Sir Pipsalot's Friday Market Update 07-09-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

Wednesday and Thursday saw quite the short covering rally on EUR/USD, AUD/JPY and stocks. It looks like it should top out over the next day or so, so keep the faith with the stock short, and start considering a position trade short on EUR/USD or a yen cross like EUR/JPY as this short covering rally matures. I can't pick an exact top this time, but the timing for a resumption lower is most likely in the next 24 trading hours.

Unfortunately, my AUD/JPY position trade short did stop out around 76.60. With optimistic news developments turning sentiment back positive on AUD/JPY, I'd prefer to take my next yen cross short on either EUR/JPY or GBP/JPY. I'd look for either suspiciously toppish price action or confirmed downwards momentum to signal a decent opportunity to get short for a swing or position trade today. There's also a chance we top out early Monday instead. Just make sure you're using appropriate risk management so you don't lose too much if we're wrong and the rally extends for quite some time.

On stocks, the price action is more clear and our original trade is still in fine shape despite the sharp short-covering rally. In fact, shorting a bit more on this bounce seems like a good idea if you're not in for very much on the stock short. Chances are we'll top out here between 1067 and 1081 on S&P futures either today, or possibly overnight Sunday. Remember I got in short for the position trade at 1030 with just over a 100 point SL, so 30-50 points against us is a perfectly reasonable pullback given the scope of the trade.

In news Wednesday and Thursday, we saw Aussie Employment data come out quite strong leading to a 75 pip initial spike higher that extended even further for 25-40 pips more hours later. In the Profit Mongers room, since the initial move was too fast to capture (for those without the SNW), we put an opportunistic buy limit order at 0.8710 which filled Thursday and made us some money. ECB and UK Interest Rate statements offered little surprises and price action of note. In news Friday:

Canadian Employment Change & Unemployment Rate (20K & 8.1% expected) - Here a big surprise on Employment Change should dominate the price action, but be wary about smaller deviations on Employment Change getting whipped around by a conflicting Unemployment Rate surprise (like last month). Typically this trade will cover 50-100 pips very quickly when there's a strong deviation. Then it will usually consolidate and even stage a decent retracement (50-62%) in the first hour. Typically this is a good retracement to get in a trade on to look at least for a reattempt of the former spike extremes.
If it comes out at 40K or higher, USD/CAD should fall 50-100 pips.
If it comes out at 0K or negative, USD/CAD should rally 50-100 pips.
If the numbers come out closer than that to the 20K expected value, we may still see a decent move worth following, but make sure the Unemployment Rate has a complimentary deviation s well.

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
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