October 2nd 2013 Daily EUR/USD, GBP/USD Analysis
The EUR/USD did make the next push to the upside for around 70 pips but also retraced the full move with a sloppy head and shoulders pattern which is typical of what price action looks like when they are going to reverse. Now we have a first push finishing during the Asian session this morning so my bias will be for the continuation today.
It seems as though the US government shutdown has started to create a bit of panic and its affecting risk sentiment that is hitting most everything risk related like the Euro and GBP along with even gold. What is a little creepy is that the USD/JPY isn’t seeing it normal risk off move with the large move into the JPY like we normally see when risk is in the hot seat. This tells me that although its a risk aversion situation that they are expecting this to do damage to the world economy and its not a matter of who is better off than the other but all assets will take the hit as everything slows down from stocks and commodities to risk currencies. What is kind of funny is that the USD will get stronger to some degree which seems kind of crazy because the US government is what causing the whole mess but that is how things work.
The best level I see to short from is a range between 1.3535 and 1.3542. If we get more of a push down during Asia the lower level will have more probability as the distance from the lows increases. If they make a good push lower when London opens then the pullback to yesterdays lows becomes an option also. If it just runs off south with no entry there is still the chance for the long around 1.3477 if they don’t have the stomach to break the lows but if they really think this US government shut down has potential to last weeks or months and it does, the cost to the US economy is expected to be billions of USD and will therefore hit the world somewhat. At a time when that is the last thing the world needs. Thanks guys!!
Eventually my thought this will break down but probably not today.
The GBP/USD has made the reversal and showing a clearer head and shoulder with the potential fist push down finishing off during the Asian session this morning. I will be bias for the short on this pair today also looking to see the pullback during London to either the Asian highs or the middle of the Asian range if they play the breakout traders to the lows first. With the Asian range already 37 pips the potential for them to run those guys out of the market while they test yesterdays lows is pretty good. The set up will need to be rather nice since they could run as high as 1.6190 before they are able to push them out.
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Forex News Today
The economic calendar is interesting today starting with the ECB rate decision and Press Conference with a little ADP Non farm payroll thrown in for good measure. There were also some rumors that the Friday NFP may be released early due to the US government shut down. That does make sense since its the government workers that provide the release may not be at work Friday if they are in the 800K furloughed and sitting at home. I don’t think the ADP figures will have much impact but when Super Mario starts getting questions of how this shut down may potentially effect Europe things could get volatile very fast if he has a hard time dodging them. Interesting may be an understatement.
Later in the day we have a Fed member speaking along with Bernanke a few hours later. If I am in a trade before then I will be making sure the stop is at break even and widening the take profit to maximize gains if they cant spew garbage enough to keep the big boys calm.
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