USDX Rises While Euro, GPB and Oil Tumble Oct.15, 2015
USD Pulls Back While the EUR/USD, GBP/USD and Oil Fall
Its only normal that when the USDX rises that other pairs are falling but one might be curious why I mention oil today. The reason is not only that oil correlates with because its priced in USD but also the secret deal the US has made with the Saudis to cut the price of oil in order to hurt Russia. When I saw the article title I didnt even have to read the whole thing to know it is true because its been well documented that the secret deal Ronald Reagan made with Saudi Arabia in the late 1980s was a key factor in the fall of the Soviet Union.
The reason is the Russians federal budget is largely dependent on the price of oil being above $80. Once it drops below they will start to have serious problems paying their bills today, just as it was then, eventually leading to the collapse of the USSR. I have my doubts that will be the case today but since Vladimir Putin has knowingly built the Russian economy dependent on the price of oil instead of restructuring it to make money flow internally to create an internal economic base it surely makes them more vulnerable to price swings in oil. I bet Putin has a few more things up his sleeve though so I wouldnt count him out just yet.
I didnt mean to freak anybody out mentioning the spreading of Ebola yesterday but everyone should be aware of what they need to be doing should this thing get out of hand and its not looking good so far. One thing to keep in mind is there are several other things that kill way more people per year like the flu for example. It kills around 500K a year world wide and there are several others like heart disease diabetes etc that do roughly the same or worse. What makes Ebola a little more scary is the kill rate it has. While the flu has a mortality rate of between 1-2% depending on where you live. Ebola so far has roughly a 50% mortality rate making the potential damage it could cause much more. Nothing to panic over for now but worth at least considering ones options. We will much more by the end of the year since the WHO expects cases to rise to 5-10K a week by then and peak there considering containment actions they have taken so far. We will see.
On to the charts
EUR/USD Gave back all Fat Finger gains plus some
With the Euro retracing all the late day low volume move from Monday Im thinking who ever it was that dumped the 750M on the market is probably having some regrets right now since the S&P is back close to the price they dumped at. However maybe not because somebody with that deep of pockets probably has inside info or at the very least a need for cash.
I will be more open on direction today but with the conviction and retest below the hourly 200 the higher probability is for the short. Having said that we have seen too many false pushes lately to discount a long from yesterdays lows. At this point I would need to see the stop run to the current Asia lows or clear signs they wont let it pass to go long there but its tradable with a clear set up. I will say it does carry more risk with the next level 26 pips below so I would want a great entry and watch for any conviction below the Asia lows to exit. Otherwise the best level to short is at 1.2665 but with a current Asian range at 30 pips they may just stop it at the Asian highs. However there is also the hourly 200 just above that has more confluence they could also push to before a turn as well.
GBP/USD Makes third push into heavy daily support
The GBP/USD finally made the third push so I will expect the reversal today and maybe close the inefficient move on yesterdays bad CPI data. If the conviction is true though they may only run it up the 50+ pips from the lows to 1.5938 before they turn for a break lower as well. I have my doubts they will due to this being the first test of the heavy daily support. They will most likely chop it around here and test any demand at the level before breaking down if they want lower prices here. The best level for the long is the current Asian lows at 1.5883 or if they show conviction to the upside above the Asian highs during London then a backside entry is possible at the Asian highs as well providing they don’t test the 1.5938 before the pullback. I will be open for the short from 1.5938 but do prefer the long on this pair today.
EUR/JPY Finishes third push also
The EUR/JPY finished its third push but also had a 60+ pip pullback yesterday so keeping open on direction is the best course of action today. Too bad the trap wasn’t clearer this morning or I would already be short getting close to moving the stop to break even. Otherwise I will be waiting for the test of the Asian highs around 135.69 for the short while still open for the long at 135.02. If there is nothing clear if they test the Asian highs they will probably run to 135.87 or higher if they do want to break it down today. The 135.18 is valid for the long but carries more risk with the next more significant level being so close.
Forex News Today
The calendar has German CPI data early on but they will probably wait to see what Super Mario has to say before making a move unless the miss is very large. I will be curious myself to hear if there is any concern with the courts up coming decision on the OMT program. If he takes questions and lets anything slip we could see a tape bomb move.
The UK has Unemployment and Earnings data later in the day expected to improve on all. The move on these will depend on all being somewhat close. If the Claimant Count is good but Earnings bad then depending on the miss they should offset but if one misses big while the other is close then they will run on the bigger miss as we have seen before.
The US has PPI data, Retail Sales and Empire State Manufacturing. Most are expected at no or small change with the exception of the monthly Retail Sales expecting a drop below zero. As long as its not a big disappointment I doubt we will see much since Draghi speaks again later in the day. Empire State is also expected to drop 7 points but being a medium impact event shouldn’t do much either barring a large miss as well.
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