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Equities Slide as USD Gains October 23, 2014

October 23
01:55 2014

Stocks Give Back Half of Tuesday Gains, USD Strengthens

Its not like equities took that big of a hit yesterday and pullbacks are to be expected in any efficient market moves. What does strike me as a  little ominous was the test of the 50 EMA on the daily chart of the S&P 500 and subsequent rejection. Of which also happened to be the 61.8 fib level of the move from the recent highs to lows. Yes this could just be the self fulfilling side of fib levels but I have to say that if they cant push and hold above the 50 EMA then the ensuing push down could be dramatic and follow the predictions of one of my favorite gloom and doomers Graham Summers. Keep in mind I am not so much gloom and doom but he has made several points over the years that I do totally agree with. I will also say that the S&P has respected that 50 EMA more often than not, that is for sure. Below is the chart.

S&P 500 daily chart

EUR/USD Analysis Oct. 23, 2014

The EUR/USD has two clean pushes to the downside so I will be bias for the short again today. After a look at the daily chart there is a couple levels that could hold it up around 1.2600 but if they do break below that then we could see a 150+ pip move to test the overall daily lows at 1.2500. The best level for the short is around 1.2680 but the 1.2666 is also valid and would be nice to see it correspond with the Asian highs. Otherwise if they really don’t have the desire to test the overall lows then they will pull it back deeper around the 1.2704 level before a move to make the third push today or tomorrow.

EUR/USD second push

GBP/USD First Long Term push

The GBP/USD managed to make a first long term push considering the run was 115 pips and moving beyond the lows from what now was a clear false push to the upside Monday. I will be bias for the short and as long as the USD strength holds up we will get the second push today. The best level to see them run to before the push down is up at 1.6076 right now but if they do manage to push down to test the lows this morning then the Asian highs will be valid as well. I want to see at least 25-30 pips in the Asian range considering what we are seeing for the ADR these days. Otherwise I will be slightly open for a long from a stop run to 1.6014 but prefer to be short waiting for the break down.

GBP/USD First push down

EUR/JPY Makes Second Push with EU

I cant really say that the second push has finished on the EUR/JPY just yet because it is well shy of the ADR we have right now. I will expect that to finish out during the Asian session today before a pullback to short for the third push down during the London session today. The best level will be the Asian highs if they can manage to make the conviction run down during the Asian session this morning. Otherwise if the run down is bigger than 20 pips below yesterdays lows then yesterdays low is valid for an entry as well. If by chance they dont make the run down this morning then I will look at Tuesdays lows or the 135.85 to take the short. Having said that the best scenario involves a break down during Asia.

EUR/JPY 1hr chart

Forex News Today

The calendar is busier today starting with French, German and EZ Manufacturing and Services PMI data. With expectations for small drops on all anything bigger will be Euro negative. While there is the slight chance that they improve I have my doubts any that are below 50 will pop above and create Euro strength but it will be something to watch out for. More so the German Manufacturing figures. With only a slight drop below 50 on the last print it has the best chance and is the highest impact event for the Euro today.

The UK has Retail Sales data all expected to drop as well. It seems the help to buy housing scheme is losing steam if they cant keep Retail Sales above the zero mark. If the monthly figures do drop below zero and disappoint then we should see GBP weakness as well and we will get the next push.

The US only has Thursday Unemployment Claims and barring a big miss they wont do much with it. I expect that they would need to see a figure above 300K in order to cause any USD weakness. If its better than the 282K expected then it will agree with our push scenarios today and we will get them finished out during the NY session.

Happy Trading



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