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<b><span style="text-decoration: underline;">1. INTRODUCTION:</span></b>

Nothing much happening at the moment in the Fx market. All eyes are now pinned on tomorrows ECB interest rate decision and Draghi’s Press conference that follows 45 minutes later.

Over the past few days the markets desire for the ECB to take action against persistent low inflation appears to be getting louder and louder for an interest rate cut or other stimulus to be introduced. Personally, I just do not see anything being done so quickly by the ECB. These calls for action emanated only very recently, primarily from the banking sector in the periphery countries, fuelled by market contributors.

Recent Eurozone data has disappointed such as Consumer Prices, which only rose 0.7% in the Eurozone versus the target of 2.0%. Although, PMi data and other regular economic data, except unemployment which is still at record highs and is projected to stay way too high for 2014, has been improving and there has been two quarters of continued growth. The issue is that the 17 member countries of the single currency are geographically split on recovery progress and overall the recovery itself lacks strength and appears very vulnerable to setbacks.

Very low inflation causes issues and the ECB is being forced to act, but will they? Remember, Germany holds the puppet strings! Inflation in the Eurozone is too low; yet thinking outside of the box to remove the over-hanging fear of dealing with stagnation and deflation is a giant obstacle for Germany. They simply will not alter course unless it is a life or death situation. The Eurozone is managed on Germany’s terms and conditions not any other countries. The Germans operate and as far as I can remember are extremely proud of their exceptionally low-interest rate policies.

<span style="text-decoration: underline;"><strong>POINTS TO NOTE:</strong></span>
<ul>
	<li>The thought of cash injections in the Eurozone like the FED has done would give German’s a massive nosebleed at only just the thought of such a policy. (Should they adopt this very unlikely route buy shares in “Scotties Tissues”…they will be selling by the truckload around Frankfurt and Brussels).</li>
	<li>The Eurozone banks are still not lending in general terms and therefore a rate cut would in my opinion cause problems for them as lending at a low-cost base.</li>
	<li>The German’s do not move fast and history shows that should they and the ECB react inside of two weeks, which has been the time span for this action, it would be seen as a panic decision.</li>
	<li>Always remember, the ECB being under pressure due to low inflation is something that Germany does not mind coping with. Their whole economy is based upon low inflation policies, and as for the other members of the single currency “Tough Sh*t!!”</li>
</ul>
I think that there will be a conversation at the two–day meeting, but they will say wait until December (the next meeting) when they will have more data upon which to make a judgment call.

I do believe that there is monumental pressure on Draghi to talk down the EUR/USD value from 1.3500 to a much lower level. The question is what is fair value for the exchange rate 1.2000-1.2500? We will have to wait and see.

Ahead of this news event I am in cash on the sidelines and I am debating whether the positions I enter, will I hold into Non-Farm Payrolls on Friday. I will update via Twitter.<b><span style="text-decoration: underline;"> </span></b>

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<b><span style="text-decoration: underline;">2. EXISTING LIVE TRADES:</span></b>

I have no live trades ahead of the ECB news.

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<b><span style="text-decoration: underline;">3. POTENTIAL TRADES ON MY RADAR:</span></b>

I am only focusing on two currencies into the ECB news event. EUR/USD and USD/CHF.

<b>EUR/USD:</b>

The news slant is so heavy to talk the EURO weaker.

I really want to be short the EUR/USD around 1.3600. Key support now lies at 1.3440. I just cannot see 1.3600 unfortunately ahead of the ECB. The next best level to enter short is 1.3580 then 1.3540. The latter number is probably the highest we will see prior to Draghi taking the stage.

On the 240 minutes (4 hour) chart there is a flag pattern developing and a break through 1.3440 sets up a measured move to 1.3100.

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<p align="center"><b>EUR/USD
</b><b>Short
</b><b>Desired Entries: 1.3540 or higher
</b><b>Stop Loss 1.3600
</b><b>Target once confirmed through 1.3440 is 1.3100</b></p>
<b>USD/CHF:</b>

This pair is not pulling back. Should the EUR/USD head lower I think this pair has a great opportunity to break much higher.

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<p align="center"><b>USD/CHF
</b><b>Long
</b><b>Enter at: 0.9150
</b><b>Stop Loss: 0.9080
</b><b>Limit /Target: 0.9250</b></p>
<b><span style="text-decoration: underline;">4. FINAL THOUGHTS:</span></b>

Big news tomorrow (Thursday) and again on Friday with U.S. Non-Farm payrolls. These type of days really test a trader’s patience and the key abilities of when to enter and exit trades. Do not get caught. Trade smart, trade lean and mean until your position is established.

No one knows what is going to happen. Let the trades come to you, remember, If you have a plan stick to it.

Trade with this in mind and trade carefully.

Good luck and take care.

Scott Pickering
The Pip Accumulator
Wednesday November 6th 2013

FOLLOW ME AT:
Twitter: @pipaccumulator
Google+/scottpickering

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