October 7th 2013 EUR/USD, GBP/USD Analysis
The EUR/USD seemed to have been the victim of the week end flows last Friday with a clean push to the downside and a failed second push. It probably has more to do with the fact that the US government cant get their house in order and pass a budget. It also don’t look like they will any time soon either. They have been fighting about this for years actually and as I mentioned in previous commentaries, since they couldn’t get any where close to an agreement last time the chances are even slimmer now. It is sure looking like the US will default and we may actually get the reset the markets have been needing for years.
The problem is that the chances of the guys who caused the mess and need for the reset will still be running things and we will be in for another round of the same in decades to come if not sooner depending on how the law is applied to the likes of Jamie Dimon and his counterparts. We are in for some interesting times ahead. Lets just hope there will be many people stepping up, doing the right thing and throwing these guys in jail. Seizing their assets to pay back what they stole would be a good start also.
As I said in Fridays commentary I expected we should get the move during the London session since there was no NFP release and sure enough both pairs ran off just after London opened. That is definitely not typical of NFP Friday but obviously last Friday was anything but typical.
Today I will be looking for the second push on the Euro with the best level I see for hitting sops being around 1.3600 and if they need will push above 1.3606. In order to consider the Asian highs I want to see the gap fully close and try for a test of the lows showing they had a good chance of accumulating position before they make the push. There is still the chance it stays in this range between 1.3500 and 1.3644 so holding on for the longer run will not be an option for me today. There is also the small chance this is a false first push so a clear stop run to the lows is possible but as usual I will be watching the hourly close if I do get long.
The GBP/USD went a little nuts with a 170+ pip push Friday thanks to the EUR/GBP throwing a little fit and the drop in the EU on USD strength. Who the heck knows why the USD should be strong with an eminent default on the horizon but there is always the thought in the back of the big boys minds that the rest of the world is what will take the bigger hit. So I guess there is a little sense in that. Not much but a little.
With this being a potential third push I will be keeping an open mind on direction. The fact is there is not much clarity and its best to play it safe and look for trapping at the key levels. The best short I see is at 1.6076 but if that don’t stop it they will probably test the hourly 200 ema where the pair found some efficiency on the way down Friday. Otherwise there is a daily level at the lows that has a good chance of holding along with the psych level of 1.6000 so a stop run down there could get me long with the right set up.
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Forex News Today
The economic calendar is light today with only Euro Zone GDP figures during the London session. Its a medium impact event so barring a large miss we wont see much from it. The US has a couple of short term bond auctions but again I don’t think there will be much to that as the Fed buys most of them anyway.
Today will most likely be focused on the US budget fight again and with Boehner literally saying that default is likely if Obummer keeps up the fight. Check out the video below if you missed it over the weekend. Although it sort of sounds like somebody has seen the light I am not holding my breath that much meaningful gets done. We can hope though, fingers crossed 🙂
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