Sir Pipsalot's Memorial Day Update 05-31-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

My outlook on the EUR/USD is pretty much the same as it was Friday. I'm a bit contrarian thinking a bounce is still possible, but I will quickly abandon that view and look to take advantage of a selloff if we can trade lower through 1.2200. See commentary from Friday's Update for more there:

On stocks, I still think the odds are tilted more towards short term upside, but medium to long term downside. A scalp long from here (1090 on futures right now) may pay off, but the trade I'm waiting for is a position/swing trade short on the S&P 500 in the 1110 to 1120 range. See Friday's signal (linked above) for more detail on that as well.

In news Friday, we had a lot of small reports come out of the US at 0830, but none were all that important, and they all were fairly close to expected so there was little market reaction. Monday is a US national holiday, so we might not see a ton of action except for early European session and later when Asia gets moving in the evening. There is some Aussie news coming out though:

2130 AU Retail Sales (0.3% expected) - Last month on a deviation that didn't quite hit our triggers, we still saw a 35 pip move, and 2 months ago on a big surprise we saw a 50+ pip move, so this report is still in play. Also, if the action happens to move too quick early, try putting a limit order in to get in on the retracement about 5 pips ahead of prerelease. Such a trade last month would have worked out ideally. Also, keep in mind that a very big surprise could lead to a 2-3 hour trend as that may play into trader's expectations for the interest rate announcement language.
--If it comes out at 0.9% or higher, AUD/USD should rally 40 pips.
--If it comes out at -0.3% or lower, AUD/USD should fall 40 pips.

0030 (Monday night, Tuesday Morning EST) - AU Interest Rate Decision (expected to hold at 4.50%) - Economists unanimously expected the RBA to hold rates steady at 4.50% after last meeting's commentary about their hikes having "normalized" their rates. Of course they could possibly surprise the market with another hike, but if not, the question is: How long will they likely be on hold? Economists really don't agree, with some looking for 1 month, and some looking for 3-5 months on hold. The language of the statement and post-announcement speech will likely be scrutinized for clues as to how long they're planning to keep rates steady.
--If they surprise markets with a hike, AUD/USD should rally 80+ pips.
--If their statement/speech is more hawkish than expected (hinting towards another hike in 1-2 months), AUD/USD should rally 40-50 pips.
--If their statement/speech is more dovish than expected (hinting towards being on hold for 3-4 months or more), AUD/USD should fall 40-50 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. If you have any questions, you can also email me at

To our success!
Sir Pipsalot