Forex Daily Analysis EUR/USD, GBP/USD November 15, 2012
Talk about correlation falling apart. Yesterdays price action had almost nothing to do with the USD until we got the big pop and drop on the Fed Meeting Minutes. This was one of the two major news events today, and it seems as though the algos went bizerk. 🙂 First off the BOE Inflation Letter was much worse than expected with them downgrading the potential growth for the UK. This means the chance for more asset purchases goes up substantially and the better than expected GDP figures were a fluke.
The Fed Meeting Minutes showed members discussed more unsterilised money printing. It also showed Janet Yellen did seem to get more members on board with her ideas like I mentioned in the Nov. 14 commentary. This in turn shot the EUR/USD up 25 pips only to get hammered back down after testing the hourly 200ema. So lets just get this straight. We are still in Operation Twits, we have begun the 40 billion per month print fest and now they are going to start more because thats not enough? Are they nuts? We are going to have 3 QE programs running at once!
What really gets me is the first QE program was the only one that had much effect and its been diminishing returns ever since yet they think this is the only path. I’m no economist and from what I see its better to not be one if you want a clear picture of just how screwed up this is. Ok enough of the rant….I just had to get that off my chest 😉
The EUR/USD today has a clear first push to the upside and the bias should be long. However I am not so sure with that 1 hour rejection. The Fed going full tilt should have had a bit more follow through than that. I will be keeping an open mind today and just looking for the manipulation at key points in price. First off, in order to lean more towards the short I want to see the hourly close below Tuesdays highs. Its not as much a significant level as a close above/below a previous days High/Low but it is a break out area, and if that breakout can’t hold then it shows they don’t have much interest in higher prices. If I do get that lower hourly close I will be looking for the short at the test of that level at 1.2726 from the downside. If it doesn’t come there then the Asian highs will be the next level I look at.
The long position may be the expected bias but I will only be considering it if we hold this breakout level and show a potential stop run. At that point I will be looking to see a bit of a run up during the end of the Asian session and the test into the breakout level. At this point however that option is not looking very good.
Update: The hourly close was not good enough to eliminate the potential long today. Keeping options open
The GBP/USD has a meager looking push to the downside for only 66 pips. However the fact that it wasn’t able to rebound and at least get back to the third push chop tells me there is probably more downside and we will most likely see the finish of the first push down during Asia today. It really only needs a few more pips to make it more clear.
At that point I will be looking for the short at the break out level of 1.5856. If we do see it push down substantially during Asia then the Asian highs become a probable manipulation point. The bounce in this pair created by the Fed news only provided the test of the US session lows from last night, so they may not test it again unless they really need to push out some weak short positions.
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Forex news Today
Scheduled news releases kick off today with French and German Preliminary GDP. If the German figures disappoint and go into negative territory it will be bad for the Euro. With expectations of .01% there is a good chance for this. Later we have Italian GDP and the ECB Monthly Bulletin which is usually an echo of the press statement but has been known to surprise when they mention downgrades of the outlook like the BOE did yesterday. Italian GDP is already in the toilet so without a big surprise the Monthly Bulletin will be most watched.
There is also CPI figures even later in the day for the Euro Zone but I don’t expect too much from these considering other releases are more important. The same goes for Euro Zone GDP as well. It is also circling the drain so only a large deviation will have an effect and the chance is more probable for a downward disappointment.
The UK has Retail Sales expected to drop into negative figures so we may see a set up the hour before if there is to be a surprise. (It seems like the smart money always has them in advance)
The US will release Core CPI expected to hold steady and I don’t expect much from this. The Unemployment Claims comes out at the same time expected to rise by almost 20K. If we see the large deviation higher we could see some manipulation but the Fed is already all in so it may be limited. The Empire State Manufacturing Index is in the mix at the same time also however without a big miss the other releases will take precedence.
Later there is the Philly Fed Manufacturing Index. This is a big one and is expected to drop to near zero. If this does surprise to below zero then we could see some USD weakness but its really a toss up because there could also be a risk off scenario created and the USD will strengthen. We will have to wait and see.
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