EUR/USD Downward Cycle Broken – February 25th 2016
Downward EUR/USD Cycle Breaks
Yesterday I was looking for the second push to the downside in the EUR/USD. For a good chuck of the day it looked like we were going to get a complete second push but we never made it further than 70 pips. Near the beginning of the NY Session it looked like we were going to get a backside short off of yesterday’s lows as I mentioned in the previous FX daily analysis. We did have a valid stop run short off of this level but the entry was not valid due to the 10:00 news having the ability to create a 15+ pip spike. As a result we had to wait for the news to come out before a trade could be taken. This put us past the correct confirmation entry candle count and therefore kept us out of the trade which protected us from taking a loss. We continued to push up during the rest of our tradeable hours, but we never made it into our first upper manipulation point.
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Pound Can’t Stop Slide
I was looking at some longer term charts of the EUR/GBP today and historically we are at a huge level. Looking at the weekly chart the area around .7800 has produced some huge market turns that all lasted years. We are now testing the backside of that previous support and the market is breaking through with ease at this point. Two weeks back we rejected this level quite aggressively but the latest test is holding the break. This is an important indicator for the Pound as a break higher could signal new lows on the GBP/USD. The over sized move to the downside on the GBP/USD keeps us trading with an open directional bias for now. To start the day we have very limited manipulation points, one lower and one upper. As I mentioned in tonight’s daily market preview video, I will be looking for newly created levels throughout the day. I would keep in mind that with the wider range you want to be sure you are trading from larger manipulation points than normal. While quality is always far more important than quantity, in this market that is especially true for level selection.
Forex Market News February 25th 2016
UK Second Estimate GDP q/q 4:30 AM Eastern: The vast majority of the time you will not see a deviation from the expected number. When we do, you can expect around a 30 pip spike which is enough for me to not carry into this release. Tomorrow’s release is expected at .5
US Core Durable Goods m/m 8:30 AM Eastern: We have been seeing much larger responses from the GBP/USD with this news but we still have +15 pip spikes on both pairs which means I would not carry a trade into the release. As this is a fairly significant news event I would use serious caution trading against any deviation that is .6 +/- from the expected number of .1