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EUR/USD, GBP/USD Analysis January 16, 2013

January 16
00:23 2013

We finally have some clarity on the EUR/USD today with a first push to the downside. It also has 3 intra-day pushes making it even better to see what the smart money is doing. Its finding support at the breakout level from Monday at 1.3281 so there may be a deeper pullback in order. As I have said in previous commentaries, nothing has really changed in Europe but the USD has been losing ground due to the political wrangling going on in the US. Having said that there has also been some Euro strength that is really unexplainable other than some European bond auctions that have gone well along with Super Mario putting fuel on the fire. Then yesterday good old J C Junker says the Euro exchange rate is dangerously high. To quote an article title from Zero Hedge, “Or Europe Wants Its Cake And To Eat It Too”. It seems like there is a lot of that going around the world these days, not just Europe. 🙂

Today I will have a bias for the second push to the downside on the EUR/USD and the levels I will be looking to short from is the high produced during the US session at  1.3317 and if that does not hold the next level will be Mondays lows of 1.3335 and lastly the highs during the London/US overlap at 1.3555.

1 hour chart of the EUR/USD on Jan. 16, 2012

The GBP/USD having gone into a chop of 68 pips yesterday does cloud things up a little but I am still expecting the third push today. I expect this was more due to the EUR/GBP rolling over with the EU so eventually the GBP should follow. There is the chance it could chop again as the EG makes its second push to the downside so keep that in mind. The best place for a safe short will obviously be the proven resistance at 1.6093 or the 1.6100 psych level considering the EUR/GBP. Be careful trading the GBP/USD today if you take an entry below there.

1 hour chart of the GBP/USd on Jan. 16, 2013

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Forex News Today

Europe news is light today with only their CPI figures expected to be slightly higher in the Core data while the main CPI expected to be flat at 2.2%. Considering the inflation data yesterday being lower than expected the chance is this will be too. Possibly bringing in thoughts of deflation in the future. Its a long shot I think but it will depend on how big the miss is and if the  main data can surprise to the downside also.

The US has some good ones later in the day starting with its CPI data also. The monthly data is expected to rise slightly while yearly figures remain stable below 2%. Again I think the risk here is a miss to the downside. with the situation worsening in the US as well, consumers spending less, the chance that retailers lowering prices is there. I have my doubts it will miss big this month but even a slight drop may be a warning of whats to come. Next is TIC Long Term Purchases where we see just how much foreigners are investing in the US. Its expected to increase substantially to 14 billion plus so if it misses to the downside there probably wont be much reaction however if it does surprise upwards it should create some USD strength in the short term. Next is US Industrial Production expected to slip to 0.3%. If this is the case it will show the weakness in the economy and might bring in thoughts of more QE but I have my doubts. The FED is already all in so I think it would take more than that to provoke them to actually start expending the balance sheet which they havent done yet but wont surprise me when they do. Lastly late in the day is the release of the Beige Book. If the report is negative we could see some USD weakness but I somewhat expect them to be painting things as rosy as possible until the data proves them wrong. 🙂

Happy trading


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