Vote Night And The US Dollar Tumbles – Forex Forecast 2/2/16
EUR/USD Rallies On US Dollar Weakness
In yesterday’s forex forecast I talked a little bit about the US Dollar index. One of the things I mentioned was the compression of the price we were seeing and how that compression often signals a large move to come. The Dollar index still remains in the very long term range but yesterday was met with selling pressure as it tested short term highs. This is one of the reason I have continued to keep an open directional bias on both the Euro and the Pound more often than not. I’ve mention many times that the EUR/USD has been in a very tight 2 month range and that range corresponds nicely to the same range in the US Dollar index. Until that breaks I wouldn’t expect the Euro to either. With that being said we still continue to have limited manipulation points today. Generally large moves leave large gaps in between levels and today is no different. To start the day I have one upper level and 2 lower listed manipulation points I would take a valid stop run from.
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Massive 2 Day Pound Rally
The Pound made quite the impressive drop a few days back, but the 2 day move back to the upside has been equally as impressive. On the move to the downside from the 29th of January I was asked why I didn’t call that a first push to the downside. Using the trading plan we cover in the DTFL course, any move that is 1.5X ADR or large we will generally throw out. We term those type of moves as “inefficient moves” as the market does not get to trade as much volume as it normally would. As a result, those fast, abnormally large moves tend to have a much higher probability of being retraced and therefore why we will not use them in our market cycle. Additionally, market direction makes up only 10% of the DTFL trading strategy. Because of that, if it does not fit our criteria I would much rather go into the day trading the manipulation points to both sides of the price and keep my options open. This is exactly what I will continue to do today. As with the Euro, the levels on the Pound are very limited. In fact, I only have one upper manipulation point from which I would consider a trade and no current lower level. As I mentioned in the members daily market preview video, any new lower level will need to be formed intra-day using our rules for new level selection.
Forex News For February 2nd 2016
UK Construction PMI 4:30 AM Eastern: Construction PMI has been a toss up for continued follow through in the direction of the news. One thing it most certainly has been as of late in a market mover and as such I would not carry a Pound trade into it. For this month 57.5 is the expected number.