EUR/USD, GBP/USD Daily Analysis October 14, 2013
Again we start off the week with no deal from the US government as we get closer to the X date of real default and some scrambling to try to get a deal done. However the way it looks to me is they are not even close. Of course there is still the chance of an 11th hour deal just to keep the bid D word from actually happening. It seems in reality that this will be the only option since neither side is willing to back down but I also doubt that either side really wants to be looked at in the history books as the ones who let the US government default. They will want to leave that for the next government for sure. Four days left until we see exactly what they do and the clock is ticking.
Looking at the chart of the Euro we do have a first push up along with the mornings gap pretty much already closed so I will have a small bias for the next push up. However with nothing really warranting a break in either direction I will be cautious and still be open for the short. Some would say that the USD should weaken and I agree to a degree but there is also no real reason why the Euro should be strong so the probability of staying in this range for an extended time is higher. At least until we get the real answer on whether the US is going to default or not.
The best levels I see for the potential long is around 1.3537 but if they really want stops below the NY session lows Friday they will push below 1.3529 or even test Fridays lows. If we get the push up during the Asian session then they may stop it at Thursdays highs of 1.3545 which is also the Asia lows but the wider the Asian range the higher the probability is. The only short I will consider is the stop run to Fridays highs at 1.3580 which is the highest probability level for the short as they hold the range. I should also say that with the Average Daily Range getting tight again, holding for a longer run carries more risk of them coming back so I wont be holding for more than 40-50 pips on this pair.
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The GBP/USD is still showing that its the weaker pair due to the EUR/GBP however there was some conviction to the upside Friday along with holding the lows with a triple bottom and a first push up even though its a little shy. On top of that there seems to be no interest in closing the gap during the Asian session this morning so as long as that holds and we see the conviction holding during the London session then the best level will be the close Friday as London closes the gap picking up any orders left behind there before they move it upward. There is a smaller chance they hold the Asian lows before moving off but in order to take the higher risk entry there I would prefer to see them test the highs first. There is the small chance for the short and a failed first push but I will need to see the hourly stop run along with trapping patterns and be watching the hourly close if I do get short.
Forex News Today
The calendar is rather bare today with just Euro Zone Industrial Production. Of which I doubt will have much impact. The US banks are closed for Columbus day so the probability of the move happening during London goes up. It is also the first of two days that the Euro group are meeting so be on the look out for any tape bombs from that. I still think they will be focused on what is happening in the US and what they will do in the case of default but they obviously have other big issues to discuss.
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