Sir Pipsalot's Wednesday Market Update 08-11-2010

Sir Pipsalot

Former FPA Special Consultant
Hey folks,

Quick signal to get this out before news...

EUR/USD has rolled over enough to put me into a sell bias on the pair good for a long term short trade, or at least a "sell-on-rallies" type situation. USD/JPY tagged the 85.00 handle and bounced a bit so far, I'm in long for 20-50 pips. Stocks which have consolidated should be topping out, so stick with the short as discussed last week. Overnight there's been a 1%+ selloff that could get that started.

**EDIT - Decided to get short EUR/USD for a wide SL position trade today during the European session.

In news Tuesday, we saw the FOMC statement come out as "Scenario C" with some action taken by the fed to support the economy, so the EUR/USD headed higher by over 100 pips and we made some money on it in the room, even though the FOMC's new Treasury buying program is fairly insignificant monetarily. In news today:

0430 UK Claimant Count Change (-17K expected) - I'm looking to trade this with an afterspike trade with +17K deviation signaling a sell, and -17K deviation signaling a buy.

0530 BoE Inflation Report (mixed expectations) - Most agree that the BoE will be forced to downgrade their assessment of the economy, lowering growth expectations by about 1% from last quarter's estimates; however, expectations for their tone and policy stance moving forward are quite widespread. This always has the potential to be a polarizing and major-move inducing report that can influence GBP/USD rates for hours, days, and even weeks if the statement is groundbreaking. I'll edit my signal afterwards with some brief thoughts within a half hour of its release.

--If the BoE makes a noteworthy hawkish shift signaling they may be looking to normalize policy or start raising interest rates soon, GBP/USD should rally 50-100 pips in the short term, and EUR/GBP should head markedly lower as well. EUR/GBP may turn into a solid long term short in this scenario.

--If the BoE focuses on a much more downbeat economic assessment and hints at or announces new monetary or fiscal steps to stimulate the economy (i.e. expanding the APF, lowering some form of rates, etc.), GBP/USD should sell off 50-100 pips in the short term, and EUR/GBP should rally as well. This should make EUR/GBP a good long term buy.

--If the BoE doesn't do anything terribly noteworthy, and merely provides mixed bits of rhetoric without a clear tone, I would stay out of the trade.

**EDIT - BoE definitely came out dovish, but there was no new groundbreaking announcement. This led to a short term selloff, but I don't think this news alone is worth a long term EUR/GBP long.

AU Employment Change & Unemployment Rate (20K and 5.1% expected) - Sometimes on AU news like this we get a large initial spike (45+ pips) that just "sticks" at a level near the extremes and stays in a tight range afterwards (what happened last month). Alternatively, sometimes we get a more modest initial move (30 pips or less) that retraces and builds up pressure to continue on for a more substantial move (40-50 pips from prerelease). Spike trading is the only real way to take advantage of the spike-and-stick first scenario. If you see signs of the second pattern emerging though, there's usually a good afterspike opportunity. Also keep in mind that the Unemployment Rate is almost as important as the Employment Change figure, so avoid conflicts.
If it comes out at 40K or higher, AUD/USD should rally 40-50 pips.
If it comes out at 0K or lower, 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
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