GBP/USD Breaks Range on Bad Services PMI Nov. 6, 2014
GBP/USD Slides on Bad Data, US Voters Give Control of House to Republicans – Equities Close at All Time Highs
I will get to the move on the GBP/USD later in the analysis of the pair but wanted to mention the US vote and what it really means. Yes it did manage to push both the S&P 500 and Dow Jones to record highs most likely on the fact that the republicans are even more friendly to Wall Street than the democrats. However in truth the two parties are one and the same when it comes to finance. Remember it was Clinton that signed the bill repealing Glass Steagall saying it was one of the greatest things for the country. Dont forget NAFTA as well along with the pardon of Marc Rich.
In reality the US has one political party while holding up the facade of two so power really never changes hands just like they want it. There will never be any real change in the US until social unrest sends those guys running for the hills in fear of retaliation. Of which could take a very long time considering how long it has taken the populace to wake up so far. On top of a compliant population they have also set things up very well to control the majority with around half of the population on some sort of government assistance. Why would any body vote for change when it means probably losing the very thing keeping them going? That would qualify as shooting ones self in the foot. So what happens now?
In short, nothing. Yes Im sure Obama and his administration had the same sort of meeting the republicans did when he won the presidency the first time. Recall the leak about the meeting stating they (republicans) will do everything they can to stimy any piece of legislation Obama put on the table. The only difference is Obama uses the word veto. Yes Obamacare did get passed some will say but it will likely be news to some that Obamacare was originally a republican idea that started with Mitt Romney in Massachusetts. There are some differences but thats the reason the republicans eventually let it go through. However lets not forget that they did shut down the government trying to fight Obamacare.
Not even a day after their win they have released plans to do the same and attach the Keystone Pipeline to an energy or budget bill next year putting the “shut down the government” ball in Obamas court. Funny stuff, American politics but I digress. On to the charts.
EUR/USD First Push Fails
Technically the first push on the EUR/USD hasnt failed quite yet since there isnt any conviction below 1.2469 but seeing that we now have an intraday push down along with the rejection it is the higher probability to see the next intraday push down today. Its not enough to give me a bias and we probably wont see any real push until Super Mario does his thing at the ECB meeting today. However considering the fundamentals and potential for Draghi going rogue doing some sort of expansion of their QE program is good. Therefor although I will be open on direction my plan will be to take the twice my risk profit on any long and if I get the short entry, look to hold through the release. If Draghi does something to cause a break of these lows the potential for a run to around 1.2268 in coming days is very good. If he blinks due to the pressure inside the ECB it will at least test toward yesterdays highs. The best level to get the short set up is up at 1.2504 but if they do push it down a bit more during the Asian session I will consider the Asian highs being so close to the 1.2493 level. The only level I will consider a long is down at 1.2456 preferably seeing a stop run. There is a chance they hold the Asian lows as well if they are going to hold the range and push up today but carries more risk considering proximity to current price unless they push up and leave the Asian box closer to the highs.
GBP/USD Dip retraced on weaker Euro
After the much worse than expected Services PMI print yesterday the GBP/USD ran off over 150 pips only to pull back and retrace most of the move as the EUR/GBP dropped going into the NY session. This rejection could be something significant but really only shows what they are thinking Draghi might do today since the USDX held the tighter correlation to the Euro move.
I will be looking at this as the first push down and bias for the short today while open for the long. Having said that the potential level for the short seems much more solid than what we have for a long. If they do intend a second push down the 1.5985 level has the most potential. If they dont turn there they will probably test up to the hourly 200 at 1.6015 or 20 at yesterdays highs. The weak level at 1.5940 is valid for the long but I will need to be convinced that the EUR/GBP is going to help since a weak Euro could get the EU and GU running opposite directions today.
EUR/JPY Crawls Higher
The EUR/JPY not showing that they want to push out weak holders or retrace any of the large move since last Thursday tells me they will likely grind this pair higher on the weak Yen making the 120 level on the USD/JPY, I have heard talk of, more probable. This could chance if Dragi does something rash today but if he dont then the EJ will have an extended move as the Euro strengthens and Yen weakens. We also have some conviction early on today on all three Yen crosses adding much more probability to the push up now. If they can bring price down to 143.33 I will look for the set up long but its looking like it will run off with out me since there was the trap early on this morning around 143.00. The set up was nice but I wasn’t that impressed with the level so waited for the pullback that never came.
Forex News Today
The calendar has German Factory Orders before the London open and has potential to start a push on the Euro but barring a big miss they will wait for the ECB later and only use a smaller miss to run stops. Later the UK has Manufacturing Production expecting an improvement. As long as this dont drop below zero they will wait for the ECB as well, maybe pushing the EUR/GBP around.
An hour before the NY open is the BOE Rate Decision and Asset Purchases which will as usual be a non event baring a surprise. This is highly unlikely with the ECB coming up later.
I dont have much of a prediction for Super Mario today. He could try expansion of the bond purchases or cave to the pressure he is getting from other ECB members. Either way there will likely be a big move according to what he does.
The US has Thursday Unemployment Claims and a couple of Fed speeches and should only have an effect if Draghi dont do anything. Otherwise they will be digesrting his move.
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