Sir Pipsalot's Daily Market Update 1-26-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

The EUR/USD is still in a bottom-forming process medium-term and remains vulerable to an extention lower to support around 1.3993 and possibly even 1.3800, but it remains entirely possible that the swing lows were set Thursday at 1.4028. Either way, we're likely to register a bottom followed by a 38% retracement (now at 1.4450) here at some point in the next two weeks or so, and that will trigger our next clear selling opportunity. The weakness on EUR/GBP has been a major headwind for EUR/USD to muster a substantial retracement so far. With relatively minor action during Europe and NY on Monday, EUR/USD has finally picked up some direction lower here during Asia. It will be quite telling to see how the European session responds to the impulse lower, so I'm going to refrain from picking a side just yet.

Stocks look set for one more push to at least slight new lows, at least that's what the futures market seems to be forecasting now. Unless we clearly break and hold through the last spot of support around 1081, I'd rather not chase this move with another sell just yet. Hopefully we'll see a decent 20 point+ bounce here before we extend too much lower since that will offer us the best opportunity for a great short trade. There are quite a bit of reasons to see support here around 1080-1090, so if it goes through without a reasonable bounce, that will be quite important.

In news Monday, we saw US Existing Home Sales come in very low, and while the USD did weaken for some time afterwards, the losses were best seen on the GBP/USD, so the EUR/USD and USD/JPY sustained smaller reactions. In news Tuesday:

0400 German IFO Business Climate (95.1 expected) - I won't be trading this, but it can create some small moves on a 1.5 deviation. Lately, it just hasn't been all that market moving though, but you never know if that's set to change.

0430 UK GDP Advance q/q (0.4% expected) - The last 2 advance releases saw very low numbers create huge downmoves on GBP/USD, so this is definitely a good one to watch. Be careful with a smaller 0.1 deviation as that has a higher likelihood of creating a whipsaw.
If it comes out at 0.6% or higher, GBP/USD should rally 40-50 pips.
If it comes out at 0.2% or lower, GBP/USD should fall 40-50 pips.
If it comes out at -0.1% or below, GBP/USD should fall 100+ pips.

1930 AUD CPI Trimmed Mean q/q (0.6% expected) - It's important to ensure that there isn't a lot of conflict amongst the Trimmed Mean, Weighted Median (0.6% expected), and regular CPI (0.4% expected) releases in order to stick with a trade here. Unfortunately though we've seen 3 straight quarterly releases with some form of conflict. If they're all in the same direction and Trimmed Mean (arguably the most important) is off by 0.2, we've got a good trade setup.
If it comes out at 0.8% or higher, AUD/USD should rally 40 pips.
If it comes out at 0.4% or lower, AUD/USD should fall 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