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Is The USD/JPY Going To Lead Equities Down? October 22nd 2015 Fx Market Preview

October 22
01:47 2015

One thing I wanted to mention before we cover the Euro and Pound is the current situation in the equity market. At the end of August when we had the major drop I started to mention the 50-70% retracement area as the key to the next direction in the market. This is something that I have mentioned time and time again since the initial drop. I haven’t mentioned this in a while as the equity market along with the currency market has been rather stagnant. Today we are still in the middle of that 50-70% retracement area and actually tested the backside of the previous support area which was 2042. After the market tested the backside of this point today it was met with heavy selling. Another very interesting point is the daily chart of the USD/JPY that I posted in the October 8th 2015 FX Market Commentary. I have posted that chart below. Compare the chart below to what is occurring right now on the daily chart of the USD/JPY. As you can see the Yen has pulled back to the exact area I had mentioned and is beginning to sell off. That doesn’t mean it is going to sell off and lead equities down but it is the point we have been waiting for and what happens next is key.

USD/JPY Daily Chart - October 8th 2015

As you can see this the first time that the USD/JPY and the US Equity market is lining up for the same move. The breakout in equities that occurred in late September did not have the USD/JPY supporting it. In the chart above you can see the USD/JPY was still stuck in the previous range while equities we breaking lower. As I wrote in the chart of the S&P, I would have preferred to see a stop run of that 2042 level but we will take what we get. What comes next is going to be key. I will keep the daily commentaries up to date with anything new. At this point the only thing that would break my belief in further downside is a break and hold (daily close) above the 2042 level. If that occurs then further upside becomes very likely as crazy as that might sound considering the current state of the world and rigged economics.

S&P 500 - October 22nd 2015

EUR/USD Has 43 Pip Range

The Euro had a ridiculously tight range today of only 43 pips. The bottom line is we do not even have the possibility of a valid trade setup unless the market comes into one of our listed manipulation points. With the size of the range the Euro never even got close to the upper or lower level and therefore no trade was possible. Considering today’s price action, my lack of directional bias has not changed and I will continue to remain open. Going into today most of yesterday’s manipulation points remain in place. The only thing I’m going to change is the first upper level. I’m moving it down to yesterday’s high instead as the liquidity is likely pooling around that level after today. Any stop run from the a pre-selected level will be a valid trade.

One reason I moved the first level closer is because of something I talk about in the day trading course called ‘time decay’. Especially with short term levels, the amount of time between creation and when the retest occurs is vital. If your a member make sure to watch tonight’s video daily market preview for a further break down of that.

EUR/USD Chart - October 22nd 2015

Pound Continues Range Bound

So many times traders talk about ranges as if they are a bad thing. The most recent range we have seen in the Pound has produced 2 classic stop run reversal trades that both went on to hit a full take profit. As I’ve always said, if your using the forex bank trading strategy, range bound markets tend to produce higher quality trade setups. The main reason for this is the liquidity is easier to locate as it tends to pool heavily around the range extremes. As a result, any stop run from those levels is going to be a quality high reward to risk day trade setup. That is exactly what we had occur today. The GBP/USD gave a beautiful stop run of the first lower manipulation point and provided a confirmation entry trade setup that resulted in a full take profit being hit later in the day.

For today the plan remains identical to yesterday. Since we remain within the range I will still continue to trade without a directional bias and will simply continue taking any valid stop run of the pre-selected manipulation points.

GBP/USD Chart - October 22nd 2015

Forex News For October 22nd 2015

UK Retail Sales 4:30 AM Eastern: This is always a big market mover with longer term implications should a big enough deviation be hit. For the month of July the report came out -.6 worse than expected and the GBP/USD spiked down 50 pips in the first 10 seconds and fell a total of 150 pips over the course of the entire day. This month .4 is the expected number.

EU Interest Rate Decision 7:45 AM Eastern: Like always this should be a major snoozer as rates are expected to remain unchanged. Any surprise change in rates would create a massive price fluctuation of 100 pips or more in the first minute.

ECB Press Conference 8:30 AM Eastern: The press conference is generally where all the fireworks come from. The majority of the time they will give advanced warning before major changes occur. This is done in an effort to keep the market from reacting as violently. Any Euro pair will get quite volatile around the start of the press conference and on any questions that invoke a surprise comment.


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1 Comment

  1. manny
    manny October 22, 02:45

    Sterling, I took both of the pound setups too. another awesome week of trading! I have a 2 questions I need to get answered though…ill make sure to ask in the room tomorrow

    Reply to this comment

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