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EUR/USD FX Trading Commentary – December 14, 2011

December 15
03:06 2011

Hi all. Todays news events were somewhat muted. there was a rumor of S&P downgrading France that never happened. the rumor did make the euro surge lower but didnt have any real follow thru. There was also an Italian bond auction of 5yr notes that they had to pay the high yield of 6.47%. Definitely not a good sign. The most troubling for the EUR/USD is todays close below the 1.3000 level this is significantly bearish however there is a large Eur/Usd option expiry today at the 1.3000 level so I somewhat expect the pair to make efforts to stay around there.

Looking at this daily chart with the volume added its plain to see there was quite a bit of buying going on in efforts to defend the 1.3000 level. Notice the increase in volume and the significantly smaller spread of yesterdays candle. This tells me there were buyers there. There is a good possibility for the retrace to the 3073 level now but since it was rejected by more than 10 pips yesterday a retrace may only reach the 3063 level. The only thing that might change that is some super duper good news that I dont see happening in the near future. Considering the possibility for the retrace now As I look at my 15min chart I will be looking for the thrust thru the 1.3009 level and a retest for a long but only ride it to the rejected highs at 1.3050 for a quick 30-40 pips. I wont be holding out for and rides on a long position considering the fundamental bias and will be tightening up stops rather quick on any longs.

As for news today there are some goodies. There is service and manufacturing PMI data out of Germany and the EZ as a whole. Not much change is expected so a large deviation to the downside is what I will be looking for and would want to see if I am short today. I have doubts that positive data here would change the trend by any means but would serve as a bounce for entry short if Im not already in the market. There is also a speech from ECB president Draghi. We are still learning his style but so far hasnt seemed to be the euro pumper that Trichet was. I doubt there will be anything market positive such as QE or eurobonds which at this point is just about the only 2 things that may please the market so it could be interesting but I have my doubts.

There is also unemployment data, PPI inflation data and TIC purchases out of the US today. I would be looking most at the PPI numbers. If this is higher than expected we may see further decoupling of the euro from the risk trade and see stocks rise and euro fall. This is released at the same time as unemployment claims so be careful if the numbers are conflicting. I am not a news trader personally but this is what I would be looking at in managing a trade I was in.

take care and be careful out there


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