S&P And USD/JPY Rally Through Resistance – October 23rd 2015
Yesterday it was looking more like equities may finally begin to roll over and push to the downside. I was actually quite excited about the possible move to come. As I mentioned in yesterday forex analysis, we still needed to see the price action confirm our belief but the setup was looking good. Today the price failed to prove the thesis as correct and as a result I did not consider any trade. So many times traders get caught trying to force the market to do what they thought. Instead of realizing their plan may be wrong they try to force a trade and get burned. It is far better to recognize a move is not occurring and simply sit on your hands verse taking a loss trying to force the position. As I mentioned yesterday, should anything interesting begin to setup again in equities I will start including it in the daily market analysis once again.
Major Dovish Comments From Draghi
Today Draghi made come major bearish comments that absolutely tanked the EUR/USD. One thing he mentioned was the European QE. He alluded to increasing the size of the monthly QE which is obviously bearish and the market reacted as such. Another major comment was the fact that they have a serious fear of deflation. The reason this is so bad is that fact that rates are already so low which puts them in a bad situation. He also made the comments that a rate cut had been discussed. Overall there was really no positive comment to be said and the price action of the EUR/USD showed that with a major sell off.
As of right now the current situation in the Euro leaves us with limited levels to work from to consider a short. The fact is when you have a major sell off you are left with limited upper levels to consider a short and in this case I have no upper level from which I would consider a short from. The only option that I talked about in the video daily market preview was the possibility of a backside of a level setup. This would require breaking the previous lows and then retesting that level from the underside for a continuation short. At this point I’m still going to leave the directional bias open. With today’s push down you might wonder why? Essentially when we have a move that is 2 times the ADR (average daily range) I do not trade with a directional bias the following day.
GBP/USD Sells Off After Bullish Retail Sales
Pound retail sales was majorly bullish and came out 1.5% better than expected which is a huge deviation. The Pound made an initial push up in the direction of the better than expected news but quickly reversed after retesting the highs. It tough to say exactly what the GBP/USD would have done if the Euro had not tanked close to 300 pips. At the time Draghi started speaking the Pound had not given up a great deal of ground. Obviously there was not a great deal of strength because the Pound tanked as soon as any USD strength was seen in the EUR/USD.
Considering today’s push down was fueled by the Euro move it does give me some concern about trading the Pound directionally. With that being said at this point I will consider today’s move a first push down and look for the continued push to the downside. Its is critical to remember that we still need to see a valid stop run of an upper level to take a short position. At this point I only have one upper manipulation point I would look for the short. The only other option would be a backside setup off of yesterday’s lows.
Forex News For October 23rd 2015
German Flash PMI m/m 3:30 AM Eastern: This month 51.8 is the expected number and it take a 1.5 or 2 point deviation from the expected number to get a 15+ pip spike. Two months back, August created a 15+ pip spike that was quickly retraced.
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