EUR/USD Plunges On Draghi Press Conference Nov.7, 2014
Dragi Gains German Support on ABS Purchases.
As Super Mario explains that there was no mutiny at the ECB all he had to do to get support of the Germans on buying ABS was to change one word in the speech from “target’ to “expectation”. Since target implies a certian price or destination for the ECB balance sheet the word expectation leaves the potential for ECB balance sheet open rather than set. This was enough to get the support from Germany for the ECB to buy ABS. There will never be an outright QE from the ECB unless somehow they get the Germans to agree on changing the laws governing the ECB. Never going to happen. However what they can do through the purchase of ABS (Asset Backed Securities) is essentially buy all the crap, low quality, about to default items that all the banks have on their balance sheets. Then hold them at the ECB allowing the banks to buy all the sovereign crap debt as they unload all the other garbage to the ECB. Great plan huh? Im sure it has already been agreed that the banks are on board with the idea since they have been the ones keeping the sovereign debt spreads low over the last few years. And the circle jerk continues, for now anyway.
EUR/USD Second Push, Expecting third into daily support at 1.2268 or Lower
Members will probably be able to recall last week in the London Live Training sessions that I was talking about the break down on the EUR/USD. What I said was if they do want to break the monthly lows from October then they will likely be pushing to 1.2268 after a hesitation at the 1.2303 level. Some might think that I am a genius or maybe a lucky nut 😉 No it all boils down to levels that were previously respected on the daily chart. This is also why I have an exceptionally good track record of determining levels they will turn price on a daily basis. Its not 100% by a long shot but being able to identify these potential levels of price where they will either have to spend some money or work to break gives us a high probability area of where they will turn price.
Of course today I will be bias for the third intraday push. I would feel better if it were a long term outlook but its not. The fundamental picture agrees along with the daily close beyond 1.2403. With the Asian lows being 35 pips away from the 1.2403 level it has a good probability of where they will turn today. Otherwise if that dont hold a push to 1.2417 is probably in the cards. As long as the Asian range pushes out to 25 pips or more its a valid level but with an extended move I want a clear set up and good entry just in case they want to push some weak holders out before the move.
GBP/USD Drops 170+ Pips on Good Data?
Something is awry when the GBP/USD can drop so far on seemingly good data. maybe my news source was at the low end of the spectrum on expectations but even then it seems as though they were expecting a much better release on Industrial and Manufacturing production in the UK. The other possibility was bad Halifax House Price Index falling. It does make a little more sense since the potential of the Help to Buy bubble beginning to burst but I think there was more to that on order of a flight to the USD as Europe begins to crumble. This will be interesting to see.
Kudos to the members who caught the short on the GU and I hope many of you took my advice and held for profits just above the ADR for 80+ pips 😉
Today I will be cautiously looking at this as the second push as well. The reason is the large move having potential to be finished. However both pushes are long term and the move down was actually rather efficient yesterday. On top of that we have the daily close below the 1.5852 daily support from October 2013. All adding more probability to the next push down. The 1.5852 will be my preferred level to short but the Asian highs may hold being backed by the highs at the end of the NY session. They could push up to 1.5867 but I have my doubts considering the efficiency of the move down.
EUR/JPY Takes Stops to Highs Before 210 pip Drop
With this move mainly being driven by the Euro I am skeptical of it continuing if the USD/JPY keeps heading upward. Its surely possible but if the UJ remains strong this pair will be held up with both the Euro and Yen being weak. In a normal situation I would be bias for the short on a first push but with such large move it could easily be the three in one move as well. Therefore I will remain open on direction for this pair and not really be expecting a large move if I do trade it. The best level I see for the short this morning is 142.87 but as usual will need to see UJ agreement to take. Otherwise I will be open for the long at 142.33 under the same circumstance while being aware that if they want to hit stops to the lows they will run down past 142.16.
Forex News Today
The calendar is rather quiet until the NFP release during the NY session but we do have a BOE Gov. Carney speech during London that could easily get the GBP riled up. At this point I wont speculate on what he might say but be careful if you are in a trade and dont have the stop to break even yet. He may not be happy with the abrupt fall of the GBP and say some remarks making it rise.
NFP expectations are for a meager 231K having more chance of a better than expected release but we all know is garbage anyway. If it is better or close than we will see more USD strength. Otherwise with a low bar set if it does disappoint we will se spikes all around as they fight over who is really the cleaner dirty shirt.
Yellen also has a speech an hour and 45 minutes after NFP which could also get very interesting since audience questions are expected.
Have a great weekend
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