Forex Daily Analysis EUR/USD, GBP/USD November 9, 2012
We did not get the second push we were expecting on the EUR/USD yesterday. However we do have a nice accumulation area building for the drop. The hourly close below Wednesdays lows shows some conviction and adds more to the probability for the second push now. Im not going to say we there is no chance for a long entry but it will need to be a rather clean stop run to yesterdays lows to get me long this pair. The levels I will be looking at for the manipulation and short are the highs of the US session at 1.2757 and the daily high at 1.2775.
We did have an aggressive entry in the live London session that I did not take. It was a little too aggressive for me since the manipulation was not at any levels of confluence. However there were some members who took the short after the third pin outside the Asian box. A good entry at the close of the last pin at 1.2767 moved off 48 pips from the entry. That should have got a nice profit of at least two times a 20 pip risk. Good job guys I hope you took the money and ran before it made the pullback.
The GBP/USD has made the first push down after the false push to the upside. The hourly close below Wednesdays lows resulting in a 112 pip move from the recent highs. I am not liking the rejection back up into the third push chop however my bias is still to the downside on this pair. the rejection was caused by a news bounce as there was talk of taking another look at the benefits/risks of more asset purchases by the BOE yesterday. Which is why I am still holding a GBP/USD short from 1.5995 I took after I saw the 1.600 psych level holding well with the 2 pin bars just above the 15 minute 200ema while at the same time testing the US session highs from Wednesday. As I mentioned in the November 8th commentary this would be a level I was looking at for the manipulation. Once we got the hourly close below for the completion of the first push my bias was mainly short and I just had to wait patiently for my entry.
I doubt I will be tempted to add to this trade since its Friday and holding trades over the weekend is much more risky these days. however if I wasn’t already in or I get stopped out at break even I will consider another entry if I see the trap around the 1.6000 level again.
Forex News Today
The scheduled news releases today look a lot more busy then it actually is. The only one of note is the US Prelim University of Michigan Consumer Sentiment and since its so late in the day I doubt it will have much impact without a large deviation.
Events To Watch Short Term
There are a couple potential events I will be keeping an eye on in the near future and its a good idea for you to do so as well.
The first is when/if Spain asks for the bailout. I have said several times before that I dont see this happening unlit their yields get above 7% and remain there for at least a week or two. I am sticking with this assessment because I highly doubt that Spain wants the Troika crawling up their financial butt knowing they will find a lot more “toxic red meat” then Spain has led on to be having in their bowels. When this does happen and yes eventually it will. this will be seen as Euro positive and for a short run at least (maybe weeks but could be only days) the EUR/USD is going to look like it will run to the moon. however once all that toxic crap is brought out in to the open its highly likely that the Euro will plummet again. So at this point I will simply be watching those yields climb and see how long they can hold up there. Of course as this happens there will be several tape bombs trying to delay the inevitable so its going to take some time.
Next is the US Fiscal Cliff
This has the potential of actually giving Spain a break from the heat of the spotlight. Which will buy them a little more time.
The US only has weeks to start showing that the politicians are working together to come up with a viable solution. I highly doubt they want a repeat of the last showdown that resulted in S&P downgrading the US from top perch of AAA. If they do play the same game again the other rating agencies will follow suit and downgrade the US also. This would have a potential snowball effect that could eventually see the USD lose its reserve currency status which would be disastrous for the US. Lets hope the boneheads in charge don’t do that again.
What to look for will be the top politicians actually working together rather than just giving lip service to the media making it look like they are. We did already have the Speaker of the House John Boehner on Wednesday pledge to work closely with the White House as negotiations begin. He said that lawmakers won’t be able to solve the country’s problems overnight, but said that voters “gave us a mandate to work together to do the best thing for our country.”
This seems to be a decent start but what we want to see is actions not just words. The last time this act played out it started in much the same fashion and did not end pretty. Once we see that there are issues getting some solutions worked out we will see the USD get stronger. However if there is a repeat of the wrangling that went on last time the USD will weaken and if you thought it fell off a cliff last time. That will be nothing compared to the potential fall coming.
Have a great weekend
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