Thursday, November 02, 2006

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:


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.


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.


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.


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).


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.



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