Sir Pipsalot's Daily Market Update 1-22-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

As I mentioned yesterday, the EUR/USD downleg has reached it's typical target range of 1.3993 to 1.4117 and is likely to bottom out somewhere in here and work higher at some point soon. Some additional downside could develop to 1.3800, but it is a lower probability. My bias on EUR/USD has shifted to cautiously bullish with the understanding price action is bound to be choppy. Assuming we do bottom out for awhile, what we're likely to see is a consolidation/retracement phase that takes us into the 1.4452 to 1.4582 (38-50% retrace of the downmove from Nov/Dec). This move should take maybe 1-3 weeks to work itself out. If/once we get that consolidation/retracement rally, the next major downleg should develop from there (Cycle wave 3 I believe) that should be at least 1000 pips down and probably more. If you're in a long term short trade from the 1.44-1.46 region as I mentioned on 1-13, I plan to hold a portion short and fade into this rally by readding some of the partial profits I've taken. If your timeframe is more of a swing trade, I would get out of shorts completely and look to reenter at a higher level as discussed.

In the shorter term, we have resistance at 1.4216 and 1.4264 that could be good spots for a scalp short. 1.4117 has worked very well as a pivot flip-flopping between acting as support and resistance on shorter term charts. To the downside as I mentioned, 1.3993 and 1.3800 are the levels to watch on an extention lower. On EUR/GBP, I've tightened my SL to just above 0.8720 and am still targeting 0.8600 area for the final portion of my short trade.

Equities rewarded our aggressive bearish call here on Monday/Tuesday with a decisive break lower. I've closed a portion of my swing trade short on stocks and now have my eye on 1090 on ESH0 (S&P 500 futures) for the final 1/2, and that level should come into play over the next 1-2 weeks. There's a very important trendline and cluster of former low support in the 1083-1090 area that looks like an ideal target now that 1125-27 has finally given way. Shorter term, stocks are likely to be a bit more consolidative with resistance to be seen in the 1123 to 1128 range, so if you took partial profits or missed out on the move so far, a limit sell in that region would be ideal.

In news Friday:

0430 UK Retail Sales m/m (1.1% expected) - This trade has worked rather well and tends to reassert or hold up its initial corresponding strength or weakness for about 20 minutes after the release, so pullback/retracement trades have great potential.
If it comes out at 1.6% or higher, GBP/USD should rally 40-50 pips
If it comes out at 0.6% or lower, GBP/USD should fall 40-50 pips

0830 CAD Retail Sales headline (-0.2% expected) - We haven't really seen a full 0.5% deviation in awhile, but even 0.4% carried on for a decent move eventually a couple months back. I'd still play it safe and hold out for 0.5 on this one. While the headline number tends to trade better than the Core, I'd stay out if there's a conflct between the two.
If it comes out at 0.3% or higher, USD/CAD should sell off 30-40 pips.
If it comes out at -0.7% or lower, USD/CAD should rally 30-40 pips.

That's all for today's update. If you'd like to learn more about trading or trade along with myself and my collegues, come join us at Profit Mongers. Our subscription is very reasonable at $179 per month, and right now you can sign up for a 2 week trial to get started for only $29. This offer is for new customers only. If you have any questions, you can also email me at

To our success!
Sir Pipsalot