US Dollar Index Holding 96 – FX Daily Forecast 2/19/16
Dollar Index Holding Support
Over the last few weeks I have mentioned the US Dollar index off and on when we approach a key level. As the Dollar started to push down after the stop run of the overall highs, I mentioned 96 as a key level. As you can see in the chart below this point has been stalling the price and what happens next is rather important. Should that level break then we are likely in for a test of the overall lows around the 93 handle. The Dollar Index has been very interesting because of the inverse correlation we are seeing to the equity market. Historically when equities begin to aggressively sell off the Dollar has historically strengthened. As of lately we have been seeing just the opposite occur. Going back to the 96 handle, should that level break to the downside then favoring EUR/USD and GBP/USD longs becomes a better option.
Euro Rejects Lower Prices
Right out of the gate the Euro got slammed to the downside. On the daily chart we are retesting the backside of the 200 EMA which is an interesting level for me. The daily 200 EMA has always been a good indicator for long term market direction. After 10 years of trading it is in my opinion the best floating resistance and support level on the chart. While I don’t place trades off of it directly, when the price starts to approach it my directional bias can shift because of it. At the end of the day, the only thing that gets us into a trade setup is a valid stop run from a pre-selected manipulation point.
Right now the 1.1115 area is a short term line in the sand. A break and hold below it and we are probably retesting the lows. If however we push up to start the day and then retest it from above I would look to take a stop run setup long off of it. Additionally we have one upper manipulation point listed on the chart from which I would take any valid stop run short.
GBP/USD Retests Backside Of Breakout Point
Looking at the GBP/USD from any longer term chart you can obviously see nothing but bearish price action. At this point nothing about the last few days changes that. We, however, are day traders and therefore entry timing is critical to trading success. The first upper manipulation point I have listed is yesterday’s highs. Anyone who shorted the GBP/USD over the last 2 days would officially be under water if/when that level breaks. Any level like that (which is fairly common if you know what your looking for) is always a high probability manipulation point because it holds liquidity. Simply put its a level where an entire short term side of the market has to make a decision as to whether they will continue to hold their position into the red. This creates churning and thus why price is often driven into these levels before turning. This is the first and only upper manipulation point I have listed. To the downside I have the upper levels counter part. It is the level where anyone who have gotten long over the last few days would officially go red. Additionally, we have one deeper level listed as well.
Forex Market News For February 19th 2016
UK Retail Sales 4:30 AM Eastern: UK Retails Sales has been acting really strange over the last 3 releases that had a sizeable deviation. We had a major spike in the direction of the release and then the price reversed just as quickly For this month .6 is the expected number on Retail Sales w/gas.
US CPI m/m 8:30 AM Eastern: US CPI is far less important lately as compared to the Pound CPI. While it is definitely capable of a large spike it has had very inconsistent follow through. Both of today’s news events are the type of release that I would not use to enter a previously confirmed setup. For this month -.1 is the expected number but it is important to look at the y/y number as well as it tends to deviate more often.