GBP Weakens On Bad Housing Data March 3, 2015
The UK Housing Bubble Starting To Show Weakness
As I was talking about the other day, we are dealing with news releases that not too long ago were nonevents for the most part. Way back in 2005-2006 the US housing data was looked at the same way. Everybody knew that there would be growth in the housing markets and the data release was taken for granted. Until the housing bubble popped and then all of a sudden in 2008 that particular release was almost as important as US Non Farm Payrolls. The same applies to the UK housing data today but in a slightly different light. The fact is that the UK recovery along with any potential interest rate increase is directly connected to the current housing bubble in the UK created by Osbornes Help To Buy scheme, of which is still continuing. Therefore once that starts to fade then all the money that has been borrowed to spend in the economy as people refinance their homes simply dries up. Pretty much the same way it did in the US seven years ago. One has to ask them self why would they do such a stupid thing when they already know the highest probable out come to be the same as in the US? Well the answer is the same today as it was back in 2008. To cover their own rear ends at the expense of the man on the street.
Now as I look through my news sources again this morning they are again defining insanity and starting up the same sort of thing in the US yet again. One bank has started offering 100% home loans again and once/if this gains traction it only makes sense that what will follow is the 125% loans. Crazy I tell you.
HOME allows qualifying borrowers to finance up to 100 percent of a home’s value, with the bank contributing up to $4,500 toward certain closing costs. The program is part of BBVA Compass’ recent pledge to put $11 billion in lending, investments and services toward supporting low- and moderate-income individuals and neighborhoods, and will also include a free online home buyer education course to help prepare borrowers for the responsibility of managing a home loan.
EUR/USD Rejects Friday High
With the EUR/USD holding inside Fridays range I wont be having a clear bias but I will say that the daily rejection does lean much more to a break to the down side rather than them pushing upward. The safer level to short from is up at 1.1236 but if they do intend a break down its doubtful they will test it again. There are a couple levels inside the range I will consider but the added risk demands several other aspects of how they trap traders in order to take a setup inside the range. I will be open for the long from 1.1159 cautious of any conviction below.
GBP/USD Shows Weak First Push Down
I am always cautious of pushes that take more than a day to materialize but the rejection of the gap open price does add probability for at least a test of the daily lows below. If they do manage another push that has the daily close below 1.5330 with clear conviction then they will most likely run it down to 1.5200 in coming days. The best level for the short is up at 1.5387 but the 1.5371 is valid if they can widen the Asian range lower or at least leave the Asian box at its lows and run the breakout traders to the downside first. I will be open for the long off the lows but will need to see they wont let it pass with more than one trapping pattern.
EUR/JPY Pushes Up With Euro And Holds With USD Strength
Again we have a push up taking two days to form so although I will have the bias for the long on this pair today I will be more open for the short from the highs around 134.55 that also has the hourly 200 for confluence. Otherwise the best long entry will be from a stop run to the Asian lows at 134.14 during the London session. Not much is forming up during the Asian session as of yet since they are not running it on the Yen right now so I will most likely be waiting for London if I dont get a set up here in the next hour or so.
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Forex News Today
The calendar starts off with German Retail sales when Frankfurt opens today. Expected to rise slightly but still rather close to the zero mark. I will only expect a large move if it surprises big since the Greek issue still hovers over Europe. Later during London there is UK Construction PMI expected to drop a bit but considering yesterdays Housing Price drop this has a higher probability of disappointment. However that may be ignored since there is a Carney speech just 30 minutes later and if he blows the rate hike horn the GBP will spike to the upside no matter how bad the housing data is.
The major news during the US session is a Janet Yellen speech late in the day. That should be interesting to say the least.
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