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EUR/USD & GBP/USD Rally Hard On Weak NFP – October 5th 2015

October 05
04:12 2015

Friday we had a major rally in the EUR/USD, GBP/USD, and US Equities. For the last few years we have been seeing a phenomenon in US Equities where good news is bad and bad news is good. The reason for this is when bad news comes out there is less of a chance the Fed will hike rates which is why you see equities rally. On the flip side good news has caused a sell off because the potential for a rate hike becomes higher. Friday’s NFP could have a dramatic shift in the next direction of the equity market so I want to cover a few points that are critical to look out for.

I have been looking for one thing to occur in US equities for the last year. What I’m looking for is the day when bad news does not rally the market. Why is that so important. The reason that holds so much importance is because that will be the day when the market finally says loud and clear that they don’t believe anything the Fed can do will help. As of right now the reason the market rallies is because smart money is betting that the bad news will cause the Fed to act and that their actions will be good for the market overall. When smart money no longer buys good news it is a signal that they don’t believe the market can be stabilized and then the big sell-off will be very likely to occur. At this point we have not seen this happen….but it still could which is why the next point is critical.

At this point with equities rallying into the previous highs, this level becomes a decision point once again. If we go into the previous selling area and then work above it I would not be surprised to see continued upside until the next major event occurs. The market is fluid and if you do not adjust to what the market is doing then you will get hammered. At this point, anyone with a short bias should be looking at the market with open eyes and let the price action over the next week set their bias not a preconceived notion.


S&P 500 Chart - October 4th 2015

EUR/USD Rallies On Weak NFP

The EUR/USD rallied into major resistance on Friday and rejected more than 50% of the initial move to the upside. Looking at last weeks latest COT data the information for the Euro is very unclear. I think this is really illustrated by the very tight range we have had over the last month on the EUR/USD. That is why to start the week I will keep an open directional bias and continue to take any valid stop run off of any of the pre-selected manipulation points.

EUR/USD Chart - October 5th 2015

Pound Considerably Weaker than Euro On NFP Release

While both pairs spiked to the upside, the spike on the GBP/USD was just over half the size if the spike on the EUR/USD. The Pound does however have a cleaner break to the upside in regards to market cycle. It is important to note that I do not trade a cycle that is started by news. Had Friday’s move NOT been a news based move I would be looking for the second push to the upside today. Because it was news based I will treat it the same way I’m treating the Euro and continue to take any valid trade setup for any of the pre-selected manipulation points.

Friday the GBP/USD did offer a nice stop run short from our first upper manipulation point listed in Friday’s forex market analysis. Ultimately the trade got within about 2 pips of the take profit and was closed manually before the end of the week as per our trade management rules.

GBP/USD Chart - October 5th 2015

Forex News For October 5th 2015

UK Services PMI 4:30 AM Eastern: Service PMI is a big market move. This month 56.3 is the expected number. This news has a very strong history of not following through after the initial spike. 4 months back we had a huge deviation which created a 90 pip move in the first 3 minutes after the release. The price was quickly reversed from there and actually went back to test the pre-release price a few hours later.

US ISM Non-Manufacturing 10:00 AM Eastern: US ISM does not typically create a huge spike but it is capable of a 15+ pip spike with the right size deviation. Like UK PMI it has a strong history of reversing the initial spike. This month 58 is the expected number.


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