SNB Removes EUR/CHF 1.20 Floor January 16, 2015
Removal Of The Swiss Franc 1.20 Peg To The Euro Means The SNB Knows Something.
I remember the day the Swiss National Bank announced the peg to the Euro. We were in the london session trading room and watched the over 1000 pip move in awe. As I scrambled to find out what was driving the move price had already moved roughly 800 pips in a matter of seconds. Yesterday wasnt much different but everyone who knew that the peg couldnt last forever wasnt surprised Im sure.
The main question in every bodies head now has got to be, Why? When asked by members yesterday the first thing that came to mind was the potential for the SNB preparing to go back to the somewhat gold standard since the recent referendum didnt fail by all that much and will be back at some time in the future. This has merit but as I look through my news sources this morning something I saw actually makes more sense. Coming from none other than Goldman Sachs, although Im sure there are others that see it the same way, the ECB is planning a massive QE program. In short one only needs to ask themself, if you were one of the biggest buyers of Euros in the market today, would you really want to continue to do so when the ECB is printing unlimited quantities? Heck NO!! This was merely the only way the SNB could mitigate future losses when the EBC does go full retard in coming days.
I have to say it would be great if the SNB got up the nerve to go back to a partial gold standard but that is going to take some time. However as things progress down the road the probability does get better and better as the fiat mess governments have created eventually finds its end game.
In such a complex world it seems as though the majority of humanity, especially those at the top, have forgotten that everything needs balance in order to have harmony. Its no different in finance, climate, markets, even life in general. In short, too much of a good thing will kill you. Too much water, oxygen and food, all the necessities of life, and your dead. The world has a natural imbalance in heat vs cold giving us our weather, another necessity of life. Tipping that imbalance too far to one side and we have either ice age or over heating. The main issue in our current fiat financial situation, the imbalance between rich and poor, mal-investment to productive investment, big business to small business, they all need balance and what the powers that be have done, thinking they can control the far weighted out of balance structure they have created, pushing this structure further out of balance, making what needs to fall off one side of the scale a much bigger chunk to get that balance back. They have destroyed capitalism, the one part of the system that was supposed to be the natural balance creating structure. Eventually it will have to come back and we will have balance again. Simple as that, the sooner they realize it and face the music the better.
Sorry, I digress. On to the charts.
EUR/USD Drops 200+ Pips
I will not be bias on direction on the EUR/USD today but fundamentally the push down should continue as QE expectations rise. The question is where leaving a potential trade open. The best level I will be looking to get long from is around yesterdays lows or just above at 1.1584 while the 1.1606 level is valid but carries more risk. The potential shorts will be at the Asian highs if 1.1638 holds but have potential to run up to 1.1685.
GBP/USD Shows Potential False Push Up
The probability for the push up Wednesday on the GBP/USD being false is pretty high now but would need to be confirmed with some conviction to the downside during the London session today. Otherwise I will be open on direction while considering that if the risk aversion still plays out today it should go down with the rest of the higher risk currencies like the Euro. I will consider a long from 1.5150 while watching for the conviction but prefer to be short waiting for the break down. If we do get conviction below 1.5166 without the test of 1.5150 then the short from 1.5193 is valid although more aggressive.
EUR/JPY Drops 350+ On Risk Aversion
A 350+ pip move on the EUR/JPY does leave me thinking they may run a pullback but looking at the efficiency of the move post SNB I am having some doubts. If they couldnt find buyers yesterday they probably wont today either. It does look as though the Asian session is trying its best to hold it up so I will be waiting to see if there is any conviction during London above the Asian highs before considering a long today. Otherwise the best level to short is the current Asian highs of 135.39 during the London session if they cant push higher this morning. Having said that this pair is at some hefty daily lows so it might have some work to do before a break down but when risk is off not much can stop the drop.
Forex News Today
The calendar starts off with German and later Euro Zone CPI figures. These have large potential to get them running on ECB QE contemplating on the size of it. If Germany drops below zero fueling deflation fears then the EZ does the same later the risk off trade should continue. Personally I think they might be scrambling to fudge the figures to make them be as expected to keep things from going pear shaped right now so Im not going to rely on the higher probability of a disappointment.
The US also has CPI data expected very close to the zero level. A dip below and we could see some of the risk flowing to the USD subside but I expect any disappointment in the EZ data and they will have already made their move for the day and have reason for the late day pullback.
Have a great weekend
MY APOLOGIES FOR THE BROKEN VIDEO OF INSIDE JOB IN THE COMMENTARY. I DIDNT THINK I WAS COPY WRITE INFRINGING WITH AN ITALIAN VERSION ALREADY ON YOUTUBE. HOWEVER YOU CAN STILL WATCH IT AT THIS LINK. STILL A MUST SEE!
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