Tuesday, November 14, 2006

Tuesday, November 14, 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:


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.


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.


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.


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.


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!

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