EUR/USD, GBP/USD Forex Market Analysis November 2, 2012
Looking at the post mortem of the price action on the EUR/USD yesterday. As I suspected the signs of the third push not coming to fruition but the probability was still for the long. There was a decent 50 pip move from the lows. however I was suspicious especially after we had the one hour candle close below the lows of Wednesday. At that point I needed clear trapping formations at the lows to take the long position and they just werent clear enough. I do know some members took that trade. Good job guys. I hope you took your pips and ran before it came back. Personally I am still holding a short from close to the highs at 1.2975. For me once we have that sing of conviction on the one hour chart my bias changes for the most part even though I was still open for the long position the clarity must be there or I just dont take the trade.
My reasoning behind the short starts with that conviction close on the one hour chart. We got a 3 intraday push to the highs that was very clear that ended in a pin bar. So there are 3 confluencing events. Then I looked back for any significant levels and there was a lower value (because it was broken) high from Tuesday. I did a pip count to assess my risk and it was 6 pips to the high. A 20 pip stop was far from that so I felt it was worth the risk. My take profit was set to 50 pips and it almost got hit while I slept. At this point I am going to give it a chance to break the lows and see if I can get a bigger move down. We will see.
As for what I expect today. The market seems confused and without a clear plan so at this point keeping an open mind is the best course. I do have a slightly bearish bias because we didnt get the third push we were expecting along with that conviction close on the hourly chart. Depending on what happens during the Asian session the first place I will be looking to potentially add to this short is at the hourly 200ema. Its sitting about 20 pips above current price at 1.2962. What I want to see is the market wait to test it with a clear trap move during London. If before that we do get another hourly close below the lows yesterday at 1.2923 I will consider adding at a clear trapping formation around the Asian highs or lows. Having said all that I will be looking for traps to the downside also and if I see more than one formation Im just closing this trade and wait for a clearer set up. Any potential long position I will consider will only be at yesterdays lows and I will have to be clear enough to close the short and reverse the position.
We have to consider that the GBP/USD has finished its 3 push cycle at this point. The consolidation between the pushes are not great but the pushes them selves are symmetrical and we have started a reversal. What will confirm it is if/when we see the hourly close below yesterdays lows of 1.6117. Until then we have to remain open to either direction as this is a third push chop scenario. If we do get the conviction close then short will be my preferred direction and will be looking at yesterdays lows as a potential trap point or the Asian highs. Other than those two levels there really isn’t good places for manipulation points other than a weaker level from the highs Wednesday at 1.6136. Any potential long entry will only be at the trap move to yesterdays lows which is only 10 pips away. My gut tells me it will break but that is no reason to trade it 🙂
Forex News Today
News releases are light until we get to the big daddy of them all. Good old NFP from the US. The only three of significance during the London session are Italian and Spanish PMI figures. We will only get decent movement if they deviate substantially but there is a chance for that. Otherwise there is UK Construction PMI data thats expected to drop. I have my doubts it will be used for more than manipulation even if is surprises to the downside. Mainly because with better than expected GDP figures earlier this will not be big enough to add to the Asset Purchase Facility.
The US of course has the big daddy release at 8:30am EST along with the Unemployment rate. What is expected is an increase of 123K jobs. with ADP Non Farm being better than expected it does have a chance to surprise but its small because the two actually rarely agree. What I will watch the most is the Unemployment figures unless there is a large deviation in NFP. The reason is the Unemployment rate is expected to increase. If it does then it will most likely be USD negative even if its as expected. If it dont increase then we should see the opposite.
The Pot Has Started To Boil in Greece
In the October 31 forex commentary I posted an article that talked about the ruling parties in Greece having a fall out and one of the three saying none of their members will vote for the Troika plan. the article went on to say that this small party on its own couldn’t scuttle the whole thing since they still had enough votes to pass it between the two left. As long as all those members voted for the plan. Well things have started to fall apart further as a few members of the larger Pasok party have quit their jobs in protest of the Troika plan. Now we have a total melt down and it don’t look good.
This is a quote from Kathimerini: “PASOK has plunged into turmoil as one MP and a prominent official quit the party following a fractious vote on the government’s privatization bill on Wednesday. The draft law paving the way for the sell-off of a number of utilities and ports passed narrowly and the failure of 17 PASOK MPs to support the legislation led to party leader Evangelos Venizelos, who failed to take part in the vote himself, calling an urgent meeting with his 33 lawmakers on Wednesday evening.”
Now lets have some icing on the cake just for s#!ts and giggles shall we? This was a statement from the Greek courts yesterday.
GREEK COURT SAYS PLANNED PENSION CUTS, RETIREMENT AGE INCREASE SOUGHT BY EU/IMF LENDERS MAY BE UNCONSTITUTIONAL
Now obviously thats not a full finding or ruling that the plan is unconstitutional but it does signal that Greece is pulling the “Financial Apocalypse” card trying to push things in their favor like thay did last year. Will it work this time like it did then? The odds are lower but still there. The question is. Can they hold out another 5 days until the US election? Mt thoughts are they are pulling this stunt before because they know after the vote in the US is done Greece will most likely be left in the dust.
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