Thursday, November 16, 2006

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:


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.


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


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.


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.


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.

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