Up Periscope!

December 7, 2015

Up Periscope!:
With Friday’s US labour report coming in largely within expectations following Thursday’s Draghi induced carnage, the market felt it didn’t need to massively re-rate for a second day in a row. A largely uneventful set of accompanying numbers being the unemployment rate steady at 5.0% and the average hourly earnings at 0.2%, both as expected saw the majors barely blip.

“USD Non-Farm Employment Change (211K v 201K expected and 298K previously)”

With the ECB rate decision inspiring an almost unheard of, 500 pip single day rally in the most liquid Forex pair the EUR/USD, it was going to take one hell of a miss for the pair to keep spilling blood. As it so often is the case, one of the most anticipated NFP releases in our short memories was largely a non-event.

EUR/USD Hourly:
151207_eurusd_1hourly
Click on chart to see a larger view.

As you can see, NFP hardly put a dint into the previous day’s daily candle. The ECB decision has flushed some of the weak shorts out of the market which after all the dust settles is actually a healthy thing going forward. Get the shock out of the way and move on.

I’m always wary of articles quoting ‘unnamed sources’ but I wanted to bring up a Reuters article which appeared over the weekend highlighting the opposition that Draghi faced heading into last week’s meeting. It looks as though the pressure that his full bravado style was designed to put on the governing council actually backfired on himself in the end.

“Draghi raised expectations too high, on purpose, and attempted to paint the Governing Council into a corner,” the source said. “This was problematic and he was criticized for this by several governors in private.”

Looking forward (through the periscope if you like) toward the upcoming week, we see top scheduled event risk focused firmly on Fed sensitive data releases including unemployment, retail sales, PPI and consumer sentiment all squeezed together on Thursday and Friday.

I’ll leave you with this quote from the aforementioned Reuters article regarding the ECB’s thinking on the Fed:

“If we had over delivered, the euro could have gone down to parity and it would have been more difficult for (Fed Chair Janet) Yellen to defend an even stronger dollar. Now the Fed will be quite relaxed.”

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Featured on the Forex Calendar Monday:
JPY BOJ Gov Kuroda Speaks

GBP BOE Gov Carney Speaks

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Chart of the Day:
Today’s chart of the day takes a follow up look at last Monday’s GBP/USD chart of the day in which we took a look at a clean bearish channel that price has been creeping down between over the past few months.

“I just can’t find a technical argument that would make me want to buy against the trend at a weak bearish channel bottom.”

Well we certainly found a reason didn’t we! Just a certain Italian named Mario Draghi.

GBP/USD Daily:
151207_gbpusd_daily
Click on chart to see a larger view.

While price is re-testing those previous swing low support levels this time as possible resistance, I am inclined to keep my bearish bias on the pair in tact and stay looking for setups in the direction of the trend.

Do you see opportunity trading these Cable parallels?

Dane Williams – @VantageFX

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