October 10th 2013 Daily EUR/USD, GBP/USD Analysis
I cant say I was really expecting the EUR/USD to break to the downside even though I did see it as the higher probability if was going to break in a direction. Now that we have a push in a direction I expect it to continue today. I wont be looking at this as a second push due to the two day chop and fake out beak above resistance Tuesday but will be treating it as a first push instead. The reason is it was stopped by a daily level at 1.3484 with a clean pin. Yes this was probably due to the markets finally getting wind of a secret meeting between the Republicans and Democrats in the US yesterday and we really don’t have much news telling us how much if anything was resolved. I have my doubts but it seems that Deutsche Bank agrees with me (or maybe me agreeing with them) that the sell off will get them rolling. Here is a quote from Jim Reid
“Over the last 12-24 hours the small cracks that have appeared in financial markets over the last week have started to edge open a little bit wider. On the plus side this may start to help concentrate the minds of the politicians a bit more after another day of stalemate and lack of urgency. Our thoughts are that this will get resolved when either the market forces the issue with a big sell-off or when we get closer to an as yet unspecified hard-date as to when the US runs out of money.” – DB’s Jim Reid
Not quite exactly what I said but pretty close 😉
The best level I see for the short since we are seeing the Asian range widen nice already this morning is 1.3527 where they stopped it at the end of the day yesterday but there is also the possibility they will want stops above 1.3535 so I will be cautious unless we see the test of the lows. I will also be open for a long also but I will have to see some typical trapping and see this low at 1.3500 hold, then get tested with a stop run preferably and a good entry with my stop below the lows.
My thoughts are it will take the good prospect of a deal in the US to turn here but the chance that the big boys know something is in the pipe and will do a fake out to the lows just before the news hits the wires is pretty good.
The GBP/USD held on to the correlation due to the USD strength I mentioned in yesterdays commentary along with the pin to the lows when equities spiked late in the day. I will be treating this the same as the Euro as a first push after a fake out expecting the continuation but with an almost 200 pip move yesterday we could or even should be in for a deeper pullback first. The GBP has been extremely weak recently but I will expect that they pull some of that money out before continuing the move. The best level I see for the short is the psych 1.5982 but seeing 1.6000 or 1.6020 is not unrealistic. What does concern me a bit is the 30+ pip Asian range so I will be open for a long from a stop run to the lows being cautious of any conviction to the downside.
Forex News Today
The economic calendar is light early in the London session with only the ECB monthly report coming out. I expect there wont be much to manipulate on since Draghi left it rather open as what they might do at the last meeting. Later the UK has its rate decision and Asset Purchases. My thoughts are they will keep everything the same but if this GBP weakness has been due to pricing in more purchases then the GU will spike up so be careful if your in a trade during that release.
The US has Thurdays Unemployment Claims expected to slightly rise so barring a big miss we probably wont see much there either.
Just before London closes Super Mario has another speech but considering everyone is watching the US shut down deal he will have to say something good to get a good reaction. Otherwise I am sure he is rather enjoying the Euro weakness right now.
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