NFP Gains and USD Strength Evaporates as Equities Drop
The Weak USD Causes Equities to Drop
I would like to say I knew that they would come to their senses on the NFP release last week but to be honest I try harder to make sure I am not thinking I know what they will do in the future. Wall Street and/or the banks are no different than the real world where if there was just a little more common sense used things would be much different and probably much better. However just about every where you look, common sense just isnt that common. Its more of a rarity.
As I look through my news this morning I see no reason data wise to warrant such a drop so I would have to agree that it would most likely be profit taking rather than data or tape bomb driven. We are likely to see more moves like this in the future as well because of the large one directional moves we have been having over the longer term. This just creates the environment where large corrections as stops are hit are more common. We shall see.
The EUR/USD had the larger move retracing the full move from Friday including the Asian move before NFP was released. At this point there is no reason to have a bias on direction so I will be open for both the long or short today during the London session. Considering the large moves the probability of them holding this range is rather high so shorting from the highs or taking longs from the lows have the best chance for good profit while any trades in between looking to see them push out of the range carry higher risk. The levels havent changed much but yesterdays price action narrowed them down a little tighter with more recent reactions. While the 1.2620 and 1.2590 levels are valid for a long the safer one is down at 1.2572 by the ADR line. Its still in the range but having the ADR as confluence helps. The best short is from 1.2660 where the hourly 200 sits so hopefully they hold it here and do the pullback and set up during London for us today.
The GBP/USD only gave back its post NFP gains yesterday adding more to the probability in a move down but that is a clear first push to the upside. With it being over extended I will be more open on direction to be on the safe side but the GBP seems to be the weaker currency according to the EUR/GBP, for now anyway. That may change since the EG has hit a significant daily level and looks to be slowing down.
As with the EU the levels inside the chop are weaker but still valid. I will be treating any entry as aggressive in the chop looking for the long at 1.6008 or 1.5985. The only short I will take will be at a pullback to the Asian highs during the London session at 1.6083.
Not much has changed for the EUR/JPY other than direction becoming even less clear as they hold the chop at the lows wondering what Abe really meant on “taking action on a weak Yen” So do they want the Yen weak for exporters or strong for consumers? You cant have it both ways.
There is a potential entry brewing as I type this but will need to wait for this candle to close along with the UJ agreeing on a short. It has already popped its level at 137.71 earlier this morning but it is riskier with the 137.80 just behind. Otherwise the 137.34 and 137.07 levels are valid for the long but also carry more risk with the lower lows just behind as well.
Forex News Today
The calendar today starts early with German Industrial Production before the London session opens. There is also the BOJ Press Conference that could stir up the Yen crosses a bit. They could go either way since there has been talk of action on a weak Yen. Seems a little nuts to me with how much they have been pushing the Yen weaker but its best not to try and understand why they do what they do. Just roll with it at this point.
Later during the London session we have UK Manufacturing and Industrial Production expected to drop on both. With them bot being so close to zero the potential for a negative figure goes up. A drop below zero should weaken the GBP further. They also have the NIESER GDP during the NY session that could also cause a move on a larger miss.
The US only has a couple of Fed member speeches. I have my doubts they will say much to push things around but its always a good idea to know when they are talking and watch to see if they do.
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