FOMC Meeting Looming Over The USD – FX Analysis 1/27/16
EUR/USD Remains Undecided
I was checking out some longer term COT data (commitment of traders) against a weekly chart and it struck me as to how tight of a range the EUR/USD has been for literally the last 2 months! During that time the Euro has spent 90% of the time in roughly a 210 pip range with only a few fast moves out to 350. Interestingly enough the ADR (Average Daily Range) has really not suffered as a result of the wider range. If your looking at a zoomed out picture of the 4H chart you can see the volatility is still there but the commitment to follow through in one direction is simply not there. This preserves the ADR but keeps the EUR/USD overall range bound. This is a great example of why I say trying to determine a directional bias every day is really irrelevant for day traders. While I will trade with a short term market trend bias if our criteria we use is satisfied, most days directional bias does not play a part in the short term trade setups I would take.
The same is true of today. Most of our listed manipulation points from yesterday’s daily market commentary are still valid since we never tested them. I have however added one additional upper level. Keep in mind that if the level breaks prior to the start of the European session then I would no longer use it.
Attention Goes To The GBP/USD
Yesterday I talked about the 1.4200 level being a key line in the sand for the GBP/USD. Looking at the chart today we can see the false push through this level before making its move to the upside. As per the rules of our trading strategy, we only consider trades from valid pre-selected manipulation points. When you get a move like we had in the GBP/USD yesterday it leaves us nothing to use the following day. When I ask myself the question, “if I was long where would my stop be” and I don’t have a clear answer to that question then that means I don’t have a lower level from which to consider a stop run reversal from. At this point we would need to see a new lower level form during the day to give us anything valid to the downside. The only lower point I have listed on the chart is very unlikely to actually be touched today. As far as upper points, I have 1 upper level that is near the upper ADR. For those of you who are members, be sure to watch the video daily market preview as there is one more upper level that has yet to quite form and I walk through what will be required for that to occur.
Forex News For January 27th 2016
US FOMC Meeting 2:00 PM Eastern: Honestly I don’t expect anything hawkish out of the Fed this time around. Last time they stuck their foot in their mouth when they said they were going to raise rates and I do not expect them to give any type of timeline again. With growth stalling across Europe and US and markets starting to show their concern there is nothing to be excited about. I wouldn’t be surprised if there was some alluding to the fact that the Fed is willing to step in and stabilize the market should that be needed. In that scenario you will likely see the US stock market tic up and the USD weaken on the short term. Either way we will have to wait and see what the liars come up with this month.
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