Profit Mongers @ 2:09 AM, Thursday October 07 2010
Hey folks,
I'm all out on EUR/USD and on the sidelines for now. There's some very strong USD weakening flows, but EUR/USD is so overextended, it's very overdue for a plunge. I took a shot, but it didn't work out. Anyhow, next likely target for EUR/USD is 1.4043 and it's likely to get there today.
On GBP/USD we saw exactly what I was talking about where we made a slight new high by 5-9 pips then reversed lower for over 100 pips. If you were looking for that based on yesterday's signal, it was very obvious. I would NOT look to make the same play today though as GBP is likely to play a bit of catch-up to the Euro.
In news Wednesday, we saw US ADP hit a sell trigger, but with USD/JPY sitting right at key support, it had trouble selling off normally. CAD Ivey came in high and USD/CAD reacted beautifully with 40 pips down over 7 minutes, and 90 pips down over 100 minutes. AU Employment came out moderately high, and with all the USD weakening influence in the market, we got an overreacting 75 pip rally that held on with no real retracement for 6 hours until recently breaking even higher. In news Thursday,
0430 UK Industrial Production m/m (0.2% expected) - We've seen a lot of overreactions to news, and even seen the markets completely ignore some news as well. It's just a function of whether the news is coming out in line with sentiment for the pair at the time. Fortunately for GBP, sentiment is quite mixed towards weak GBP and weak USD, so it should be able to go either way. Since this is a smaller report though, I'm going to hold out for wider triggers.
If it comes out at 0.6% or higher, GBP/USD should rally 50 pips
If it comes out at -0.2% or lower, GBP/USD should drop 50 pips
0700 BoE Interest Rate Decision (no change unanimously expected) - The issue here isn't so much about the Interest Rate, but whether or not they will announce another round of QE by expanding their Asset Purchase Facility or taking some new fiscal measure of support.
--If the BoE expands QE, GBP/USD should sell off 70+ pips.
--If the BoE issues language that strongly hints or implies it will expand QE, GBP/USD should be choppy, but still head lower.
--If the BoE does nothing to expand QE nor imply it may do so soon, GBP/USD should rally pretty reliably and play catch up to EUR/USD. It depends on what EUR/USD is up to at the time, but we could see 100's of pips higher for GBP if EUR/USD is still on a tear.
0745 ECB Interest Rate Decision - There's really not much to look for at the announcement. A bit after 0830 Trichet will start his speach that may put out some tape bombs, but it's harder to guess what might come out of that, so I plan to just play that by ear.
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