Sir Pipsalot's Daily Market Update 11-18-2009

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

We've been getting some notable see-saws in the EU and GU recently, but I think we've seen a shift in sentiment a bit more towards USD strength, especially with some further "unwinding" type actions we saw today out of the Fed (reducing maximum maturity of primary credit loans from 90 to 28 days). With the bounce up in the asian session, I think it's a great chance to get short for swings or scalps on the EUR/USD here around 1.4890-1.4900. For a scalp, try a 20 pip SL, for a swing, use 50-100 pips.

It looks like we're getting closer to another top on stocks as I've been discussing the last week or so. We still hold the short term potential to bust through higher with a rally to around 1120, but either those highs, or the recent highs around 1113 may end up topping us out and leading to a decline lasting 1-2 weeks and potentially developing into more. From a day trading perspective, a long on stock futures targetting 1115-1120 with a tight SL could pay off a bit, but from a swing trading perspective, shorting around 1120 or after the top more clearly defines itself should pay off well. Long term is worth entering short now or holding if you're already in.

In news Tuesday, we saw UK CPI come out a bit high, but not high enough to hit our triggers and we still got the 40 pips up we were looking for. In news Wednesday:

0430 BoE Minutes - This was the meeting where they expanded their APF by less than expected (bullish GBP) and were surprisingly hawkish on inflation; however, the BoE Inflation report last week got spun funny as trying to talk down inflation a bit, showing a "more subdued path for inlation." It will be enlightening to see how strong the will is to expand the APF more down the road (GBP bearish), and how hawkish or dovish the sentiment really is at the BoE.

0700 CAD CPI - This hasn't been tradable for quite some time.

0830 US CPI Ex Food & Energy m/m (0.1% expected) - We saw the PPI Tuesday come out low and the initial surge was indeed towards broad-based USD weakness best seen on the USD/JPY, so that's how I'd recommend approaching CPI. It's hard to say how far the pair may surge, but with a 0.1% deviation, typically the USD/JPY has surged 20 pips initially, and has a chance at a further move of 40-50 pips after a subsequent retracement. A surprise 0.2% or more away from expectations may see a more amplified move. As usual with CPI, you have to make sure there are no glaring conflicts with the other CPI figures released at the same time. Because of the potential conflicts and small potential move, I don't think this is a very high quality trade again yet.
If it comes out at 0.2% or higher and the other CPI figures are as expected or higher, USD/JPY should rally 20-50 pips.
If it comes out at 0.0% or negative, and the other CPI figures are as expected or lower, USD/JPY should fall 20-50 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.

To our success!
Sir Pipsalot
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