Forex Trading Signal 07/21/09

Crazy Cat

Former FPA Special Consultant
Hey folks,

Here is the video:

It looks like Monday extended last weeks' stretch just a bit further, and now we may be starting that rollover pullback in just about all the markets we cover. EUR/USD, GBP/USD, Stocks, commodities are all pushing relatively in the same directions, and all are due for a bit of a breather retracement of their surges over the past week and a half. Please watch the video for an in depth look at each. I'm not getting too aggressive on the selling, because the trend is up, and we are headed higher here over time. In an up-trend, overbought and extended can easily become more overbought and extended; however, there's good reason to expect this retracement now, if not soon, and if/when it develops, it will be a good long opportunity. On the shorter term time frames, I recommend being nimble, but bias yourself a bit short, especially if either the 2am EST or 3am EST Euro/London opens induce some good selling pressure for confirmation. I'm expecting a pullback on EUR/USD to the 1.4100 to 1.4000 range and looking for a position trade long from there should it occur. Based on the fundamental outlook for the CAD Interest Rate Statement later (see below), I'm recommending holding a long USD/CAD during the European session leading up to the news as well. Stocks will probably pull back into the 900-920 range to set up for good long, and Silver I'm preferring to hold short through all this and looking to add more short when it eventually pushes higher above $14. No big surprises out there in economic news on Monday other than a little risk appetite from decent CIT news. For news Tuesday:

0900 CAD Interest Rates (no change at 0.25% expected) - Sure if they hike, that will be a nice sell USD/CAD and any cut will be a nice buy USD/CAD, but neither is at all likely to happen. The biggest issue I think will be whether or not the BOC talks down the CAD like they did at the June 4th previous meeting. If they say CAD strength is counteracting the affect of the recovering financial sector again, or get even more aggressive on their verbal intervention, USD/CAD will stage a nice rally in both short and longer timeframes. In anticipation of this, I think positioning long on USD/CAD now during the European session to take advantage as people worry about this potential and load up long just in case is a good idea. Since I'm already dabbling with calling a top here on Stocks, the EU and GU, going long USD/CAD may be an even better move with the negative CAD risk on this statement. If you want something low maintenance, try a long at market with a resonable stop loss. If you're looking to increase your odds, look for some USD strength confirmation shortly after 2am or 3am EST to help confirm the USD side is in your favor. Lastly, if USD looks too weak, you can work it as a EUR/CAD long instead. Conversely, if for some reason there is no striking mention of the Canadian Dollar's strength, I would expect selling to come in to force USD/CAD lower.

1000 US Bernanke Semi-Annual Testimony - Bernanke may or may not throw out a tape bomb here about Quantitative Easing (QE).
If he recommends or mentions expanding the level of QE, EUR/USD and GBP/USD will rally 50+ pips.
If he instead focuses on the unwinding or scaling back of QE, EUR/USD and GBP/USD will sell off 50+ pips.
There will be other issues that may cause volatility with his testimony, but this is by far the biggest issue the currency markets will be focused upon there and should be a good opportunity if anything concrete is revealed about QE by Bernanke.

2130 AU CPI q/q - I don't fully recommend trading this one. Watch the video for more on this release. Obviously, if all 6 of the CPI figures come out high, that should be AUD/USD strengthening, and if all 6 come in low, that should be AUD/USD weakening.

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To our success,
Sir Pipsalot