Tuesday, November 21, 2006

Thanksgiving is fast approaching and while I'm excited about stuffing my face with an endless supply of delicious home cooked food, there is something even more exciting that is putting a twitch in my trading finger. It's called "Black Friday" and it refers to the one day a year when stores have ridiculous discounts so that the US consumer can start their annual Christmas shopping. This means waking up early, standing outside stores in huge lines, and fighting the mob for all the cool new gadgets stores have to offer. The day after Thanksgiving sparks the start of Christmas which to me could spark a short term growth in consumer spending.

I talked about this a couple months ago but consumer spending has been one of the few areas that are keeping the US economy afloat. We all know housing is dead, but with the shopping season starting, we could see a short term uptrend for the dollar. I expect consumer spending to be big. Gas prices are still relatively cheap and employees are making more, giving them more cash to spend on little Tommy and Katie. I just thought I'd throw out that little point.

In other news, the BOJ minutes were released early this morning and the consensus is that they will not be raising rates until sometime next year. The tone was that the their economy is growing moderately which basically means they are in no hurry to raise their rates. Enough said.

Coming Up:

Again nothing major is coming out, but the BOE minutes will be released and you should definitely give it a read. Also, consumer confidence is coming out at 10 am ET, but I don't think it will cause any movement unless the number is very extreme.


Chart Analysis:

EUR/USD












Ok so the Euro didn't fall as much as I thought it would, but it did make another bounce like I expected. At this point it's hard to say where the Euro will go tomorrow because the 4hr stochastics turned upwards before hitting the oversold region. Daily stochastics is still headed down but I don't see any major resistance levels nearby to justify a move down. The pair has bounced off of 2850 a few times so it could hold once again. It's hard to say at this point. I'm going to hold off on this.


GBP/USD












Like I said yesterday, the Cable moved up to where the 100 SMA is and I think the next move is a bounce down. 4hr stochastics moved briefly out of overbought territory but it headed back up there towards the end of the day today. Since the 9000 level is also where the 100 SMA is on the 4hr chart I think this resistance will hold because of the lack of fundamentals and slow trading week this week. Look for the pair to move back down to 8950.


USD/CHF












So the resistance I mentioned yesterday at the 50 and 100 SMA held its ground and the Swissy made another move back down to 2400. The million dollar question now is whether or not 2400 will hold. Stochastics on both the 4hr and daily chart are both showing more room for selling power but like I said, trading will be kind of dead this week because of the holiday and lack of fundamental reports. My guess is that this pair will hold at 2400 and may range to 2450.


USD/JPY












The Yen did even more consolidating today and I am expecting a breakout at some point in this pair. I think a good play would be to straddle it by looking to buy past 118.50 or sell below 117.50. If the pair breaks one of those levels I think the logical targets would be 119.00 and 117.00 respectively. I think we'll see more tight range trading the rest of the week so this probably won't happen until sometime next week.


Conclusion:

With tomorrow being the day before Thanksgiving, many people will be traveling and trading volume should be pretty low tomorrow. Times like these can be dangerous so be careful if you do trade tomorrow. This will be my last post until next Monday as I will be out of town for the holidays. Have a happy Thanksgiving everyone!