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Sir Pipsalot's Tuesday Market Update 08-10-2010

Discussion in 'Commercial Trade Journals' started by Sir Pipsalot, Aug 10, 2010.

  1. Sir Pipsalot

    Sir Pipsalot Former FPA Special Consultant

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    Hey folks,

    EUR/USD failed to hold up medium term momentum Monday and now is looking at support in the 1.3089 to 1.3120 region. Should this support fail, the momentum will seem to be failing even on the daily chart. For now I think a buy around 1.3120-35 with a 30-50 pip SL is appropriate looking for a 30-100 pip bounce for a short to medium term trade. Long term however, we've been looking for a clear reversal lower to get in short for what should be an 800-3000 pip decline from its highs, and a break of aforementioned support and momentum may be enough to put us into a long term short to be discussed tomorrow.

    Stocks continue to consolidate, and while last Friday was the ideal time for a clear high to be put in place, it could stretch out as late as this Friday. I continue to hold short as discussed in last week's signals, and will add to the short when a confirmed turn lower develops.

    In news Tuesday, we have one important news item:

    1415 US FOMC Interest Rate Statement (no change at 0.25-0.50% expected) - While no rate change is expected, the market has priced in a 35-40% chance that the FOMC will enact some form of easing at today's meeting. This is quite opportune because it creates some controversy that should lead to good price action no matter what the outcome of the meeting.

    Scenario A: (Most Hawkish scenario) - FOMC drops a bit of it's dovish rhetoric and continues sets the stage for tighter monetary policy moving forward. There is little acknowledgement of slowing economic conditions, and perhaps even additional dissenters joining Hoenig. In this case a short on EUR/USD or AUD/USD should play out nicely for 50+ pips.

    Scenario B: (Dovish as expected, but no action) - FOMC acknowledges slower growth and/or lowered inflation risk and maybe even hints at extending their balance sheet or taking additional measures to support the economy in the future, but does nothing monetarily or fiscally at this meeting. In this case a EUR/USD and AUD/USD should head lower as those 40% of market pariticipants looking for easing are disappointed and the USD strengthens.

    Scenario C: (Dovish with easing of some form) - FOMC not only acknowledges slower growth and/or lower inflation risk, but also takes action through some form of easing. This could be some sort of confusing partial rate cut, extending their balance sheet to buy more Treasuries or MBS debt, talk of forgiving debt for homeowners, or some other extention of monetary or fiscal easing to support the economy. In this case, EUR/USD and AUD/USD should head higher by 50+ pips as USD weakens since such a move by the FOMC is possible, but not fully priced in.

    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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