker level requiring a great entry.
EUR/JPY Holds Wednesday Range
The EUR/JPY could go either way from here. With it testing and holding both sides of the Wednesday range the levels havent changed for the best potential entries until we see some conviction outside the range. Once that happens I will look for levels to take backside entries from. Having said that there is a more aggressive potential entry from the current Asian highs during the London session. Its riskier but with the highs during NY yesterday backing the current Asian highs a stop run for the short there can potentially catch a risk aversion move off NFP later today. Having said that I will say again, it is much riskier and describe why in the news section.
Forex News Today
The calendar only has two events before NFP today that have any potential of creating any moves. Starting with German Industrial production early on expected to slightly improve, however with the big disappointment on Factory Orders yesterday this has more potential to disappoint. Even if it does I expect a somewhat muted move due to NFP later. The same goes for the UK Manufacturing Production. Its expected to rise above the zero mark of last print and a higher chance for disappointment as well but would need to be big to get them pushing the GU. Any larger move will likely be on the EUR/GBP.
There are a couple most likely scenarios with NFP today, the third, not so much. Since the coming layoffs being announced havent hit yet, the chance it come out close to expectations is higher in my mind but surely may not be the case. If it does disappoint and come out closer to or below 200k then we will see some USD weakness along with a stock bump up as they think the Fed will be potentially think QE again. Otherwise any jump close to the 300K mark (highly unlikely) would have the opposite effect but smaller considering the Evans comments on any rate increase.
Have a great weekend
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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