GBP Crashes as Inflation Report Threatens Deflation-Nov 13, 2014
GBP/USD Third push Fails On Negative Inflation Report
As I mentioned in both Tuesday and Wednesdays commentary (inside joke for members) the UK inflation report (lovingly referred to by our UK members as the UK economy is in the crapper report) had potential to screw up all plans for pushing up the GBP/USD. Well that was the case yesterday when not only did Carney blast Helicopter Ben saying “no central Bank should resort to helicopter policies” but also lowered the CPI expectations to below 1% within six months and not get to the 2% target for another three years. Yes that means potential deflation within six to nine months although they will never say it.
So what the heck is up with the the UK since it wasnt but a couple months ago they were the cleanest dirty shirt on the block? Its only takes looking at what was driving their so called recovery. Yes the housing bubble created by the help to buy scheme. To be honest I expected some news of curtailing that before we saw the UK prospects drop but there is another factor at hand that still revolves around their housing market. Two things come to mind. First the Russian sanctions. When you cut all the rich Russian oligarchs off from buying, or in this case just piss them off enough they retaliate and stop buying five or ten million GBP homes, its bound to have an effect and slow the economy. The other main problem is China slowing down as well. As we know the other big players in the UK top end housing market was the rich Chinese looking to park their ill gotten gains somewhere offshore and one of the best places to do so at the time was the UK housing market. Now that China looks more to be coming in for a crash landing it only makes sense that there isn’t as much money propping up the UK housing market from them either.
Now with Carney saying he don’t like helicopter policies it reduces the potential for more QE from the BOE but we all know when push comes to shove he will jump in a print the heck out of the GBP maybe saying its a dump truck rather than a helicopter.
EUR/USD Holds Range as Expected
Great job to the members who caught the EUR/USD short from the high of the range yesterday. There was a nice 50 on the table that I know many of you caught. Thanks for the updates.
Today not much has changed other than its at the lower end of the range with more potential for the long at either yesterdays lows or the 1.2404 level from Tuesday. Otherwise I will still be open for the short if they push to around the hourly 200 EMA but if they run there I prefer to be long looking to take profit.
GBP/USD Smack Down on Carney Speech
As I mentioned above the GBP/USD was killed by Carney yesterday pushing down 180 pips from the highs of the day. This is likely to continue but I wont have a bias as of yet with the possibility of a pullback before another move down. The move was rather efficient so getting orders left behind shouldn’t be a problem but pushing out weak holders will. The only place I will consider a long is at the lows after showing they refuse to let it break and preferably see the stop run. Otherwise the best level to short is at 1.5802 where it has the confluence of the psych level along with daily breakout and shorter term breakout yesterday. Its also 40 pips from the lows giving it the best proximity from current price.
EUR/JPY Takes Stops, Makes First Push Down
The move on the EUR/JPY yesterday is typical when they do plan to finish the three push move but I am skeptical as usual. Taking stops to the highs is a good sign but the time of day they did it is concerning. There is almost no money around to be convincing at that time of day. Therefore meaning more potential for a sticking of the breakout traders and then pushing them out as they drop price.
I will have a small bias for the next push down but also be more willing to take the long from yesterdays lows at 143.33. The best level to short from is 143.78 this morning but they cant seem to be able to test there as of yet. If they do break it upward this morning a test of 144.29 is the higher probability even though there is a weaker level at 144.07. The price action is whippy so far as well, adding more risk. Right now its looking like the best move is to wait for the London open to see where they push for a set up.
Forex News Today
The calendar has Inflation data from several European countries today with Germany being the most impact of course. With expectations on the monthly figures still below zero it could be interesting if it drops lower again. Keep in mind the big D word is what they fear most now and with no signs of hyper inflation on the horizon for any of the helicopter dumpers it really only opens the door for more dumps. The ECB will be buying a boat load more corporate and bank bonds if Germany shows deflation is here to stay for now.
The US only has the Thursday Unemployment Claims expected to rise by 4K. With such a small expected increase we will need a large miss in either direction to create much movement on this considering Unemployment has fallen off the radar so mush as of late. Its almost not worth mentioning here.
MY APOLOGIES FOR THE BROKEN VIDEO OF INSIDE JOB IN THE COMMENTARY. I DIDNT THINK I WAS COPY WRITE INFRINGING WITH AN ITALIAN VERSION ALREADY ON YOUTUBE. HOWEVER YOU CAN STILL WATCH IT AT THIS LINK. STILL A MUST SEE!
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