Forex Commentary EUR/USD, GBP/USD March 15, 2012
Its tough to work on Wall Street if you have a conscience.
To start off todays commentary I want to briefly discuss the New York Times article by Gary Smith and his decision to leave Goldman Sachs for ethical reasons. As we in the financial world already know Goldman has been seen from 2 different perspectives. Either you want to be them if you are another financial institution or you down right despise them and know them as the Vampire Squid. Having said that I have to commend Gary on writing the piece for the NYT. One does have to wonder why he took 12 years to do so since Im sure he made millions on the way up the ladder at Goldman. Maybe because he knew that the big bankers and their cronies could easily screw him as well just like they did Mark Mensack when he tried to blow the whistle on Morgan Stanley for taking hidden fees from its retirement-account customers. Get the full story here on how the crony system has worked for him.
Well we have held out for another day on the decoupling theory. The Dow Jones held up with the rally as the EUR/USD slid. The longer we hold this the more I will be convinced but it will be some time before I would be willing to hold my breath. If the European crisis shows up again via Portugal or Spain then we will be right back to the risk based market. I do find it refreshing that the Japanese Yen has finally started to weaken as it should have long ago. I find it hard to believe that Kyle Bass and a few others are the only ones to know that Japan is teetering on the edge of a cliff. The weakening of the Yen is really their only hope of pulling out of their hole and even that probably wont be enough.
The scheduled news releases are light for the EZ with the ECB monthly bulletin of which I expect to be a small event. What could move the markets on this is if there was a lot of talk about inflation during the meeting but I have my doubts. Next up is the US PPI numbers which is expected to increase from 0.1 to 0.5. If there is a surprise to the upside then the $ should get stronger as the the chance for more QE gets pushed further down the road and helps bring closer a tightening from the Fed. Unemployment Claims are expected to drop slightly but will be watched closely for any surprises. The TIC Long term Purchases is expected to rise and show that foreign investors are buying into this rally which should also add to $ strength. Last but not least is the Philly Fed Manufacturing Index which is expected to rise and show that manufacturing in the Tri State area is getting better and should add some strength to the $ also. All signs point to the probability of the USD continuing the run even if we are at daily support on the EUR/USD and a quadruple top on the DX. If these levels do pop expect a quick run as stops are triggered.
Looking at the hourly charts of the EUR/USD and GBP/USD. The Euro I can see 3 levels of drop and it has potential for a reversal considering the Smart Money trend but with decoupling and the $ strength potential the SM trend may get trumped here by fundamentals its hard to say. I will of course be looking for the a clear trap move with a small bias to the downside.
The GBP/USd is a bit clearer and has a more bearish tone with the recent daily close just below the level we are at right now and a hourly topping formation at the 1 and 4hr 200EMAs (blue and black lines). If I see the stop run to the upside during the London session I will be taking the short here.
Happy trading every one
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