EUR/USD, GBP/USD Daily Analysis October 25th 2013
The EUR/USD has not shown much conviction to extending the pushes to the upside as of today. There are several hourly closes above Wednesdays high but the daily level just above at 1.3828 has seen harsh rejection at any attempt to even reach much less breach the level. This points more toward the potential for the move down today considering the end of week flows and how close we are to the end of the month. I have my doubts there will be much conviction in a down move but at test of Wednesdays lows is entirely possible if not probable today. Of course they might be simply absorbing selling at this point also but with a strong Euro most likely hurting European countries as their exports become more expensive the chance that there are big boys that have been told to absorb buying to keep the EU from breaking upward is the higher probability the way I see this.
I will be keeping an open mind on direction considering price action but the fundamental picture points more toward a move to the downside even if they think the Fed is going to increase the QEternity next month. At this point my thoughts are that instead of the Fed increasing its purchases we will see Super Mario take his turn in trying to weaken the Euro and either lower interest rates like they discussed in their last meeting or even go all in and start up another LTRO that possibly goes for four years since the last three year program Trichet ran didn’t really do much than save the big boys temporarily.
Even though the majority of the printed money coming out of the Fed is going to European banks on US soil (then funneled back to save European bank main branches) the Fed and the USD takes the hit even though the money is still going to Europe. The fact is the Fed and ECB are in bed together along with other central banks and they will work together to maintain the status quo. Therefore common sense tells me that in short its the ECBs turn and they will step up to the plate and give it their best shot. The wild card here is the possibility they both jump head first throw a ton of Euros and USD into the market together to try and limit any rise in the EUR/USD while still once again saving the big banks at the expense of the people.
The best levels I see for the short today are 1.3813 or possibly the Asian high if they accumulate to the downside like they are and either play the breakout traders to both sides of the Asian range (tight range) or 1.3803 where the current days high is. If they do test the 1.3813 level during Asia this morning then I will want to see price leave the Asian box closer to the lows and then run stops to the highs with the clear manipulation for the short. Of the three levels that are potential for a long the best is Wednesdays low since the other two are in the middle of this choppy range.
The GBP/USD whipped around in a bigger range yesterday with no clear direction either showing they are more concerned with the USD at this point and will probably stay that way for the near term. This pair will also be ran by Friday flows most likely and the safest trades will be from yesterdays highs or lows. Again I will prefer the short from the highs at 1.6212 but will also be open for the long from 1.6140. Otherwise I don’t expect a break unless of course the UK GDP figures miss big and give them a reason to push.
Forex News Today
The economic releases today start off with German IFO Business Climate figures expected to rise again and has a good chance of doing it. Most of the previous releases have been as or better than expected and in all reality Germany is doing well s I don’t expect any big surprise here. I will say that the strong Euro may be having an effect on their exports but I am thinking its a little early and if not then they wont be putting pressure on the ECB and big boys to get that down just yet. Once Germany starts seeing the effect of the strong Euro we are just about guaranteed another LTRO or interest rate drop.
The UK has their GDP figures mentioned above and with the supposed good news coming from their housing data it should not disappoint. I also doubt it will surprise to the upside enough to create a big move but it is certainly possible. If it does disappoint then that does expose the housing improvement as the farce it is and we will probably see GBP weakness next week as long as the USD gets out of the spotlight somewhat.
The US has Durable goods data expected to get into positive numbers but just getting above the big zero will never signal that the housing market is in any sort of recovery so barring a big surprise I don’t expect much movement from it.
Have a great weekend
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