Sir Pipsalot's Daily Market Update 1-25-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

It's quite likely we'll see a pause in USD strength here as the EUR/USD seems to be bottoming out. The consolidation/retracement could take 1-2 weeks give or take and target the 1.4450-1.4585 range. Because there's a strong likelihood we'll see choppy price action, I don't recommend chasing momentum long on the Euro. Instead, I'd prefer to buy on dips within channels and off clear support, such as a buy around 1.4120, or the buy that worked earlier just ahead of that around support at Friday's close. If you're looking to play shorter term momentum, usually GBP/USD will work a bit better.

The easy way to play this is to wait. Wait until EUR/USD completes it's retracement pattern, then get in short. If we get something unexpected, the worse case scenario is you get in a little late. If you gamble on this bounce, keep in mind it's more risky than trading with the trend because the bottom is not yet fully confirmed, and countertrend moves are a lot trickier than trend based moves. That being said, I'm cautiously looking for longs as I mentioned in the first paragraph.

On Thursday night I said stocks would work into a support area between 1080 and 1090 over the next week or so, and it made it to 1086 in one day. Now though, it seems stocks have shot their wad a bit, and while there's always the chance they can extend lower, it's more likely that we'll see stocks retrace higher similarly to EUR/USD and target the 1109.50 (38%) to 1116.50 (50%) range. I think the best way to play stocks right now is to take some profits now if you haven't already, and hold some short if you're in short from 1120 or above. Otherwise, get flat or scalp small moves until we see a 38% retrace on the hourly. Right now that would mean getting short around 1109 on the ESH0 (S&P 500 futures).

In news Friday, quite low UK Retail Sales hit our 40-50 pip price target a bit more quickly than usualy only 6 minutes after the release. CAD Retail Sales came in a bit weak, but not hitting our triggers; however, USD/CAD still managed to gain 60 pips slowly but surely over the course of 90 minutes. In news Monday:

1000 US Existing Home Sales m/m (5.90M expected) - Lately Existing Home Sales has produced small to moderate spike reactions, but more importantly, it has helped shape the session and led to further USD strength on repeatedly better than expected releases. I expect a broad-based USD move to hold up for at least 30 minutes, and quite possibly 1-2+ hours in response to this data. Sometimes it's not a huge move, but nice and gradual.
If it comes out at 6.15M or higher, USD/JPY should rally 30-40 pips.
If it comes out at 5.65M or lower, USD/JPY should fall 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