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Sir Pipsalot's Thursday Market Update 09-16-2010

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Sep 16, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey folks,

    EUR/USD continues to form a potential top up here in the 1.3000-1.3050 area. If this double top holds and we trade lower through 1.2950, we should target at least 1.2887, but possibly as low as 1.2793 fairly soon. After that, there's potential in the wave pattern for a much larger selloff, but it's not clear yet whether the big selloff towards 1.0000 is in effect just yet... it may be a few weeks or months away from resuming and we may need to rally as high as 1.3800 before turning over. For now (at 1.2988 as I type), I think it's a risky but potentially fruitful short with about a 100 pip SL and 100-200 pip TP.

    USD/JPY is finally starting to retrace a bit as Japanese exporters are taking advantage of the sharp rally to unload a glut of JPY at what they see as "attractive prices." Already there's buzz that Japan should intervene again today to make the most impact, but that's not their style. They probably would have done it earlier in the day too if they were going to. Instead, they likely have a floor level they'll protect with intervention. We know for sure their ministry of finance saw 82.00 as the "line in the sand," but we never got that low.

    In the meantime, since all 3 sessions had their chance to participate in the rally, it's time for some profit taking and dip buying today. Wednesday was all about momentum buying, and if you bought around the 15min 10EMA as I suggested on Wednesday, there was only one rough patch which quickly turned around. Thursday will be more about picking the right spot to buy on a dip, but the problem is... you can never tell for sure what the right spot will be. 1000's of other traders big and small are thinking the same thing on the pair today... those in too early will hit SL's or suffer rough drawdowns, and those looking for too big a dip will miss their orders and lose out on the potential continuation... or we're all wrong and exporter selling crushes everyone =P My plan is to buy near the 38% retracement around 84.65... it's low enough to stop a few nervous nellies out, but high enough to ensure a good chance of getting in. Also, given the fundamental setup, a 38% retrace seems just right.

    Alternatively, you could pick a deeper retracement level like one of the ones I mentioned in yesterday's signal, or you can use a fade method to leg into the trade bit by bit with low leverage at various support levels with a wide SL. As always with trading, the choice is yours.

    In news Wednesday, we saw UK CCC come out too close to expectations for a trade, and we got no decent deviations out of the smaller US releases either. The RBNZ left rates on hold as expected, but had a more dovish stance than anticipated and the NZD/USD lost 50-60 pips over an hour (in line with my forecast) and has lost more in the hours since. In news Thursday:

    0430 UK Retail Sales (Ex Gasoline) m/m (0.2% expected) - We've been getting big runaway price action on UK Retail Sales lately (70 pips in the first minute, 150 pips in the first 30 minutes last month might be hard to match though)... in any case, it may pay to be a bit more aggressive than usual on this report. Look for signs of a runaway train and try to snag some momentum pips on the 1 minute chart or after a small pullback. Make sure though there's agreement with the "with gasoline" number (0.3% expected) first.

    --If it comes out at 0.7% or higher, GBP/USD should rally sharply for at least +50 pips and likely stay strong fro 30-40 minutes.
    --If it comes out at -0.3% or lower, GBP/USD should fall sharply for at least 50 pips and likely stay weak for 30-40 minutes.

    0830 US Initial Jobless Claims (459K expected) - This report is small, but has regained some reliability in the last month or two. A 15-20K deviation on this usually sends USD/JPY on a 20-30 pip move and S&P 500 futures (ESZ0 contract specifically) on about a 5 point move initially, and ultimately around a 10 point move.
    --If it comes out at 475K or higher, USD/JPY should sell off 20-30 pips and stocks should drop 0.5-1% over 5-15 minutes.
    --If it comes out at 440K or lower, USD/JPY should rally 20-30 pips and stocks should rally 0.5-1% over 5-15 minutes.

    1000 US Philly Fed (0.5 expected) - On this report, a smaller +/- 5.0 trigger tends to cause a slower move, while a bigger +/- 10.0 to 15.0+ trigger tends to cause a similar move, but much faster within a minute or so. We've seen both scenarios manage about 30 pips on USD/JPY in the last 6 months.
    --If it comes out at 5.0 or higher, USD/JPY should rally about 30 pips.
    --If it comes out at -5.0 or lower, USD/JPY should fall about 30 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 sirpipsalot@profitmongers.com

    To our success!
    Sir Pipsalot
     

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