Great Day For The USD and Equities October 22, 2014
Stocks Have Best day of 2014, USD Rises
As Equities have their best day of the year the USD rose with them sparked by a rumor that the ECB was planning to buy corporate bonds. It turned out to be false but that didn’t stop the all out buying as both the S&P and Dow closed on their highs of the day. It doesnt surprise me that on a day with no good news releases that they get one of the most watched news sources (Reuters) to dribble a rumor to cause a jump in the markets. The question is can this hold without the ECB or Fed buying something? This is a clear sign that the markets are totally dependent on central bank buying bonds to support their respective economies. It would really be great if it was actually working and not just lining the pockets of the 1% with what will eventually be taxpayer money. I have to admit I dont think this rally can last unless the ECB or Fed starts another round of QE but like I have said many times before. Nothing surprises me in the markets any more.
We did get a nice first push to the downside on the EUR/USD yesterday. Great job to all those that caught it from the highs. I know of two members that got a better entry than I did. Kudos to Chrissi, Guy and anyone else that got a better entry than 1.2834. It shows you are letting your patience work for you and as you can see when you stick to the plan you can get entries that barely run against you before taking off for the run of the day. I would love to hear the pip counts on profit on this trade in the comments below. Don’t be shy now. 🙂
Now that we have the first push I will be bias for the short today, however if they dont think the rumor can actually come true in the future they will test the ECB and Fed and drop the equities markets like a stone just to prove a point. Thats not to say the USD will go with but its possible. The best level for the short today is up at 1.2740 where the high at the end of the NY session has confluence with the hourly 200. If that cant hold then they will likely test higher to the 1.2780 level even though its unlikely being 75 pips from the lows. I will be open for the long if they show clear signs they wont let it pass the Asian lows. They have shown the potential fake conviction hitting the daily lows from Thursday last week so it definitely could hold up here.
GBP/USD Moves Down But Not a Clear Push
Although the GBP/USD did move down with the EU it only went 79 pips so far leaving it open for a potential push up still. I do have my doubts it will since it will need quite alot of help from the EUR/GBP but the possibility exists. At this point I will be more open on direction for this pair and look for a long set up down at the 1.6081 level where the 200 sits and open for the short at 1.6137. I will say the short does carry more risk being in the middle of the first push up still. Otherwise the safest place to be considering a short is up at 1.6180.
The EUR/JPY also made the first push down along with the EU yesterday. I will also have the short bias on this pair but the levels for potential entries short aren’t all that great. The 136.26 is a break out level that hasn’t been tested yet but is also close to the Asian highs so if they can push down and widen the Asian range a little more then it would help. Otherwise the 136.45 is better if they don’t push down further this morning. I will be open for the long from yesterdays lows of 135.68 being a first push scenario but would prefer to be short waiting for a break if they push that low.
Forex News Today
The calendar today is somewhat light again with only the BOE Meeting Minutes along with the vote counts. The ones that will likely have the most impact will be if there is a change in the votes. If one of the nine switched from voting to hike rates then it will be a wild ride for the GBP today. I have my doubts anything will change but its possible.
The US has Retail Sales Data expected to rise above the zero mark. As long as it can do so it should be good for the USD but a miss below zero should have the opposite effect depending on the size of the miss.
Asian session traders have a RBA Governor Speech to watch tomorrow along with Chinese HSBC Manufacturing PMI a bit later in the morning.
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