Hey folks,
We had a lot of news trades this morning, and I spent a lot of time recording video for our webinar in the Diamonds room today, so I'm a bit tired of video recording and would rather stick to a text signal tonight if you don't mind. The EUR/USD broke through 1.4100 to confirm the head and shoulders sell on the hourly, only to frustratingly rally back up as GBP continues to be the preferential sell. At the moment, as long as the 1.4241 highs hold on EUR/USD, the bias should be short from here. If those highs go I'd shift to neutral. If we do resume downside price action as we've seen on the GBP, the 1.3800 level is a likely medium term target. One big reason the GBP has been weak are rumors of UK Prime Minister Brown potentially resigning. These rumors have been refuted by his office, but the markets definitely still smell blood. Pretty much all of the scheduled news on Thursday came out pretty vanilla without any big surprises with the exception of very strong UK Halifax house prices which made a very nice short term GBP strengthening move of 80 pips in 40 minutes.
Stocks are working their way through what is likely the final phase of its advance before a significant, major, earthshattering decline. As Doug Hoenig described in a recent essay, we are in the eye of this economic storm, and a second major financial crisis is in store for us on the other side. This one will likley be worst than the last. We'll keep a close eye on stocks since once the reversal is well confirmed there, that will have strong implications for currencies and gold.
After taking a much closer look at gold as part of the Q&A session of our webinar today, it became pretty apparent to me that while gold very well may top out somewhere near recent highs, it's entirely possible we can see an "expanded flat" retracement pattern on gold which would take prices modestly above their $1007 highs before the more major C wave lower that will take prices back below $700 before bottoming out. If an advance past $1000 does occur though, and it is more impulsive in nature, that could mean the entire longer term wave count is off somehow and we'll re-examine it for alternatives. For the news Friday:
0700 CAD Employment (-36.5 expected) - Last month's huge positive
deviation created a surprisingly small selloff in the USD/CAD. On the one hand it seems as though CAD levels after news events have been frequently manipulated; however, CAD Employment is usually a very reliable indicator and one bad month shouldn't completely force us to sit on our hands here. A comprimise of trading a wider
trigger than usual seems appropriate.
If it comes out at 0.0K or higher, USD/CAD should sell off 50 pips
If it comes out at -62K or lower, USD/CAD should rally 40+ pips
0830 US Nonfarm Payrolls (-520K expected) - We have not seen very large deviations on this report since December 2008. Because of that, we've gotten a lot of strange price action on the smaller deviations primarily due to large order flows that tend to follow this release. I recommend trading a wide 100K trigger and if it comes out closer to expected than that, or if there's a conflict with Unemployment Rate, avoid taking long directional trades and simply look to scalp sell rallies and scalp buy sell offs into support. Because we've seen some clear decoupling of EUR/USD, USD/JPY and EUR/JPY, it's hard to say which pair will have the best reaction on the news. My best guess is USD/JPY will be best for a quick news
spike pop, but EUR/JPY will have the deepest, most sustainable move.
If it comes out at -420K or higher, EUR/JPY should rally 50+ pips
If it comes out at -620K or lower, EUR/JPY should sell off 50+ pips
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Forex Trading Signal 06/05/09 -
06-05-2009, 04:37 AM
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