The Alba System Journal- EUR/USD intraday system

[Big Pippin]

Friday, October 27, 2006

The Now:

So I opened up my internet browser and what headline do I see flashing across my page?

“Economy weakest in three years”

If that doesn’t spell bad news for the dollar, then I don’t know what does. Basically, it was another day of the dollar getting pummeled. GDP grew at 1.6% in the third quarter which was down from 2.6% the previous quarter. This is the weakest growth pace for the US in 3 years and since the GDP is basically the main tool for measuring the economy’s strength, the weak number had a huge impact on the dollar.

With the balanced Fed statement that was given on Wednesday, traders have been looking for a catalyst to help them to decide whether not they should hold onto their dollars. These past few negative reports have been giving them ammo to shoot the dollar down. Even with the positive Consumer Confidence report, the GDP’s weaker than expected numbers already gave traders enough reason for them to make up their minds to sell the buck.

However, all is not lost. Yesterday, I mentioned that I saw a bearish hidden divergence on the EUR/USD daily. I recommended a short at 2750 with a target an initial target at 2700. Right now the trade is active and it still looks like it has a good chance of winning.




Chart Analysis:


EUR/USD

The trade recommendation from yesterday is currently active and still looks like it will head down so I would hold for now. Stochastics on the 4hr chart has been in the overbought territory for quite some time now so I think the dollar will make small rally on Monday.


GBP/USD

Just like the EUR/USD, the Cable has been showing overbought on the 4hr. chart’s stochastics. The pair may rally back up to 9050 before moving back down, or the pair could just move down from where it’s at right now which is currently around 8965.


USD/CHF

The Swissy has broken through a major support area and is now hovering around its 61% Fib level on the daily chart. Stochastics on the 4hr chart have been showing oversold for a while now so I expect a bounce to around 2530 sometime on Monday.


USD/JPY

The Yen went a little crazy today as it spiked all the way down to 117.00. For now it looks like 117.00 will be its new support but with the price being around 117.50 right now it’s hard to pick a direction. But since all the majors show signs for a short term dollar rally, my gut tells me the pair will move back up to 118.00.


Conclusion:

It’s been a tough week for the dollar with all the negative fundamentals that came out this week. Early next week should give us a slight retracement, but after that, fundamentals will once again dictate the direction of the Greenback. Have a great weekend everyone!

Cheers,

-BP

 

[Big Pippin]

Monday, October 30, 2006

The Now:

The dollar made up some ground after last week’s losses, but it wasn’t anything significant. Although personal spending came out lower than forecasted, personal income increased. Some economists are saying the reason that personal spending still decreased even with the increase in personal income is because of lower energy prices.

Personal spending accounts for 2/3 of the GDP which last week showed disappointing numbers.
Richmond Fed President, Jeff Lacker also said that inflation outlook is “discomforting” which means that he is still supporting a rate increase. Keep in mind that Mr. Lacker has been preaching higher rates for a while now so although he speaks very hawkishly, it will take more than just him to cause any significant gains for the dollar.


Weekly Bias-O-Meter

Right now my Bias-O-Meter still shows favor towards the dollar and if momentum shifts in it’s favor, we could see some good trades this week.

EUR/USD; GBP/USD= Bearish

USD/CHF; USD/JPY= Bullish


Coming Up:

Japan Interest Rate Statement
1:00 am ET; 5:00 GMT
Previous= .25%; Forecast= .25%
The consensus is that Japan will keep rates the same but look for statements that show any signs of inflation worries.

US Employment Costs
9:30 am ET; 13:30 GMT
Previous= 0.9%; Forecast= 0.9%
This is the broadest measure of labor costs. I don’t think this will move the market too much especially with the other US news coming out today.

US Consumer Confidence
11:00 am ET; 15:00 GMT
Previous= 104.5; Forecast= 108.0
With the weak personal spending report, this report will be important to gauge how consumers feel about the economy. Remember, consumer spending has been keeping the economy floating so a weak number will be bad for the dollar.

Chicago PMI
11:00 am ET; 15:00 GMT
Previous= 62.1; Forecast= 58
Once again, look for any major surprises (negative or positive) in order for there to be an effect on the dollar.


*Overall, what we want to look for is if there is an agreement with the US reports, whether it’s positive or negative. If all 3 reports line up, then we could see a nice move in all the dollar paired currencies.



Chart Analysis:


EUR/USD

Our trade has now hit our initial target of 2700. If you are still in you might want to move your stop to breakeven. 2650 looks like it will be a good 2nd target because the 50 and 100 SMA are both in that area so it should make a decent support level. Our hidden bearish divergence is now fully formed so it looks like we’ll see another drop in the Euro.


GBP/USD

We’re seeing a small regular bearish divergence on the 4hr. chart. This isn’t a strong divergence, but it does give indications that the trend is getting weak. Notice how the price made higher highs while the stochastics made lower highs. This upward trend looks exhausted and since 9050 is a long term resistance level look for this pair to drop. The question is where will it drop to? I don’t see any strong support levels so my only guess is that the pair will drop to 9000 and possibly down to 8950.


USD/CHF

On the Swissy I see a bullish hidden divergence on the daily chart. This makes sense because the Swissy is highly correlated to the EUR/USD. Notice that the pair made higher lows but on the stochastics it made lower lows. With the price currently hovering around the 61% Fib level, this gives me good indication that this pair will be headed up soon.

Trade Idea:

Buy at 2450. Stop Loss= 2400; 1st Target= 2500; 2nd target= 2550



USD/JPY

I’m still not sure about the Yen right now as the technicals aren’t really giving me much to work with. My first guess is that the pair will bounce up given the extended period of oversold indications on the Stochastics of the 4hr chart. The daily chart stochastics is also in oversold territory now so a move back up to 118.00 looks like a good possibility.


Conclusion:

Technicals are showing a short term reversal dollar rally. However, once again it will be the fundamentals that will ultimately dictate where the market is headed. Have a great trading week everyone!

Cheers,

-BP

 

[Big Pippin]

Tuesday, October 31, 2006

The Now:

Trick or Treat! The dollar’s getting weak!

Yesterday I said that if we saw an agreement of the US reports, whether it be positive or negative, we would see a good move for the dollar. Today both the Chicago PMI and Consumer Confidence report came in negative and as a result, the dollar took a tumble.

Chicago PMI came in at 53.5 which was much lower than the forecasted 58.0. This means that the slowdown of the US economy is trickling down to the businesses and as a result we are seeing less business activity.

The big story of the day was the weaker than expected Consumer Confidence report which came in at 105.4 compared to the forecasted 108.0. Even with lower energy prices, it seems that consumers are starting to get weary of the US economy. Remember, this report affects consumer spending and consumer spending makes up 2/3 of the US GDP (the measure of the overall economy). You can see how this weak number has put traders in a frenzy as now it seems that not only the housing market is slowing down, but consumer spending (which has been holding the economy up) might also be losing its steam. This is very bad for the dollar.

As a result of the news, my Euro trade has now been stopped out at breakeven, but we still may have another opportunity as our charts still show signs of a dollar reversal.

Because of the big negative dollar move, my Swissy trade idea has been triggered. This trade still looks good so I will continue to hold. I’ll explain more in the chart analysis below.



Coming Up:

ISM Manufacturing Index
11:00 am ET; 15:00 GMT
Previous= 52.9; Forecast= 53
With the weak Chicago PMI numbers that came out today, this report will be watched closely. If the report comes out around 50 or lower, then look for another day of dollar dropping.

Also watch out for what Mr. Bernanke has to say. He is due to speak at 2:00 pm ET, 18:00 GMT.



Chart Analysis:


EUR/USD

After moving down as low as 2677, the Euro has shot back up and is currently around 2762. The bearish hidden divergence is still in tact on the daily chart and we may have another opportunity to short this pair around 2800 and target 2750 and 2700.


GBP/USD

This pair also followed the technicals up until the negative US news reports came out. Now the Cable is hovering around 9100. The last time the Cable was this high was on August 8th so this is a pretty key level right now. We’ve seen the pair go around this level 4 times and each time, the price has backed down so this will be an important level to watch. Unless there is another big negative surprise in the US news reports the rest of this week, look for this pair to bounce back down again.


USD/CHF

So our trade is now active from yesterday’s post. The Swissy broke through the 61% Fib line on the daily chart after the news reports and got down as low as 2412. You can still clearly see the bullish hidden divergence so this trade still looks like it can work in our favor provided that we don’t see any drastic US news reports tomorrow.



USD/JPY

Like I stated yesterday, the Yen had been showing oversold for quite some time on the 4hr chart and made its way back up to 118.00 overnight. However, because of the news, the pair dropped back down and is now hovering around 117.00 again. In fact it got as low as 116.60 earlier today. The pair bounced off of 100 SMA on the daily chart and stochastics is currently showing oversold. However, by looking at the stochastics on both the 4hr and daily chart, I think we will see a move down to 116.50 before we see the pair reverse back up.


Conclusion:

I stated yesterday that fundamentals would ultimately decide the markets’ direction and now you see why. Even though the technicals did predict the near term movement, nothing is stronger than the power of the news! If nothing drastic happens tomorrow (i.e. ISM comes out around forecast & Bernanke doesn’t say anything too crazy), I think we’ll see some reversals from today’s movement.

Cheers,

-BP

 

[Big Pippin]

Wednesday, November 1, 2006

The Now:

After a little spike following the weak ISM report, the dollar has pretty much stayed put today. The ISM came in lower than expected at 51.2 compared to the forecast of 53. On our Swissy trade, the pair came within 3 pips of stopping us out but has now settled back to where we were yesterday.

I believe the reason why the dollar didn’t drop further is because of the anticipation of this Friday’s Non Farm Payroll (NFP) report. This is usually a big mover and comes out the first Friday of every month so the lack of movement today indicates that this is probably what traders are waiting for.

US data has been coming in very weak now. The combination of the real estate downfall, weak GDP, weaker business and manufacturing activity, lower consumer confidence, and now the stabilization of oil prices, we are seeing a pretty good set of ingredients that could make for a longer term dollar sell off.

It’s pretty apparent now that the Fed will hold rates steady for the rest of this year, and the possibility of them cutting rates in Q1 of next year is increasing. I still don’t really know if the Fed will cut rates in Q1 but I do know for sure that they will not be increasing them anytime soon. That seems to be the sentiment among traders now and I think it’s what will be keeping the dollar from making any strong gains.

I’d like to note that on the Cable, the pair is hovering around a 3 month high at 9100. The pair has tested this level 3 times in these past few months and each time it has failed to break through it. With speculation that the BOE will raise rates to stop inflation and the mixture of weak US reports, this might be the time that the Cable finally pushes past 9100. I will be keeping a close eye on this pair to see what happens.



Coming Up:

ECB Interest Rate Statement
7:45 am ET; 12:45 GMT
Previous= 3.25%; Forecast= 3.25%
Interest rates are expected to stay the same, but regardless, you should keep an eye on this.

Trichet Speaks
8:30 am ET; 13:30 GMT
The most important thing to watch for during this statement is for any indication that the ECB will raise rates. If Trichet doesn’t say anything about raising rates, this should weaken the Euro at least for the day. However if he is hawkish then watch for dollar to continue drop against it.



Chart Analysis:


EUR/USD

The Euro didn’t quite reach 2800 which is where I said would be a good place to short, and it’s a shame because the price has retraced back down to around 2750 since getting as high as 2797. The bearish hidden divergence I’ve been talking about is still in place so a move to the downside is still a good possibility. 2700 looks to be the next near term support.


GBP/USD

This Cable spiked briefly above 9100 and got as high as 9134 before moving back below 9100. This level is a good “make or break” level for the pair and I’ll be watching it closely to get an indication of future direction. On the 4 hr chart we are seeing another sign of a reversal as we can see a regular bearish divergence. Notice how the Cable has been making higher highs while stochastics has been making lower highs. That and the fact that the Cable has just been skyrocketing lately leads me to believe that we will see a short term reversal in the near future. I think we’ll see a short term move to 9000.

Trade Idea:

Short at Market Price (around 9077); Stop Loss: 9135; Target= 9000


USD/CHF

After coming within 3 pips of getting stopped out, the Swissy has bounced back up and is now hovering around our entry. The bullish hidden divergence is still in tact and there is also a bullish regular divergence on the 4 hour chart. This is giving me strong indication that a short term dollar rally to at least 2500 is a strong possibility. I still like this trade and will continue to hold.



USD/JPY

We are now seeing a bullish hidden divergence on the Yen as well as another test of support of the 100 SMA on the daily chart. Look for this pair to bounce up to at least 117.50 and maybe 117.80.


Conclusion:

With traders anticipating Friday’s NFP report, I think the markets will follow the technicals tomorrow and we’ll see a short term dollar rally. The 4 majors look poised for a reversal and unless something drastic happens tomorrow I think we’ll see that reversal tomorrow.

Cheers,

-BP

 

[Big Pippin]

Thursday, November 2, 2006

The Now:

Oh how the markets like to tease me! The Swissy trade I am in moved in our favor again and got as high as 2476 (my target is 2500) before moving back down to around 2450 again. I still like this trade because the technicals still work in our favor but tomorrow’s Non Farm Payroll (NFP) report could stop me out if we see a weak number.

I’m also in a short Cable trade right now. I got really excited as the pair got down to around 9033 but unfortunately the feeling didn’t last as the Cable proceeded to bounce right back up and is currently hovering around 9086. Once again, it will be up to the NFP report to decide whether or not I win on this trade. I could cut my losses now or try to wait and get out at breakeven, but up to now I still think 9100 is a strong resistance, so I will hold in hopes that this resistance level will stay in tact.

On the Euro front, Mr. Trichet used his famous 2 words again in his speech—“strong vigilance”. I could almost guarantee that whenever he uses those 2 words, the Euro will rally. In his statement today, Trichet was very hawkish and confirms the belief that the ECB will raise rates again. However, he is still holding back on what they will do with rates in 2007. This is still keeping traders in the dark on the longer term future of the Euro which is why we didn’t see a bigger rally today.

Other than Jean-Claude’s statements today, there wasn’t really too much else going on. Remember, traders are waiting in anticipation for tomorrow’s NFP report so expect some good movements in the markets.



Coming Up:

US Non Farm Payroll
8:30 am ET; 13:30 GMT
Previous= 51k Forecast= 125k
The last NFP report came out very weak, so this one will be watched like a hawk. The US fundamentals have been showing increased weakness in the US economy so if this NFP report comes out weak (90k or lower) then expect some major dollar sell-offs. If the NFP comes out around the forecast then I think we’ll see the short term dollar reversal that the technicals have been showing for quite some time now.



Chart Analysis:


EUR/USD

We still have a slight bearish hidden divergence on the daily chart but the future direction of this pair will depend on the NFP report tomorrow. Technicals are (and have been) showing signs for a reversal so my gut instinct is telling me that we’ll still see a move back down to 2750 and maybe even 2700.


GBP/USD

I’ve been saying that this uptrend we’ve been seeing in the Cable is getting exhausted and if you look at today’s daily chart, we’ll see even more evidence of that. Notice how today’s candle is a doji. These types of candlesticks are usually good signs of a reversal. Stochastics has also been showing that the pair has been overbought for the past 6 days now. If you are a pure technical trader, we are seeing very strong indications that the Cable will drop very soon. I still think 9000 will be where the pair will move, but again, it will all depend on the outcome of the NFP report tomorrow.


USD/CHF

I still like the trade I am in because we have a very sexy looking bullish hidden divergence still in tact on the daily chart. That and the fact that we are resting on the support of the 100 SMA gives me comfort that my target at 2500 still has a good chance of being hit.



USD/JPY

Our bullish hidden divergence on the daily chart is still looking good. The 100 SMA support is also still holding its ground so I have a good feeling that this pair will move to at least 117.50 and maybe even 117.70 (which is where the 50 SMA is on the 4hr chart).


Conclusion:

Hold onto your chairs and grab some snacks because tomorrow should be quite a show. With US fundamentals showing a weakening trend, tomorrows NFP report will be critical for the dollar and will be watched VERY closely.

Cheers,

-BP

 

[Big Pippin]

Friday, November 3, 2006

The Now:

The technicals had been showing signs for it, and today the fundamentals finally allowed the dollar reversal that I've been talking about for a week now to take place. On all 4 majors I have been ranting on and on about how there would be a dollar reversal because everything was either showing oversold or overbought along with divergences, hidden divergences, and strong support/resistance levels. In a market where things rarely happen the way you'd expect them to, this is kind of a nice moment for me. So I'd like to take a second and take a deep breath.....ahhhh! Man it feels good to be right! Sigh, ok back to reality...

Yesterday I said that if the NFP came in at 90k or lower we would see a dollar sell-off. Fortunately, the NFP came in at 92k which is still an increase from the pathetic 51k that was posted last month. As close as the NFP was watched today, the bigger story was the unemployment report. Unemployment fell to a 5 year low which means that the job market is still sizzling. This is the breath of fresh air the dollar has been waiting for, and it was just enough for traders to bring the dollar back up.

Remember, the housing market sucks right now. Consumer confidence is dwindling, even with lower energy prices, which leads to lower consumer spending, and consumer spending is what was keeping the economy afloat for the past few months now. The lower consumer spending means lower GDP which is what economists use as a benchmark for measuring the strength of an economy. With all of those factors, its no wonder why the dollar has been getting beat to a pulp. Today's reports showed that there is still one hope for the US economy, and that's the job market. If the labor market also begins to cool off, prepare for a longer term dollar sell-off. For now, I'm happy that both of my trades came up as winners.

My Swissy trade got all the way to my 2nd target at 1.2550 and I was able to grab 100 pips of profit per lot. My Cable trade reached my target at 1.9000 and I closed all my lots for a 70 pip profit per lot. It was a great way to end the trading week! Now it's back to the drawing board...


Chart Analysis:

EUR/USD

After today's retracement, it's hard for me to determine a direction for the Euro at this point. Yes, our bearish hidden divergence is still in tact but now we are hovering around what could be good support levels. Price is right at 2700 which is also where the 100 SMA is on the daily chart and also where the 50 SMA is on the 4 hr chart. Stochastics on the daily still shows that the Euro is overbought so we could see more movement to the downside. The 4 hr. stochastics also shows some room for more selling as it is headed down but is not yet in oversold territory. Since we saw such a large drop in the Euro, my first instict tells me that the Euro will retrace back up slightly to 2730-2750. However, I think we will see a little more selling after that and I think the pair will go to at least 2680 or even 2650.


GBP/USD

It looks like that 3 month resistance level at 9100 is still in tact as the Cable FINALLY bounced back down. Like the Euro, I think the Cable will retrace back up slightly and then head back down. I could see this pair getting to 8970 and even 8950. Stochastics on the daily chart still shows overbought and there is still some selling power on the stochastics on the 4hr chart. I chose 8970 as the initial target because that is where the 50 SMA is on the 4hr. chart.


USD/CHF

Right now the Swissy is testing a good looking resistance level. Currently at 2533, the Swissy stopped at 2550 which was where the 200 SMA on the 4hr chart is, and is currently hovering just below the 200 SMA on the daily chart. However, our bullish hidden divergence is still in tact and if the Swissy can break 2550, then I have a good feeling it will go all the way up to 2600 or at least very close to it.


USD/JPY

I see all sorts of resistance levels the Yen is facing right now. It's right around 118.00 + 200 SMA(4hr) + 50 SMA (daily) and right above it is the 100 SMA (4hr). Stochastics on the daily still shows plenty of room for more buying power, but the stochastics on the 4hr chart is starting to move into overbought territory. I'm all sorts of confused on this pair and won't even try to guess where this one is going. On second thought, I'll flip for it......just kidding!


Conclusion:

It's been a great ending to a crazy trading week. Now it's back to the drawing board. After the nice dollar rally today, it will be interesting on how it will continue to move throughout next week. Can you feel the excitement?! Have a great weekend everyone.

Happy trading!

BP

 

[Big Pippin]

Monday, November 6, 2006

Don't say it's a conspiracy! Can someone please tell me how September jobs went from 51,000 to a "revised" 148,000? That is complete malarky! With elections coming up, it's no wonder why the numbers are "misleading"...(get it?) For cryin out loud, can someone just please tell us the truth?

Yes I know I'm ranting and raving again, but I'm not the only one. This seems to be a big topic right now especially since all these crazy revisions are occuring right around election time. Surely, a politics doesn't play a role in the toying with the numbers just to make their party look better to the oblivious general public! (note the sarcasm) Either way, this gives us more evidence that the job market is still hot on its toes. This maybe the last hope the dollar will have and once it's gone, look for the dollar to sell off...big time!


Weekly Bias-O-Meter

My Bias-O-Meter has finally changed. Now I'm seeing signs of a momentum shift and it looks like the market is poised for a longer term dollar sell-off.

EUR/USD; GBP/USD= Bullish

USD/CHF; USD/JPY= Bearish


Coming Up:

There are no major news reports tomorrow. The US will be having their mid-term elections where they will select 1/3 of the Senate and members of the House of Representatives.


Chart Analysis:

EUR/USD

I said on Friday that the Euro would retrace back up to around 2730 and then drop back down. Well with the slow day today, only the first part of that statement came true. The Euro headed to around 2730 earlier today but has stalled since then. The daily stochastics is showing signs for more selling as it is now heading down from the overbought territory. Notice how the 38% Fib line matches with the 50 SMA. Currently the price is at 2720 and I can see the price going to around 2670 or 2650. However, the stochastics on the 4 hr chart is moving upwards and is still not overbought so we might see a little more movement to the upside before the fall.


GBP/USD

The Cable did manage to go to 8950 like I said it would on Friday but now the pair looks like it could use some retracement. On the daily chart I still see plenty of room for selling but in the immediate short term, it looks like the market will retrace upwards. I can see this pair going as low as 8900 which is where the 38% Fib level is.

Trade Idea:

Sell at 1.9050; Stop= 1.9100; Target= 1.8900; (If price gets to 1.9000, I will move my stop to breakeven and trail my stop every 20 pips)


USD/CHF

Friday I said that if the Swissy could break 2550, it would go up to 2600. Well since then it has broken 2550 but has not quite gotten to 2600 yet. It got as high as 2578 before moving back down towards 2550. I still think this pair will hit 2600 but we may see some downward retracement in the short term as the 4hr. stochastics is showing overbought.


USD/JPY

I see alot of spaghetti on the 4hr. chart right now and I don't like to mess with the market when it gets like that. By spaghetti I mean that all my moving averages (50,100,200 SMA) are all bunched up together and it's hard to get any kind of direction. Stochastics on the daily shows plenty of room for more buying but short term stochastics shows signs for an immediate retracement. I can see the price going back down to 118.00 before bouncing back up.


Conclusion:

With not too many major fundamental reports out this week. I think the market will move more in line with the technicals. Pay close attention to support and resistance levels as they will probably hold strong this week.

Happy trading!

BP

 

[Big Pippin]

Tuesday, November 7, 2006

Bank of Japan governor Fukui said that they will adopt a forward-looking approach, and take action (against rising prices) in advance, moderately. Or, in layman's terms, the BOJ is probably going to raise rates again. And when a big bank leader says something like this, it usually means good things for their currency. This statement sent the Yen in a frenzy and as a result, it kicked the dollar's ahem..."rear end" today.

Janet Fellen, the San Fran Fed Pres., said in a speech today that countries may decide to channel less of their reserves into dollar assets. Apparently she is not the only one saying this. It seems that even Mr. Greenspan is also paying attention to this very point. Foreign investors have been pouring money into dollar assets and according to these 2 financial gurus, this trend may not continue for long. If they are right, this could spell trouble for the Greenback.

Speaking of the Greenback, mid-term elections were held today. I came across a really cool article that talked about the market's reactions to past elections. It basically says that when one party controls both the House and the Senate, it means good news for the dollar. On the other hand, when there is gridlock (each party controls either the House or Senate), it's usually dollar negative.

"Looking back at the last six mid-term elections, the US dollar has rallied in all but one (2002) and in each of these cases, there was a one party majority win. This suggests that the currency market actually likes political harmony and dislikes political gridlock. Therefore, should the Democrats win either the House or Senate, the dollar could resume last month’s weakness. If Republicans retain control on the other hand, November could prove to be a dollar bullish month."

Read the full article here


Coming Up:

Again, there aren't any news reports that I think will cause any chaos tomorrow but Chicago Fed Prez, Moskow, speaks tomorrow so pay close attention to what he says. The market is looking for reasons to either buy or sell the dollar so what he says could make an impact on tomorrow's dollar movement.


Chart Analysis:

EUR/USD

I talked about retracements and how we were likely to see them because of the strong dollar rally on Friday. I just didn't think they would be this extreme of a retracement. The Euro retraced as high as 2820 which was a complete reversal from Friday's downward move. Now that we've seen a good retracement, both the 4hr chart and the daily chart are showing signs of another downward move in the EUR/USD as both stochastics have touched overbought levels and are heading back down. I expect this pair to get down to 2750 as a primary target and maybe even as low as 2725-2730 (the 50 SMA).


GBP/USD

Well my trade idea didn't work out as I planned. While I did expect the Cable to rally to 9050, I didn't think it would go as high as 9123 today. Now that the pair has hit 9100 (which by the way is that strong 3 month resistance level I've been talking about), and stochastics on both the 4hr and daily chart have been overbought and heading down, there's a good chance we'll see the Cable fall to 9000. Coincidentally enough, that is where the 50 SMA seems to be headed.


USD/CHF

All I can say about the Swissy is that it looks like it will head back up. I can't find any good technical targets but both stochastics on the 4hr and daily chart show signs for an upward move. On the daily chart, the all 3 moving averages (50,100,200) are converging together which means we are seeing some rangebound movement. Since the pair dropped today, I expect to see a rally tomorrow.


USD/JPY

Like the Swissy, I don't see any good technical entries or targets. However, I do see signs that the pair will head back up after today's strong downward movement. Look for the Yen to move back up to 118.00


Conclusion:

Be on the lookout for any comments made by any Fed Presidents or Bank Governors and whether they speak hawkish or dovish. Their statements will play important roles in this week's market movements since there aren't too many important fundamental reports coming out.

Happy trading!

BP

 

[Big Pippin]

Wednesday, November 8, 2006

It was a pretty dull day in the markets regarding fundamentals. Nothing too extreme has happened in the past 24 hours. However, the Democratic party did take control of the House of Representatives. Now this gives them the power to block government spending and reverse tax cuts. Like I talked about yesterday, this will create a power gridlock since one political party no longer controls both the House and Senate. When this happens, it becomes negative for the dollar because policies become harder to pass.

The Democrats have taken 5 of the 6 six seats that they needed in order to take control of the Senate, and the 6th seat is coming down to the Virginia results. Democrat Jim Webb leads current Senator George Allen by 1 percentage point. The recount will determine whether or not the Democrats will actually win the Senate. However, even if the Democrats do take the Senate, you still have a Republican president and a power gridlock will still be in effect.

In the technical analysis world --- After some retracements took place (mentioned in my chart analysis yesterday), the dollar moved right back around to where it was yesterday. My Euro, Cable, and Yen targets were all hit but after that, the pairs moved back to their original levels.


Coming Up:

BOE Interest Rate Statement
7:00 am ET; 12:00 GMT
Previous= 4.75%; Forecast= 5.00%
The BOE is expected to raise rates a quarter percentage point to 5.00%. This is bullish for the Cable and perhaps it may even give it the juice it needs to finally break 9100 after 3 months. Also look for statements for future rate hikes.

US Trade Balance
8:30 am ET; 1:30 GMT
Previous= -69.9; Forecast= -66.0
The trade balance is expected to narrow which could mean good news for the dollar. A number lower than -70 would be a big surprise and if that happens, expect the dollar to drop like a rock.


Chart Analysis:

EUR/USD

I said yesterday that my primary target for the Euro was 2750 and my secondary target was around 2725-2730. I'm going to stick with my secondary target because I still see a little more selling power. The 4hr stochastics isn't oversold yet and is still headed down. The daily stochastics shows plenty of selling room and I don't see any major support areas until 2730ish because that is where the 50 SMA is on the 4hr. chart.


GBP/USD

The Cable didn't quite get to 9000 but it did get as low as 9006 which is pretty darn close. After bouncing back up to 9050ish, I still see this pair heading back down toward 9000 as there is still signs of a little more selling power shown by the 4hr stochastics. 9000 looks like a good target because that is where the 50 SMA is on the 4hr chart.


USD/CHF

This pair is looking really ugly right now. On both the 4hr and daily chart, all 3 moving averages are consolidating and it really gives me no clues as to where this price is headed. I can see from the 4hr. Stochastics that an upward move looks possible. If the pair can break through its 50 SMA at around 2512, then I can see the Swissy getting to 2550 which is where the 100 and 200 SMA are on the 4hr chart.


USD/JPY

Well the Yen did reach 118.00 like I thought it would and since then it has bounced down slightly and is hovering around 117.83. I think the pair will move back up to 118.00 again and at best, I think it could go as high as 118.20 which is where both the 100 and 200 SMA are on the 4hr. chart.


Conclusion:

After a week of dull fundamental activity, tomorrow's BOE statement and US trade balance report should cause the market to stir. Look for a decent move tomorrow.

Happy trading!

BP

 

[Big Pippin]

Thursday, November 9, 2006

The BOE raised rates to 5.00% and yet the Cable drops. Although this was probably already priced in the market I would've expected the Cable to rally on this announcement. That wasn't the case. In fact, the Cable dropped after the interest rate announcement. An hour and half later, the US trade balance comes up narrower than expected (bullish for the dollar) and the Cable dropped some more, which seems logical. However, the crazy thing is that an hour after that, the Cable then proceeded to rally higher and ended up spiking to almost 9100 again. Talk about a roller coaster day for the dollar!

Explanation? I wish I had one. One of the things I've learned in this market is that a lot of times it is very difficult to understand the exact reasons why the market moves the way it does. However, I do have some theories:

Regarding the dollar rally after the BOE's interest rate statement-- This was probably just one of those cases where the market already priced in the rate hike and the news announcement sparked traders to take some profits. This may have been the cause for the initial drop in the Cable.

An hour and a half later, the US trade balance comes in at -$64.3 billion compared to the forecast of -$66.0 billion. This narrower balance was primarily caused by lower oil prices, but US exports have also been rising and helped the deficit. This surprise is what caused the 2nd wave of the dollar rally.

So why did the dollar end up losing after another hour and half? I think it has something to do with what China said regarding their reserves.

The Bank of China Governor, Zhou Xiaochuan, said he has a clear plan to diversify their foreign exchange reserves. China's reserves have exceeded $1 trillion which is the most ever held by one country. Most of those reserves are US dollars. While it's a smart move to have their reserves in the dollar, too much of a good thing is not always "good". The fact that they are saying they have plans to diversify may have played a part in why the dollar dropped against all 4 majors at the end of the day.


Coming Up:

Nothing dramatic is happening tomorrow. However, Big Ben Bernanke and Trichet are speaking at 8:45 ET tomorrow. These could be potential market movers if they say anything out of the ordinary.


Chart Analysis:

EUR/USD

The Euro halted it's drop and didn't quite make it down to 2730ish like I thought it would. Instead it only went back down to 2750 before rallying as high as 2847. At this point it's hard to pick a direction for the pair because the rally has caused the daily stochastics to cross back up. The 4hr stochastics is also heading up and is not overbought yet. I honestly have no idea where this pair is headed tomorrow.

GBP/USD

This is the 2nd day in a row that the Cable is showing indecision. If you take a look at the daily chart you'll notice that the past 2 candles have told almost identical stories. The market pushes in each direction but at the end of the day, it ends up right back where it started. Stochastics on both the daily and 4hr chart aren't helping me either because both of them aren't moving in a clear direction. Right now it's a coinflip but tomorrow might be another range bound day for the Cable. Watch for it to move in between 9000 and 9100 tomorrow.

USD/CHF

The past few days I've been saying that the Swissy is stuck in a range. The daily chart still shows the price bouncing in between 100 and 200 SMA. I expect for it to move in between these 2 moving averages tomorrow.

USD/JPY

The Yen is doing the exact same thing as the Swissy except it's bouncing between the 50 and 200 SMA on the 4hr chart. Look for the Yen to trade between 117.80-118.50 tomorrow.


Conclusion:

Tomorrow looks to be a dangerous day to trade as none of the pairs are showing any clear directions. It's not that suprising to me as there haven't been any major economic catalysts to propel the market to move this week. I will most likely stay on the sidelines tomorrow and hopefully I'll be able to find some direction after tomorrow's trading ends.

Happy trading!

BP

 

[Big Pippin]

Friday, November 10, 2006

Happy Friday to everyone. It's been a pretty dull week in the currency market due to the lack of economic reports and most of the movement has been based on various statements from head honchos of different countries. It's true we've seen plenty of spikes but a clear directional trend is still up in the air. I'm going to keep this update short because it's Friday and I want to start my weekend already!

The lingering story is still the statements made by Zhuo regarding China's plans to diversify their reserves. This diversification plan means that other currencies and even commodoties may rally. As a result, the dollar once again lost ground to the majors today. Enough said!


Coming Up:

Next week we have interest statement announcements from both the ECB and BOJ. Both of those head honchos have been suggesting that they may be raising rates. This will add further selling pressure to the dollar against the Euro and Yen so it should be an exciting week.


Chart Analysis:

EUR/USD

The Euro rallied all the way up to 2900 before closing around 2850. On Monday we may see the pair retrace down to 2800 as that's where the 50 SMA seems to be headed on the 4hr. chart, making it a decent short term support. Stochastics on the 4hr. chart is now heading down after being in overbought territory, so a short term drop is possible.


GBP/USD

Remember how 9100 is the 3 month resistance for the Cable? Today the pair spiked up to almost 9200 before coming right back down to around 9100. So does this mean that today's high is the new resistance? I doubt it. What we saw today seems just like a knee jerk reaction and with the price closing back down at 9106, this still seems to be the level to break. Now if we see another move to higher and a close around 9150 then I would consider 9100 to be broken. We'll have to wait and see. According to the stochastics on both the 4hr. and daily chart, the pair shows signs for a drop on Monday and the pair could head towards its 50 SMA on the 4hr chart which is around 9050.


USD/CHF

I'm still getting confusing signs on the Swissy. The 4hr stochastics shows signs for a rally while the daily stochastics seems to be showing signs for a drop. After a spike to 2350, the price closed slightly above 2400. I'm still not sure on this but going by correlation with the EUR/USD (remember, I expect a short term drop), I'd expect this pair to rally up to 2450.


USD/JPY

The Yen looks poised for a short term rally to 118.00. Stochastics on both the 4hr and daily chart are headed up but we do face some resistance at 117.80 because that is where the 50 SMA is on both charts.


Conclusion:

I'm glad this week is over. It's too hard to trade when the market moves based on nothing but statements. I want to see hard facts and I need economic reports to do that. I think next week will be a lot more exciting with the ECB and BOJ interest rate statements coming out so be prepared. Have a restful weekend because next week should be one heck of a trading week!

 

[Big Pippin]

Monday, November 13, 2006

The dollar made a short term rally today and my chart analysis was dead on target. Am I a genius or a magical psychic? Hmmm...I barely broke 1000 on my SATs and I picked the Tigers to win the World Series so that's a definite NO. With a slow economic day today, the markets pretty much just followed the charts to a tee. This usually happens when there aren't too many important economic reports out. However, I do believe this dollar rally we saw today was partly caused by traders correcting their knee-jerk reaction to China's statements regarding diversifying their reserves.

Last week when Zhou announced that they had a clear plan to diversify their reserves, traders rushed out to sell their dollars as they figured this would be the catalyst for a big dollar sell-off. However, I think traders felt some regret about their decisions when they calmed down and went back to Zhou's statement on Friday in which he stated that he was not planning to sell US dollars in order to diversify. Ooops!

On the technical front, all 4 majors hit my projected targets (I know I know, I keep tooting my own horn). With the nice dollar rally today, we'll have to see if the dollar can maintain it's speed or if it will fizzle out once again and cause yet another retracement.

Weekly Bias-O-Meter:

For the 2nd week in a row now I am getting dollar-negative indications. This could be the start of a longer term dollar sell-off. Be ready for it!

EUR/USD; GBP/USD= Bullish
USD/CHF; USD/JPY= Bearish


Coming Up:

UK CPI
4:30 am ET; 9:30 GMT
Previous= .1%; Forecast= .2%

German ZEW Sentiment
5:00 am ET; 10:00 GMT
Previous= -27.4; Forecast= -30.0
The Zew has been a big mover the last couple of months so look for this one to move the market if there are any surprises.

US PPI
8:30 am ET; 13:30 GMT
Previous= -1.3%; Forecast= -0.3%
This report will be important because it measures inflation pressures felt by manufacturers. Inflation has been the bigger worry for the Fed (as opposed to the slower US economy) so this report will be watched closely.

US Retail Sales (all & excluding autos)
8:30 am ET; 13:30 GMT
Previous= -.4%; Forecast= -.4%
Excl. Autos Previous= -.5%; Forecast= -.1%


Chart Analysis:

EUR/USD

The 50 SMA on the 4hr chart is approaching 2800 which makes it a decent support level. With stochastics also reading oversold, a short term move to 2850 is possible although the stochastics on the daily chart still shows plenty of selling power. If the Euro breaks 2780, look for it to head towards its 100 SMA at around 2750ish.


GBP/USD

The Cable once again spiked above 9100 and got as high as 9150, but again it failed to stay above there. 9100 has proven to be a very good resistance area up to this point. The Cable has dropped like a rock to 9000 and the 4hr stochastics is reading oversold. I think there is a good chance the pair will get to at least 9050 but it may spike below 9000 at around 8970 (100 SMA) before bouncing up. The daily stochastics still shows plenty of selling power.


USD/CHF

The Swissy is currently testing resistance at 2450 (50 SMA) and 4hr stochastics is reading overbought. I think there is a very good chance that 2400 is the Swissy's next move.


USD/JPY

I'm seeing a small bearish hidden divergence on the 4hr chart. Notice how the pair has made lower highs while stochastics has made higher highs. With the pair bouncing off of its 200 SMA and stochastics reading overbought, I think there's a good chance this pair will hit 117.50.

Trade Idea:

Sell at market (118.12) OR at 118.00. Stop loss= 118.50; Target= 117.50


Conclusion:

There are plenty of economic reports to keep the markets busy tomorrow. I'm expecting a volatile day after having been without a solid fundamental catalyst for some time now. I think the markets are poised to move so be prepared for lots of thrills and excitements tomorrow!

 

[Big Pippin]

Tuesday, November 4, 2006

Let me first warn you that I will once again be holding my shoulders high because for the 2nd day in a row, every single one of my chart analysis predictions came true! Cmon, you gotta admit that you feel the same way whenever you make correct market predictions! It's perfectly natural, and if you were correct in your market analysis' then I commend you and pat you on the back.

Before I delve into the fundamentals, let me first recap the Yen trade from yesterday. I had 2 options. One was to short at market (which was at 118.12) or at 118.00. The target was 117.50 and the stop was 118.50. The trade ended up hitting my target early last night and netted 62 pips if you shorted at market, and 50 pips if you shorted at 118.00.

Now for the fundamentals. US PPI was weaker than expected coming in at -1.6% compared to the -0.3% forecast. This means that inflation experienced by wholesalers is relatively low. As a result we should also see a lower CPI report on Thursday since wholesalers won't have to pass on any of their expenses onto the consumer. This weak PPI report caused an initial drop for the dollar but the move was quickly countered by the Retail Sales report. The Retail Sales report also came in lower than expected but this was due to 2 things that traders already have factored in their minds. The first is the lower gas prices. Because gas prices have been so cheap, sales have dropped like a rock, falling 6%. The 2nd is the fall in furniture sales. Well we all know that housing has been crappy lately so it's no big surprise that if housing sales have been slumping, so should furniture sales. Because these 2 things are already assumed, the actual number doesn't seem that bad. When you take away those 2 groups, retail sales actually rose 0.4%. This gave some support for the Greenback and kept it from falling too much.


Coming Up:

US Empire Manufacturing Index
8:30 am ET; 1:30 GMT
Previous= 22.9; Forecast= 15.0

US FOMC Minutes
2:00 am ET; 19:00 GMT
Pay close attention to statements regarding inflation and the slowing economy. More importantly, pay attention to what Fed says they will do regarding these issues.


Chart Analysis:

EUR/USD

Although we had some volatile moves in the EUR/USD today, there hasn't been a clear direction. As a result, stochastics on the 4hr chart isn't really giving me a clear signal. The pair has found support at 2800 again and with the 50 SMA also hovering around that level it should make decent support. My best guess is that the pair will once again bounce off of 2800 and make another run towards 2850 but I'm not entirely confident about it. Stochastics is still heading up on the 4hr chart but it's moving slow so I'm not sure if that trend will continue. We'll have to wait and see.


GBP/USD

The Cable has been under a lot of selling pressure lately and I think we'll see a retracement soon. Look for the pair to rise to 9030-9050 (around the 50 SMA on the 4hr chart) in the short term. On a longer term outlook, I think the pair will eventually drop to 8900. Stochastics on the daily chart has a nice downtrend and there is still plenty of room for the pair to fall.


USD/CHF

The Swissy is once again testing resistance at 2450 (50 SMA) and 4hr stochastics is making its way down. I think the pair will go to at least 2400 but after that I'm not sure if the pair will have enough juice to keep pushing forward. If the pair reverses and breaks 2450, look for the Swissy to go to 2500 which is where the 100 SMA is at.


USD/JPY

I think the Yen will make a run towards 117.00. I'm not sure if it will actually hit or not but it should get close. After that look for the pair to bounce back up to 117.50 again. Stochastics on the 4hr chart shows a little more room for selling but not much so I don't expect it to drop much further.


Conclusion:

There are less economic reports tomorrow but still be on the lookout for some nice movement, especially after the FOMC minutes. Tomorrow should be another exciting day so be ready!

 

[Big Pippin]

Wednesday, November 15, 2006

The dollar made pretty decent moves verses the Swissy and Yen but ended up pretty much in place against the Euro. The biggest loser however was the Cable in which the dollar made a very nice rally against it. The GBP showed weak reports during their session and added to the fact that a higher than expected number came out for the US Empire Manufacturing Index, traders placed their bets that the dollar is still the stronger currency.

The FOMC minutes showed that the Fed is still worried about inflation and the slowing economy but the overall sentiment is that the Fed will still keep rates steady for the remainder of 2007.

After a few days of back and forth dollar movement, stochastics on the daily charts have been wishy washy. Now the stochastics seems to be resuming its trend for a dollar rally. I expect the trend to continue until the daily stochastics on the majors reach extreme levels again so unless we see devastating news for the dollar, watch for the Greenback rally to continue for a few more days.


Coming Up:

GBP Retail Sales
4:30 am ET; 9:30 GMT
Previous= -0.4%; Forecast= 0.2%
The forecast shows a possible increase in retail sales. With the weak GBP data out today, this number will be important for the Cable. If the retail sales happens to come out lower than the previous number of -0.4%, watch for a big drop in the Cable.

US Core CPI
8:30 am ET; 13:30 GMT
Previous= 0.2%; Forecast= 0.2%
PPI came out lower than forecast which means that we should also be seeing a lower CPI number. If for some reason CPI comes out higher than expected, I think the dollar will rally. This number will have to be fairly big as traders will also probably want to wait for the TIC data and Industrial Production report due out later in the day.

US TIC Data
9:00 am ET; 14:00 GMT
Previous= 116.8B; Forecast= 63.0B
Anything lower than 63.0B will cause the dollar to drop like a rock. TIC data is important because it basically funds our deficit so a lower than expected number will crush the dollar.

US Industrial Production
9:15 am ET; 14:15 GMT
Previous= -0.6%; Forecast= 0.2%


Chart Analysis:

EUR/USD

Yesterday I said that we would see another bounce to 2850 and I hold firm to that claim. The Euro once again bounced off of 2800 and is currently at 2824. Stochastics on the 4hr chart is headed up with plenty of room for buying power so I expect the pair to reach 2850 and maybe even 2870. On the daily chart, stochastics is once again sloping down so we still have plenty of long term selling power. After the pair moves up to 2850-2870, we could see some of this selling power tomorrow.


GBP/USD

Yesterday I said the Cable was showing an extended period of oversold in the 4hr stochastics and with another big drop today, that period has been extended even longer. To top it off, the pair has found support at the 200 SMA on the 4hr and the 50 SMA on the daily chart. I am seeing strong technical signs that this pair will rally tomorrow. Stochastics on the daily chart is also beginning to enter the oversold category which is also another sign that this pair will move up.

Trade Idea:

Buy at 1.8800; Stop Loss= 1.8720; Target= 1.8900


USD/CHF

I said that the Swissy would reach 2500 if it could break 2450 and that's exactly what it did. Now the pair has bounced back down and is currently resting on its 50 SMA on the 4hr chart. I'm not clear on the direction for this pair tomorrow but if I play the correlation rule, I would expect this pair to go down since I believe that the Euro will rally tomorrow. My best guess is that the pair will move down near 2400.


USD/JPY

Unlike the Swissy, the Yen shows a clearer sign that it will drop. The 4hr stochastics is reading overbought and I think the pair can go down to 117.50. However it faces some resistance along the way as the 50 and 100 SMA stand in between the current price and the 117.50 level.


Conclusion:

The market is full of economic reports tomorrow so we should see a pretty exciting day once again. Since we have 3 major US reports, we will see the most movement if they all line up, whether they are all positive or negative.

 

[Big Pippin]

Thursday, November 16, 2006

The dollar rose slightly due to the higher than expected TIC data and Philly Fed Index. However, the gain was held back by a lower CPI (which we already knew was going to happen because of the low PPI number on Tuesday). The GBP retail sales also rose higher than expected. All these factors led to a lackluster day in the majors as the pairs pretty much stayed put.

My Cable trade did not trigger because the pair did not drop low enough. I still think the trade looks good so I will keep it in play. However, the pair bounced off of its 200 SMA on the 4hr chart and I'm not sure if we'll see another drop. Regardless, I will keep the entry the same as stochastics on the daily chart still show a little more room for some selling power and with the 100 SMA also lining up at our entry level of 8800, I think this is the safest place to put a buy order at.


Coming Up:

US Housing Starts
8:30 am ET; 1:30 GMT
Previous= 1.77M; Forecast= 1.68M
Housing has been weak lately and the debate now is whether or not the slump is over. Economists are forecasting another drop so if we happen to see a rise in housing starts (especially a number higher than last month's number) then we should see the dollar rally tomorrow.


Chart Analysis:

EUR/USD

The EUR/USD didn't quite get to 2850 but it did get pretty close. Now the pair has once again dropped back down to 2800 which is also where the 50 SMA is lurking. This pair has tested 2800 several times the last few days and has bounced up each time so this is turning out to be a pretty decent support level. Stochastics on the 4hr chart has reversed and is showing signs for short term selling with the daily stochastics also showing signs for selling. The next support level will be at the 100 SMA on the 4hr which is currently around 2770. At this point I'm not sure where the pair is headed as 2800 has been providing good support while stochastics on both the 4hr and daily charts are showing selling signals. With 2800 being a good support and the 100 SMA not too far below it, my best guess is that this pair will bounce again towards 2850. Since stochastics is showing selling power if the pair drops, it shouldn't drop too much lower than the 100 SMA.


GBP/USD

I'm going to keep my trade idea active but I'm having doubts as to whether the trade will trigger. The Cable has found support at 8850 (the 200 SMA on the 4hr chart) and the 4hr stochastics is showing an upward trend. Not to mention the fact that the today's daily chart candle was a spinning top which gives strong indication of a reversal. I may have missed the boat on this one but I don't want to play it too aggressive. The entry level for my trade is a very safe level and if it does happen to trigger, there is a VERY good chance my trade will win. I'll just have to suck it up if the price just continues to bounce up without taking me along for the ride. If you're feeling aggressive you could buy the pair now (around 8890) and target 8950 and put your stop at 8850.

Trade Idea:

Buy at 1.8800; Stop Loss= 1.8720; Target= 1.8900


USD/CHF

The Swissy has been real quiet lately and is starting to look really ugly. Right now the pair is testing resistance at the 100 SMA on the 4 hr chart and we have another good resistance level at 2500 which is where the 50 and 200 SMA are at on the daily chart. Stochastics on the 4hr chart still show signs for more selling although the slope is moving ever so slowly. I expect to see a drop tomorrow as 2500 is looking to be a very strong resistance point since 2 moving averages are converging at that same level. Unless we see drastic US news tomorrow, I don't expect 2500 to be broken. Look for the pair to drop to 2400.


USD/JPY

The Yen is also looking really ugly as all 3 moving averages on the 4hr chart are looking like multicolored spaghetti strands right now. The pair has found resistance at 118.30 (200 SMA on the 4hr chart) but stochastics is wiring together and isn't giving me a good directional bias. I'll refrain from making any guesses on this one.


Conclusion:

There isn't much going on tomorrow except for the New Housing Starts report. Look for the market to follow the technicals unless the numbers for the new housing report are extreme.

 

[Big Pippin]

Monday, November 20, 2006

This week is going to be dull. Personally, I am already thinking about the gorgeous turkey that I will be devouring on Thanksgiving. With hardly any economic reports due out this week and the fact that Thanksgiving is on Thursday, I don't expect too many things to happen in the Forex world. Last year I ended up losing 3 straight trades on the 3 days right before Thanksgiving so I will only be taking a trade if I see a really good setup.

I will not be posting on Wednesday-Friday since I will be out of town, and seeing how this is the most traveled holiday (yes even more than Christmas), I am expecting a rather low volume of traders during these days. I highly advise that you take a vacation from trading and enjoy the time off. If you're outside of the US, use this time to maybe re-focus. Review your past trades. Review your current trading systems. Just take a few days to analyze yourself as a trader. This is the perfect time to do so!

My Bias-O-Meter is once again telling me that the dollar is poised for a sell-off. I've been seeing a downtrend for the dollar across the majors for about 3 weeks now. This doesn't necessarily mean that the dollar will be bearish from now on, but it does give me some indication as to where the dollar may be headed in the medium term.

Weekly Bias-O-Meter:

EUR/USD; GBP/USD= Bullish
USD/CHF; USD/JPY= Bearish


Coming Up:

Absolutely nothing! Well not really, but there isn't anything major coming out. The BOJ minutes will be released so you might want to go over that but I don't see anything major coming out tomorrow.


Chart Analysis:

EUR/USD

Am I good or am I great? I said on Thursday that I felt 2800 was a good support and that if the price dipped it would find support at around 2770 which was where the 100 SMA was approaching. I also said that I felt the price would move back to 2850. Like magic, the pair did exactly that and I once again have a big head. I apologize and hope you can bare with me! Deep breath......ok back to reality. After all the bouncing the 2800 is giving us, I think we're going to see a stronger push down this time. With the lack of fundamental reports this week mixed with the Thanksgiving holidays I'm not sure if we'll see that push this week. However, my next target for the Euro is 2750. Stochastics on the 4hr has plenty of room to fall but depending on the movement the pair may just bounce off of 2770 again. We'll have to wait and see.


GBP/USD

Well my trade never got triggered but my thinking was correct. There were a lot of signs pointing towards a reversal to the upside and 8850 looked to be the bottom of before the reversal. The pair has moved nicely and is currently around 8970. My next guess would be for the Cable to retrace down to around 8900 as the 4hr stochastics is showing an extended overbought signal. The 50 SMA on the daily chart is also approaching 8900 so that should be a good support area. Look for a move towards 8900 before another bounce back up.


USD/CHF

I said on Thursday that I felt that 2500 would hold as a good resistance level and after a brief spike, the pair ended up closing back below 2500 on Friday. I targeted 2400 and the pair hit that level today. From the 4hr stochastics point of view it looks like a move up is the next play. However the pair faces resistance at the 50 and 100 SMA on the 4 hr chart which is hovering right above the price at around 2460. Not really sure where this is going.


USD/JPY

Woooweee the Yen is trading tighter than the Ohio State vs. Michigan game was! From my vantage point I'm seeing an ascending triangle on the daily chart. I think a breakout is going to happen soon but it may not happen until after this week. 118.50 will be the level to break. If we see this broken, look for a move to at least 119.00 and maybe even 119.50.


Conclusion:

It's a short week with very few fundamental reports. Look for a lot of spikes and range trading. Be very careful if you trade this week.

 

[Big Pippin]

Tuesday, November 21, 2006

Thanksgiving is fast approaching and while I'm excited about stuffing my face with an endless supply of delicious home cooked food, there is something even more exciting that is putting a twitch in my trading finger. It's called "Black Friday" and it refers to the one day a year when stores have ridiculous discounts so that the US consumer can start their annual Christmas shopping. This means waking up early, standing outside stores in huge lines, and fighting the mob for all the cool new gadgets stores have to offer. The day after Thanksgiving sparks the start of Christmas which to me could spark a short term growth in consumer spending.

I talked about this a couple months ago but consumer spending has been one of the few areas that are keeping the US economy afloat. We all know housing is dead, but with the shopping season starting, we could see a short term uptrend for the dollar. I expect consumer spending to be big. Gas prices are still relatively cheap and employees are making more, giving them more cash to spend on little Tommy and Katie. I just thought I'd throw out that little point.

In other news, the BOJ minutes were released early this morning and the consensus is that they will not be raising rates until sometime next year. The tone was that the their economy is growing moderately which basically means they are in no hurry to raise their rates. Enough said.

Coming Up:

Again nothing major is coming out, but the BOE minutes will be released and you should definitely give it a read. Also, consumer confidence is coming out at 10 am ET, but I don't think it will cause any movement unless the number is very extreme.


Chart Analysis:

EUR/USD

Ok so the Euro didn't fall as much as I thought it would, but it did make another bounce like I expected. At this point it's hard to say where the Euro will go tomorrow because the 4hr stochastics turned upwards before hitting the oversold region. Daily stochastics is still headed down but I don't see any major resistance levels nearby to justify a move down. The pair has bounced off of 2850 a few times so it could hold once again. It's hard to say at this point. I'm going to hold off on this.


GBP/USD

Like I said yesterday, the Cable moved up to where the 100 SMA is and I think the next move is a bounce down. 4hr stochastics moved briefly out of overbought territory but it headed back up there towards the end of the day today. Since the 9000 level is also where the 100 SMA is on the 4hr chart I think this resistance will hold because of the lack of fundamentals and slow trading week this week. Look for the pair to move back down to 8950.


USD/CHF

So the resistance I mentioned yesterday at the 50 and 100 SMA held its ground and the Swissy made another move back down to 2400. The million dollar question now is whether or not 2400 will hold. Stochastics on both the 4hr and daily chart are both showing more room for selling power but like I said, trading will be kind of dead this week because of the holiday and lack of fundamental reports. My guess is that this pair will hold at 2400 and may range to 2450.


USD/JPY

The Yen did even more consolidating today and I am expecting a breakout at some point in this pair. I think a good play would be to straddle it by looking to buy past 118.50 or sell below 117.50. If the pair breaks one of those levels I think the logical targets would be 119.00 and 117.00 respectively. I think we'll see more tight range trading the rest of the week so this probably won't happen until sometime next week.


Conclusion:

With tomorrow being the day before Thanksgiving, many people will be traveling and trading volume should be pretty low tomorrow. Times like these can be dangerous so be careful if you do trade tomorrow. This will be my last post until next Monday as I will be out of town for the holidays. Have a happy Thanksgiving everyone!

 

[Big Pippin]

Monday, November 27, 2006

So there I was, stuffing my stomach with deep fried turkey, mac and cheese, succulent ham and all the other fixins and all the while the market was making huge moves. The last thing I said before I left was that I seriously doubted that the markets would move. Boy was I ever wrong! That just goes to show you that you should never completely "listen" to me. I mean sure, I am the best looking member of the FX-Men and many times it seems like I have superhuman abilities to foresee the market, but at the end of the day, I'm just a handsome analyst who makes a best guess decision on market movements based on what I see is going on around me.

Ok so what's the deal with the crazy move? Let's see....The French said business confidence was at its strongest levels in 5 years. Being that the French make up the 2nd largest economy for the Euro-Zone, this is pretty big. To add to the Euro fuel, German business confidence surprisingly jumped to a 15 year high! So can someone say interest rate hike? Apparently that's exactly what the few traders that traded over the holidays were saying as they sold off the dollar and drove the Euro and Pound to new highs.

Now before you go and join the crowd, consider this: Volume was very thin over the holidays and as a result there was no one to sell against the rising Euro and Cable. I think we'll see a correction during the course of this week. We are already starting to see some of the retracement and I expect that we'll see more counter movement throughout the week.

On the US front, shopping was crazy throughout this weekend. The word on the street is that consumer shopping has started off on a strong note and could be indicative of a good shopping season. This strong spending will cause a spike in Retail Sales and Consumer Spending especially since salaries have been growing. People have money in their pockets and they're not afraid to use it!

Weekly Bias-O-Meter:

My Bias-O-Meter is still showing a dollar negative trend. It's been like this for 4 straight weeks now.

EUR/USD; GBP/USD= Bullish
USD/CHF; USD/JPY= Bearish

Coming Up:

US Durable Goods
8:30 am ET; 13:30 GMT
Previous= .5%; Forecast= .4%

Consumer Confidence
10:00 am ET; 15:00 GMT
Previous= 105.4; Forecast= 106.4

Existing Home Sales
10:00 am ET; 15:00 GMT
Previous= 6.18M; Forecast= 6.20M


Chart Analysis:

EUR/USD

Whatever the Euro has been doing over the holidays has caused my oscillator to show extreme levels. As a result, I see REVERSAL opportunities. The 4hr stochastics has shown overbought since last Tuesday and the daily stochastics is also in overbought territory. I'm starting to see the formation of a regular bearish divergence on the daily chart so there's a good chance the next move is down. The trick now is to find a suitable entry point. I'm going to hold off until the fast stochastic line actually crosses down below the slow stochastic line.


GBP/USD

Like the Euro, the Cable is telling a similar story. 4 hr stochastics has been showing overbought since Monday of last week and we're now starting to see the formation of a regular hidden divergence on the daily chart. Again, the trick is finding a good entry point and I will also hold off on this one until the fast stochastic line crosses below the slower stochastic line.


USD/CHF

The Swissy has found support at 2000. The pair has been in oversold territory on the 4hr chart since last Tuesday and it looks like a reversal is a good possibility. Unlike the Euro and Cable which are showing divergences, the Swissy is not showing any kind of divergence but its daily stochastics is in oversold territory and looks to be heading back up.


USD/JPY

The Yen got as low as 115.50 and looks to have found support there. Currently it's right at 116.00 and seems to have found new support at the 200 SMA on the daily chart. The 4 hr stochastics has been moving up so it's hard to say whether or not the pair will continue to move up or if it will reverse back down. Things are kind of tricky right now since the holiday trading kind of made the market movements a little weird.


Conclusion:

Thanksgiving trading really threw a bone at the market as the low volume of traders forced the market in a lopsided direction. Now that the rest of the world is back in the market, it will be interesting to see what happens. My personal opinion is that last week's move will be corrected this week but if US data continues to show negative reports coupled with stronger Euro and GBP reports then the trend could continue.

 

[Big Pippin]

Tuesday, November 28, 2006

The dollar took another beating today as all the US fundamentals came out negative and confirmed the notion that the dollar's rise is over. Durable goods and Core Durable goods both came out lower than expected and housing prices fell for the 3rd straight month (Interestingly enough, existing home sales went up which means we have some discount buyers out there). Right now everything is looking gloomy for the dollar and there might not be much that can keep it from falling.

It's funny because usually when the Euro appreciates against the dollar very fast, the ECB officials will start to talk the Euro back down. This is not the case this time which can only add more doom and gloom for the mighty Greenback.

Even Triple B himself, (Bernanke for those of you who aren't up on the street jive), couldn't slow down the dollar slump with his statements today. He said in a statement that inflation risks are "primarily to the upside". The market doesn't seem to buy that anymore and even with that, they still don't believe the Fed will have to increase rates to cut down inflation. In fact, traders are placing their bets that the Fed is going to cut their rates in March of 2007. This Thanksgiving move could be the beginning of the dollar's demise. MWUAHAHAHAHA! (Sorry, an evil laugh just sounded good after I used the word "demise")

Kathy Lien over at FXCM said that the majors made a similar rally against the buck last Thanksgiving but that it corrected itself the Monday after the holiday. This time around however, the markets have actually gone with the flow which to me, signals that traders are actually thinking the same way for a change.

Coming Up:

US GDP
8:30 am ET; 13:30 GMT
Previous= 1.6%; Forecast= 1.8%

US New Home Sales
10:00 am ET; 15:00 GMT
Previous= 1.08M; Forecast= 1.02M

US Beige Book
2:00 pm ET; 19:00 GMT
This could be significant because it will give us a look at how the different Fed branches view the US economy right now.


Chart Analysis:

EUR/USD

With another Euro rally today, our regular bearish divergence I saw yesterday has now been voided because stochastics is now higher than it was at the previous swing high. However, the 4hr chart is now forming a regular bearish divergence which still leads me to believe that the pair could head down. This has been the longest Euro rally against the dollar in a long time so I'm thinking this pair is bound to retrace but it will all depend on the economic data coming out tomorrow. What I want to wait for now is the 4hr stochastics to start reversing down. If I see this then I will start to look for a short entry point. Right now however, the direction is still blurry until the fundamentals are released tomorrow.


GBP/USD

There is still a slight hint of a regular bearish divergence on the daily chart of the Cable. The Cable has not reached 9500 since December 15, 2004! This is an extremely high level right now for the pair and I'm not sure if it can sustain it. The technicals are showing signs for a reversal but again, it will depend on the fundamentals tomorrow. It's a very tricky time right now because we need to find out if there is enough fundamental juice to continue to fuel this rally. Tomorrow should give us a better picture.


USD/CHF

The Swissy is still holding support at 2000. Unlike the Euro and Cable, the Swissy didn't gain any new ground against the dollar. The next move will be dependent on tomorrows news reports. Today was pretty much a range day for this pair.


USD/JPY

The Yen is still holding support at its 200 SMA on the daily chart. Today's candle was a spinning top and could be a sign of a reversal. Daily stochastics is reading oversold so there are good technical reasons to believe that this pair will head up in the near future.


Conclusion:

Tomorrow's fundamentals will play an important role in the dollar's fate tomorrow. We've seen the dollar take quite a beating these past few days and now the tricky part is deciding whether not the market will continue the trend or correct itself. Be very careful if you are trading at this point. I know I will be!

 

[Big Pippin]

Wednesday, November 29, 2006

The dollar made a little bit of a comeback but I'm not fully convinced that this is a true reversal.....YET! Sure the GDP came out higher than expected but New Home Sales dropped so the dollar is still not out of the mud. Today's dollar gain looks more like some profit taking by the sellers over the Thanksgiving holiday. We only saw a slight retracement in the majors and I'm not fully convinced the dollar is done dropping.

The Beige Book stated the obvious. There is moderate economic growth and housing sucks. Boring...we know this already. I think this is why the market didn't really react to this. The report did say that the labor market is getting tight in some regions so this could be another potential pitfall for the Dollar once the NFP rolls around. Just something to think about.

One thing I do want to note is that this retracement came in line with my technical analysis I had been doing the past couple of days. I saw bearish divergences on both the Euro and Cable and now those moves have taken place. It's still not clear where the dollar is going to go the rest of this week because the technicals still aren't giving any strong indications on the dollar's next direction. Once again we have a slew of economic reports for both the Euro, Pound, and Dollar so movement will be very dependent on these numbers. If we see good numbers for the Euro and Pound, and weak numbers for the Dollar, expect the dollar to lose big again. However, if the opposite is true, look for the dollar to add on to the ground it made up today.

Coming Up:

EUR CPI
5:00 am ET; 10:00 GMT
Previous= 1.6%; Forecast= 1.9%

EUR Consumer Confidence
5:00 am ET; 10:00 GMT
Previous= -7; Forecast= -8

EUR GDP
5:00 am ET; 10:00 GMT
Previous= 0.9%; Forecast= 0.5%

GBP Consumer Confidence
5:30 am ET; 10:30 GMT
Previous= -5; Forecast= -5

US Personal Spending
8:30 am ET; 13:30 GMT
Previous= 0.1%; Forecast= 0.1%

US Core PCE Index
8:30 am ET; 13:30 GMT
Previous= 0.2%; Forecast= 0.2%

US Chicago PMI
10:00 am ET; 15:00 GMT
Previous= 53.5; Forecast= 55


Chart Analysis:

EUR/USD

The Euro finally found resistance at 3200 but with only a 50 pip retracement I'm not sure if this pair is done moving up. 4hr stochastics shows that there is still room for downward movement and we could see it reach 3100 or possibly even down to its 50 SMA. Tomorrow's move is going to be very data dependent so I'm not placing too much emphasis on the chart at this point. Technicals say the pair is going down but it's not giving me a resounding answer.


GBP/USD

It's the same story with the Cable as the Euro. The pair found resistance at 9550 and retraced slightly to 9450. Yes I know...it's 100 pips, but with the Cable, trust me...that's not that much of a move. 4hr stochastics is showing even more room for selling than the Euro's 4hr stochastics so I could see the pair dropping another 100 pips to 9350 and it could also possibly reach its 50 SMA.


USD/CHF

The Swissy is "chillin out, maxin, relaxin, all cool and all..." at around 2100 right now. (*If you can guess what song that quote came from, you are super cool in my book) The 50 SMA is fast approaching the pair and could be the next resistance level although the 4hr stochastics is already hovering into overbought territory. Technically speaking, 2150 looks like an appropriate target for the Swissy in the near future.


USD/JPY

The Yen is the lone ranger out of the 4 majors today. Unlike the other 3 pairs which show a little more room to continue its current direction, the Yen is already at a solid resistance level. The pair is right at its 50 SMA on the 4hr chart and stochastics is almost in the overbought territory. So I see 2 possible scenarios. The first is that the pair bounces down from where its at right now OR the pair follows the trend of the other 3 pairs and continues to move up to its 100 SMA before bouncing back down.


Conclusion:

It will be another data dependent day tomorrow with the plethora of news reports due out. Today's market actions remind me of how I felt when I was 14 on my first date with a girl....unsure and reluctant! Tomorrow's news should give traders enough indication whether or not they should hold onto their dollars or sell them like hotcakes. Happy trading everyone!