US Dollar Index Retraces Lower – FX Market Analysis 1/4/16
Welcome back for another year of trading! 2015 was a great year of trading for us at Day Trading Forex Live (DTFL). If you have not gone through the month end reviews you can find them under the Recent Trades tab. I’m going to work on getting the video for December done tomorrow. As December was a short trading month it will be a much shorter video. Lets get into today’s market analysis.
EUR/USD Still In Range
If you exclude the large news based move that occurred on the 3rd of December, the EUR/USD was in a 250 pip range for the entire last month. The market didn’t just die out but it would move rapidly into the outer range and then fail. Obviously this gives us a key upper and a key lower level from which the Euro will likely gain its next direction. Right now the US Dollar index is still holding below the overall highs set at the beginning of December. On a shorter term basis we had a strong rejection after creating a stop run through 99 on the US Dollar Index. If we stay below 99 then we are likely to see some short term Dollar weakness which could mean further retracement to the upside on the EUR/USD. If/when we do see the 99 handle break the next strong Euro dive will likely occur as well. To start the year I will keep an open directional bias and I have 2 upper manipulation points and 1 lower level I would consider a stop run from.
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Large Stop Run Of 1.4700 On Pound
The GBP/USD starts the week by making a large stop run of the 1.4700 psychological barrier. Although the Pound is quite bearish I would not consider a short without a substantial retradement considering how extended this move is. Often times these straight short moves often retrace to their starting point. In the case of the GBP/USD that happens to line up with our one and only upper manipulation point as seen on the chart. At this point I do not have a lower manipulation point from which I would consider a stop run reversal long. For those of you who are members be sure to watch the daily market preview video for details on what needs to happen for the lower level to become valid. Like with the Euro, I will start the year with an open directional bias. As I described in the daily market preview, we may have a current cycle but it formed in a “holiday” illiquid market which is why I would rather keep the bias open to start.
Forex News For January 4th 2016
UK PMI Manufacturing 4:30 AM Eastern: This month 52.8 is the expected number. This has been a very good market mover in the past with fairly consistent follow through on marginal deviations. One recent spike that did push back the opposite direction was in November. The news was much better than expected which created nearly a 50 pip spike. Given the current Pound weakness I wouldn’t be surprised to see any market spike up be sold into rather quickly.
US ISM Manufacturing 10:00 AM Eastern: Usually this keeps to less than a 15 pip spike but it has been capable of going over that number in recent months. 49 is the expected number this month.