July 5, 2013 Daily EUR/USD, GBP/USD Analysis
The move on the EUR/USD yesterday was a little surprising considering I expected some Euro pump from Super Mario. However as I have mentioned in past posts there has been a change in what I call the Euro pump into the exact opposite Euro dump and guessing which way Draghi will go is a fools bet so its best to just sit back and watch rather than try to trade it.
In response to a comment on yesterdays commentary from Rene. Yes that was a valid entry on the EUR/USD after the two pins to test the Asian highs. On my charts they don’t breach them which is why I wouldn’t consider it a stop run but yes a clear sign they wont let price rise on the news from the BOE while the GBP/USD dumped and the EUR/GBP skyrocketed. That was the only valid trade for the day as it was well before the Draghi Euro dump and pulled back far enough to get a 20 pip stop above the high of the pins. I did not take it but I would bet some members did.
Today I do expect the continuation of the push to the downside but being Friday and the US still having a bank holiday (even though markets will be open) there could also be a deeper pullback do to the inefficiency of the moves on both pairs. What makes me think they will continue the EU to the downside is where they stopped it at the test of the daily breakout at 1.2926. Now that we see the boys in Asia widening the Asian range nicely, as long as they run it down a few more pips I will be comfortable using the Asian high as a level to watch for some trapping patterns. Otherwise it may reach up as high as 1.2942 and if it does and gets the hourly close above 1.2926 then it will most likely test higher to 1.2963 or even retrace the entire inefficient move back to 1.2980. Therefore I will be willing to take the long at either a stop run to yesterdays lows or look for some trapping going on after the hourly close above 1.2926. Patients will be key today.
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So just what started the GBP crash yesterday? Well as I expected Carney didn’t come out and say anything personally but the wording in the report on the interest rate decision was what obviously scared the bajeebies out of the big boys making them flee from the GBP in a large way. Whats funny about this is when Carney made his first foot in mouth move a couple months ago he talked about the UK needing to get out of debt sending the GBP/USD soaring hundreds of pips while now its the exact opposite. Of course the words are vague at best but was clear enough to send them running to exit. Here is what was in the report that I am sure his buddies Goldman had hours before the release.
The latest remit letter to the MPC from the Chancellor had requested that the Committee provide an assessment, alongside its August Inflation Report, of the case for adopting some form of forward guidance, including the possible use of intermediate thresholds. This analysis would have an important bearing on the Committee’s policy discussions in August.
Yes there was a little bit of the “recovery is upon us” dribble. With housing getting better thanks to a bubble created by the government covering 20% of any losses on house loans to get the banks to lend on housing. Think Fannie and Freddie Mac and how well that went.
So if that’s the case then why didn’t the GBP go up instead? Well the bold part of the vague text explains a bit. In laymen translation it means “we will wait for more data and since we know its going to suck we will act in accordance to the sucky data” ie… Print Print Print. The race to the bottom has gone into warp speed folks. I have to say I think the chance of Bernanke tapering just diminished somewhat.
The direction for my bias here is down today also but as with the Euro I will be cautious. We already have a 50 pip range during Asia this morning so that does diminish the chance of retracing the inefficient move. It does not eliminate it though. I will be looking for the manipulation to short from starting at the 1.5059 level and then the 1.5080. As you can see there is also a daily level its finding support at 1.5033 but that is more like a range that runs all the way to the psych level of 1.5000 so some manipulation down in that range showing the wont let it drop will be good for a long position. However it will need to be a clear set up and will be risky holding through Non Farm later in the day.
Forex News Today
The calendar is pretty quiet until the US Nonfarm during the US session. There is German Factory orders to watch during London expected to get into positive figures but as usual barring a large miss we probably wont see much due to Nonfarm later.
Nonfarm payrolls is expected to drop by 10K while surprisingly the Unemployment Rate is expected to drop also. Shouldn’t that be the other way around? Unless of course more of the already unemployed are simply losing their benefits and going into the group of jobless that the government doesn’t count. More number fudging I suppose. If that does surprise and stays at 7.6% then it will weaken the USD as thoughts of tapering go away a bit more.
The are Watching Me?
Of course they are but I am a small fry compared to most out there and there are many more of those that pose a more serious threat to the powers that be than me for sure. Long before they come after me we will see them attack folks like Alex Jones and the guys over at RT along with Max Keiser. I will get more concerned if/when I see that happen and Im thinking by then the people will smarten up and start the clean up. At least I hope anyway. Check out this article I found yesterday that pretty much explains how I truly feel. I actually did try to keep my comments to a low roar so I didn’t get a phone call from Ster while he was wearing his tinfoil hat telling me not to post stuff like that. Every time he does that the tinfoil makes an annoying sound that drives me nuts. That was a joke guys 😉 Also check out this article on Snowden when you get a chance. This guy makes a serious point about the governments around the world buckling to the US. it almost makes me jump in the boat with Ster. I may just make my own tinfoil hat this weekend!
Have a great weekend
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