GBP/USD Tanks On Dovish Tone From BOE – November 6th 2015 Market Analysis
Still Looking For EUR/USD Third Push Down
For today my thought process on the EUR/USD is pretty straight forward as I will be looking for the same second push to the downside that I described in yesterday’s market commentary. Today we had more sideways price action which is perfectly fine in regards to our market cycle criteria. Typically we look for a cycle to occur over a 3-4 day period with 5 days being the absolute longest. Today would be the third push on the forth day of the cycle and thus perfectly acceptable. At this point I have one point that I would look for that third push to continue from as illustrated on the chart. For any members, be sure to watch the daily market video preview as I walk through the possibility of a slightly more aggressive level coming together if certain price movement occurs first.
Yesterday we did have a valid trade setup that occurred during the European session. The trade resulted in either a break even trade or a -8 pip loss as a worst case scenario. The difference would have occurred based on when someone moves their stop to break even at it hit the first target area and thus why most had a break even result. I will however count this as a -10 pip loss when I do the month end trade results video for November.
GBP/USD Smashed On BOE’s Bearish Tone
Let me introduce you to what I like to call between ‘a rock and a hard place’. It looks like expectations were for more rate hike votes as that had been the talk leading up this rate decision. I’m sorry but when you have -.1 inflation you cannot raise rates. I know we are in an economy where right is wrong and wrong is right but common sense says if your not growing you don’t stifle growth further with higher rates. Typically negative inflation would cause rates to be cut traditionally but then again 18 trillion in debt would normally cause people to be concerned. What likes normal anyway?
I do not have a current cycle bias on the Pound. Anytime a first push is created by news I do not trade with a directional bias. Additionally, when a move is 2 times the ADR I generally don’t trade with a cycle bias. Why? When the market does one of those two things it is outside of what I term as a ‘normal’ move and therefore I would rather just take any stop run from a pre-selected manipulation point both long and/or short. Sorry the chart is a bit distorted on the Pound as the move down throws off the scale.
Forex News For November 6th 2015
UK Manufacturing & Industrial Production 4:30 AM Eastern: Forex Factory has this as the more important news item at 4:30 but a quick look back at the price action has shown Industrial Production as more often than not the more important release when the two conflict. I talk a lot about trading against forex news releases, this is however one release that you would be wise not to trade against. Especially if both pieces of data deviate in the same direction, either positive or negative. When they conflict, and one conflict isn’t considerably larger than the other, Industrial Production will typically win. This month .2 is the expected release for Manufacturing Production and -.1 is the expected number for Industrial Production.
US Non-Farm Payroll 8:30 AM Eastern: Trading the initial release on NFP is obviously crazy unless you are trying to spike trade the deviation which I’m guessing 99.9% of people reading this are not. The key with this release is to get the deviation, the revision to the previous month, and the unemployment rate. Once you have all the numbers you can make a decision. The most important is the headline and the revision to the previous month. If those deviate in the same direction then a safe trade is generally a continuation trade after a 30-40% retrace of the initial spike. This trade setup has a 80% hit rate with a decent reward to risk. This month 181K is the expected number with an unemployment number of 5%.
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