The Equity Crash We Have Been Looking For? Forex Commentary 2/12/16
Euro Gains On Risk Aversion
Over the last week we have continued to see global equities decline. What has been very interesting about this move is the lack of broad based US Dollar strength when risk aversion sets in. Historically speaking, the US Dollar will strengthen when global risk increases. When we see equities begin to fall aggressively and yet we do not see Dollar strength this is troubling. The reason the Dollar strengthens in this scenario is because it is the safety mechanism of the world, the “safe asset” people run to when all else fails. If this begins to fail then it is a scary scary signal for the Dollar. Obviously this is very early in the move and we are far from making major assumptions such as this. If equities do continue to fall, this Dollar connection to risk aversion will be closely watched as it has major implications.
Today the Euro continued to grind slowly higher. We don’t have a cycle bias at this point and I don’t have a great deal of faith in the continued move to the upside. At this point I only have one upper manipulation point from which I would consider a stop run short. Our lower levels are even more limited as we only have one lower level to consider at this point and this point is beyond the lower ADR.
Possible First Push Down For GBP/USD
Over the last month we have see the market continue to aggressively chop back and forth. The lack of the traditional cycles has meant we continue to trade with an open directional bias. Had we been in a more consistently cycling market I would more than likely have called today’s move a first push to the downside. Looking back over the last few days the we have seen the GBP/USD rising. Therefore today’s move down clearly breaks that move and starts a potential first push down according to the rules we use. Without getting into all the rules we lay out in our online forex trading course, there are a few criteria that are just missing and therefore still keeping my directional bias open.
Unlike the Euro, the Pound has quality manipulation points. We have two official upper levels and one lower level from which I would take a valid stop run reversal day trade. For those of you who are members, be sure to watch tonight’s daily market preview video as we have an additional upper level that may potentially become valid and I cover what needs to occur for that to happen. We had a very nice backside day trade short off of our first lower manipulation point from yesterday’s FX forecast so hopefully we will see the Pound come through for us on the last day of the trading week.
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Forex News For February 12th 2016
US Retail Sales 8:30 AM Eastern: Retail Sales is a tough call this month. The reason I say this is because of the historical releases of this data. Generally Retail Sales has been released with PPI which has made the move smaller than it would have been when there was a conflict. On the other hand when both deviate in the same direction the move is larger than it otherwise would have been. For this month both Retail Sales and Retail Sales Ex/Autos are expected at .1