EUR/USD,GBP/USD Analylis July 18, 2013
Well Ben did as expected and didn’t show any real direction for the Fed either way. Saying we may taper or we may add to the QE more or less. Of course the big boys reacted accordingly and we see a 100 pip chop. He is actually telling the truth in that his hands are tied. He has to do what the market expects as the news comes in so we will be seeing even more wild swings as the data comes is released later. Thanks Ben.
I have to admit I had to chuckle when he was asked if he was printing money he said “not literally”. I about fell out of my chair when I heard that. I was laughing so hard I missed the next five minutes and if they asked him after if he was “figuratively printing money” because that is exactly what he is doing. I would have loved to hear him admit that but if they did ask he probably dodged the question. Then there was the big one. A silent admission that the Fed is simply propping up the markets when he said that if the Fed were to tighten policy, the economy “would tank”
So lets put 2 and 2 together and get a good idea of what they will do. Workforce participation is around 30 year lows, percentage of the population on food stamps at all time highs, 80% of the NFP jobs created are part time, mortgage applications at 2011 lows. I could go on and on but I think you get the picture. I could even find some good data out there but when one scrutinizes the details there are holes in almost all of it. Ok so 2 plus 2 equals the US economy is still in the tank and never left but has just been held up by Ben “figuratively printing money”. Therefore he cant stop and wont stop. This will go on until things really start to get better which could be years and by that time there will be so much figurative money chasing profit if you think being Zimbabwe was bad. Imagine that on a world wide scale.
On to the charts.
The EUR/USD shows a potential intraday first push down now but still nothing all that clear on direction. The levels look rather sloppy at this point also. I do like the way the 1.3120 level is holding here during Asia but in order for me to trade it during London I need to see them push down and widen the range a bit. Preferably below the 1.3100 level inducing shorts just to come back and stop them out before the push down. Otherwise the next level to potentially short from is the 1.3159 area. The reason its an area is due to all the hourly wicks up there yesterday and could turn as low as 1.3150 or reach the highs at 1.3173. The potential for a long is at 1.3100 and 1.3080 but the same would need to happen showing they induce some long positions by the break of the 1.3120 level and come back and show me they wont let it pass 1.3100. If there isn’t anything clear there it will most likely test 1.3080.
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The GBP/USD has shown the second push to the upside and made some significant closes above a few daily levels. My bias here will be for the long but the only good level I see is way down at 1.5168. These Asian lows at the psych 1.5200 have potential but it could easily reach the 1.5180 or even 68 so I will be watching close for a good set up. It will need to be rather nice or if we see them induce some longs first with a push up then run to 1.5200 then I will consider a more aggressive entry there.
On a side note I came so close to taking the GBP/USD long from 1.5088 yesterday but the entry just didn’t have enough per my rues to take it. I had an inkling they were inducing shorts before the news but I need a rather nice set up to take entries that close to news. On to the next trade.
Forex News Today
Scheduled releases start off today with the Retail Sales numbers from the UK. Expectations are for a drop from the previous release and I am sure that is priced in so we will need a surprise to get much movement. If it does drop below zero then we may see a larger move.
The Euro Zone has a 10yr Spanish Bond auction. This does have the chance of disappointing so keep an eye out for the release of the interest rate and amount they sell. If the rate goes up substantially and/or they cant sell what they want the Euro will get weak.
The US has weekly Unemployment Claims as usual. Expectations are for 345K and if it surprises up like last week there will be USD weakness as thoughts for negative numbers at the next NFP and Unemployment rate release. Of course that increases the chance Ben adds to QEternity.
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