US Dollar Selling Continues – Daily Forex Commentary 3/21/16
Euro Continues Near The Highs
The Euro is approaching a very significant level around the 1.1370 level. In the short term I believe this is one of the most important “lines in the sand” for directional bias. A break and hold above that point could signal a much longer directional shift to the upside. From time to time I will mention COT data and one point I want to mention is what we are seeing with the Euro currently. Since June of 2015 we have continued to see buying pressure slowly come into the Euro but yet no rise in the EUR/USD. This is one of my favorite points with COT data, that is a divergence between the price movement and the underlying buying or selling pressure. This is what I pointed out a few months back in regards the Aussie as it crested new lows while buying pressure remained clear. Now the Aussie is 500-600 pips higher from the point where that was first seen. This same type of divergence has been seen in the the Euro which gives me a stronger bias towards the upside long term. Some key points need to break and hold before any longer term upside bias becomes solidified.
From a short term perspective I’m continuing to remain directionally neutral. I do think we could see a short term push down first, even if the price eventually works to the upside but we will let the price action make that decision. As always, our job is to simply pick the high probability points where liquidity is likely sitting and then simply wait for the stop run of one of those levels to give us an entry signal. To start the week I have two upper levels and one lower point. Additionally, I would also be open to a backside short from our lower level should the proper criteria be satisfied.
GBP/USD Buying Pressure Continues
I think this is a pivotal week for the Pound. Overall we are seeing the long term Asset class still showing a heavy short position with no shift up. On the shorter term data represented within COT, we do however see some bullish signs. Remember the latest COT goes from and includes March 8th to March 15th. If you notice March 14th and 15th showed heavy selling pressure on the GBP/USD and yet we ended with heavy buying pressure shown in the COT data among large speculators. Buying into a falling market is a very good sign of accumulation which makes further upside more likely. I would have preferred if we didn’t have the huge rally Thursday and Friday but I do think the upward bias still remains the higher probability this week. Like always, bias is fine but it is not a reason we take an entry.
To get a valid entry, we have 3 listed levels here today. Officially directional bias remains open in regards to short term market cycle. To the upside we have two listed points and one lower level which I would also take a backside short from should the opportunity arise.
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Forex Market News March 21st 2016
We have no scheduled data that I will worry about avoiding