Hey folks,
EURUSD got a nice retracement up from the NFP achieving re-entry levels previously specified. Here is the news for Monday Dec 6th 2010:
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1000 CAD Ivey PMI (56.35 expected) - Past 3 releases of this indicator have been quite large, and have had good follow thru. For smaller deviations this release can cause a quick spike but then reverse. If you can control your broker's slippage and have target limit orders set within 15-20 pips then a deviation of +/5 can be used, for catching follow thru on an afterspike a deviation of +/- 8 is best.
This one is a pretty solid trade that sometimes has a decent spike with additional follow-through, and other times has a modest spike with plenty of slow follow-through.
Spike strategy: Use somewhat tight slippage control to ensure entry within 10 pips of pre-release. Typically the spike is 20 pips with an extension to new extremes (30-40 pips) over 5-10 minutes. If deviation is nominal lock in profit quickly and if there is no continuation be ready to exit the remainder.
Afterspike: Oftentimes USD/CAD will go into a nice slow-motion trend that will push prices even further over 2 hours after release. Try to get in on a 50%-61% of pre-release in the first few minutes and look for a retest of the highs to take half profits and let the run for gravy.
If it comes out at 62.0 or higher, USD/CAD should sell off 30-40 pips
If it comes out at 50.0 or lower, USD/CAD should rally 30-40 pips
For Canadian Dollar Futures, symbol 6C, remember that this has normally been a low volume trade. If we get between a 5 - 10 point deviation, stay with low risk on the number of contracts you trade and get out of at least a portion of your position quickly. If it is above 8, you may want to close half size at 10 ticks profit and hold the other half for possible continuation.
If it comes out at 62.0 or higher, 6C should rally 30-40 pips
If it comes out at 50.0 or lower, 6C should sell off 30-40 pips
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2330 AU Interest Rate Decision (expected to hold rates at 4.75%) - As of Dec.5th all economists expect the RBA to hold rates steady, this is despite the poor GDP and Retail Sales readings last month.
Spike Strategy -- On a hike, buy aggressively and expect about 70-90 pips on the spike.
Afterspike Strategy -- Last 2 months after an immediate spike in the first minute after RBA surprised expectations, the AUDUSD started to chop with only a slight pressure in the direction of the news. Still possible to scalp 20 pips in these dips or peaks and hold some for a possible break for another 20 pips. To get in on even a 38% retracement of the initial news spike would be lucky and would likely be front-run.
On a hold, action may turn choppy if accompanied by a hawkish (we'll hike next time) type statement. If price does drop on a hold a possible reversal back up could setup for the European Open, depending on risk sentiment and US Dollar based market flows overall.
If they hike rates, AUD/USD should rally 70-100 pips.
If they hold rates steady with a clearly hawkish statement, AUD/USD could get volatile, but likely grind higher into a choppy range but might trend better on a cross like EURAUD.
If they cut rates, AUD/USD should sell off 70-100 pips.
If they hold rates steady with a neutral or dovish statement, AUD/USD should drop 20 pips and has a much better chance to hold onto downside momentum.
For Australian Dollar futures, symbol 6A, remember that even on interest rate changes, 6A can have low volume because many US traders do not have orders in the futures market. If there is a surprise, you should be able to spike as many as 10 contracts safely. For any afterspike trades, you should be able to follow the same strategy above.
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For those trading forex or futures in the Profit Mongers room, Cactus Jack is running CAD Ivey and Doug is running AUD Interest Rates.
To our success!
Sir Pipsalot sirpipsalot@profitmongers.com
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