Sir Pipsalot's Daily Market Update 1-27-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

We continue to see consolidation on EUR/USD in keeping with the forecast I've been talking about for a few days now of choppy price action, bottom forming, and eventually a slow push back up. While there's always the potential to extend a bit lower to 1.3993 or even 1.3800, it's still worthwhile to play the ranges and expect some choppy price action. Once we retrace a good 38% over the next week or two (1.4450 right now it looks like), we'll be in prime position to get in short for the resumption of the downtrend.

Equities are presenting a similar pattern of bottom-forming short term and right now the 38% retrace there is poised around 1106, so in the 1106 to 1114 range is where I'm willing to hop back in short. A break of 1077 though may call for a momentum sell.

In news Tuesday, we saw UK GDP come in low and lead to a 100 pip selloff over 1-2 hours. All other news was too close to expectations for a clear trade. In news Wednesday:

1415 US FOMC Interest Rate Decision (no change at 0-0.25% expected) - There is almost zero chance they'll surprise the market with a hike here as several FOMC members are on the record saying that interest rate hikes will be one of the last things they'll do in this recovery cycle. The price action will instead come from the commentary in the FOMC statement itself. There's pretty low odds we'll see anything substantial out of this statement as Bernanke is finishing up his confirmation process and likely doesn't want to ruffle any feathers. Here's a link to a good rundown on the FOMC for more information:
DailyFX - EUR/USD: Federal Open Market Committee Interest Rate Decision

1500 NZ Interest Rates (no change at 2.50% expected) - Economists are unanimous but there's always the chance they'll follow Australia and surprise by raising rates. If they do it will be very NZD/USD bullish. Right now their timeframe for raising rates is around the middle of 2010, so any accelleration to that outlook will be NZD/USD bullish, and any delays to that plan will be NZD/USD bearish.
If they surprise hike, NZD/USD should rally 70-80 pips.
If they stall/delay interest rate hike timeframe past mid-year in their statement, NZD/USD 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