FX Trading Strategy for 10/31/2006

Here is what's going on tomorrow.

1. Tuesday, October 31st, 2006 (8:30 am New York Time) CANADA
We have Canadian GDP coming out for the month of August. Most economists predict that it will be around 0.2% to 0.3%. If it comes out at 0.5% or higher, I may possibly go short on EUR/CAD. If it comes out at 0.0% or negative, I may possibly go long on EUR/CAD. I like trading EUR/CAD on this report, because it has much bigger range, due to Canadian dollar being much cheaper in comparison to Euros as opposed to U.S. dollars. Also, there is another employment index report coming out simultaneously out of United States, and I don't want any conflicts associated with trading USD cross pair. If my triggers get hit, I would expect a move of around 50 pips.

2. Tuesday, October 31st, 2006 (10:00 am New York Time) USA
We have Consumer Confidence coming out of United States, together with Chicago PMI. I'll focus on Consumer confidence to make an immediate trade before the spike, however once I am in, I will definitely take into consideration the Chicago PMI, and if there are conflicts, I will exit immediately.
Basically consumer confidence is the first report for the month of October, and is more important this month than usual, because it's expected to be way better than last month, due to low gas prices, which is supposed to counter the depressing housing situation that high interest rates have caused. It's expected to come out at 108.0 versus 104.5 last month. If the number comes out at 104.5 or lower, that would mean that lower gas prices had very little effect, and would re-confirm depressing situation for the dollar. If the number comes out at 110 or higher, we are starting off the month of October reports with a lot of hope for a better month for the U.S. than September. So if the number comes out at 104.5 or lower, I may possibly go long on GBP/USD. If the number comes out at 110.0 or higher, I may possibly go short on GBP/USD. Anything in between would be a no trade. As soon as I am in a trade, I'll look at Chicago PMI, and if it comes out not conflicting, it would be very nice. If it conflicts by a lot, I may consider exiting, if it conflicts just by a little, I may stay. I'll have to see when the situation arises...too many possibilities to make predictions.

Todays FX Trading Strategy

Okay...here is what happened yesterday. We were watching two numbers. We were looking to place a trade based on UK Retail Sales, and place a trade based on U.S. Philly Fed Survey. The UK Retail sales came out WAY below expectations, hit my trigger for a short on GBP/USD, we saw the pound gradually dropping by about 50 pips. It was a nice slow and steady move,

Then we had the Philly Fed Survey coming out. I told you that if it comes out negative, it would be a good 20-25 pips move up on GBP/USD. It did come out negative and we did see the GBP/USD moving up immediately by 20 pips, then we saw a small retracement, and then it continued to even higher highs.

Okay, here is what's happening today.

1. Friday, October 20th, 2006 (4:30 am New York Time) UK
We have UK 3rd quarter GDP coming out. It's expected to be a bit weaker than 2nd quarter GDP. They are expecting it at 0.6%. If the number comes out at 0.7%, it would be good for the pound, so I may possibly go long on GBP/USD. If the number comes out at 0.5% or lower, it would be bad for the pound, so I may possibly go short on GBP/USD. If the number deviates by at least 0.1%, we may very well see a move of 50 pips or more either direction.

2. Friday, October 20th, 2006 (7:00 am New York Time) CANADA
We have Canadian CPI numbers coming out. I am going to be focusing on the core number, which excludes the volatile components. The monthly core number is expected to be at 0.2%. If the number comes out at 0.4% or higher, I may possibly go short on USD/CAD. If the number comes out at 0.0% or negative, I may possibly go long on USD/CAD.

Todays FX Trading Strategy

So let's review what happened yesterday. We were watching two things. We were watching the UK BOE minutes, and the U.S. core CPI. Here is what happened...

On the BOE minutes, it was expected that the decision to keep rates unchanged in October was unanimous, so 9:0. However, when we saw the actual minutes, we saw that the vote was 7:2, which meant that 2 out of 9 members wanted to hike the rate back then, which again reinforced the fact that UK will be hiking rates in November. GBP/USD strengthened by about 20 pips, The reason the pound didn't strengthen much more than that was mostly because UK unemployment check claims came out higher than previous month, and average earning number came out lower than expected.

Then we had the UK core CPI, which came out exactly as expected. At the same time, the headline CPI number came out slightly worse than expected, which housing starts came out quite a bit better than expected, and even better than last month. The market was indecisive for quite a few minutes, staying within a range of 5 to 10 pips, which is very strange, it usually picks a strong direction after CPI numbers, but not this time. And then we saw the dollar strengthen based on the housing numbers mostly, so we saw GBP/USD drop by about 40 pips or so. I didn't take this trade...too risky going against the general GBP/USD up-trend, while U.S. CPI came out in-line, and even a little less than expected on headline number.

Here is what's happening today.

1. October 18th, 2006 (4:30 am New York Time) UK
We have monthly retail sales coming out of UK. Expected number is around 0.3% or 0.4%. If the number comes out at 0.6% or higher, I may possibly go long on GBP/USD. If it comes out at 0% or negative, I may possibly go short on GBP/USD. This particular report is usually good for about 30 pips, however it will depend where the GBP/USD is before the report. If it still hangs around the 8670s area, like it is now, we may get a much bigger move to the upside.

2. October 18th, 2006 (12:00 pm New York Time) USA
We have monthly Philadelphia Fed Survey number coming out. This is not the most important report in the world, but if it deviates by a lot, we may get a 20-30 pips move out of it. Expected number is at 7. If the number comes out negative, I may possibly go long on GBP/USD. If the number comes out at 15 or above, I may possibly go short on GBP/USD. Again, be careful with this report, get ready to exit fast, if it creates a move, it might be a short term move.

Todays FX Trading Strategy

Here is what's going on today...

1. Wednesday, October 18th, 2006 (4:30 am New York Time) UK We have Bank of England meeting minutes coming out from previous interest rate statement. Everybody is expecting Bank of England raising the rate next month, so a confirmation of that could be bullish for GBP/USD, but mostly already priced in. What would be really bullish for GBP/USD is a clue of possibly another rate hike after November. What would be short term bearish for GBP/USD is if there is some strong uncertainty about the rate hike in November.

2. Wednesday, October 18th, 2006 (8:30 am New York Time) USA
We have U.S. monthly CPI coming out. There is two numbers, the core number and headline number. My focus will be on the core number, which will exclude food and energy. Core number is expected at 0.2%, and headline number is expected at -0.3%, mostly due to drop in oil prices. If the core number comes out at 0.3% or higher, I may possibly go short on EUR/USD. If it comes out at 0.1% or lower, I may possibly go long on GBP/USD. Note that I picked these two different pairs. Reason being is that I don't want to go short against the general trend up in pound, that's why if I go short, it would be in the EUR/USD. If the number comes out as expected at 0.2%, I am not planning to trade it...however, it would probably be more good for the dollar than bad, because such number still signifies healthy economic growth, and inflation. The higher the inflation, the bigger the chance for Fed to do another rate hike.

Todays FX Trading Signals

Nothing happened earlier today, Bernanke didn't say anything pertaining to the U.S. monetary policy. The market was pretty dead, I think everybody is waiting for the CPI numbers from various countries this week, in order to be more certain on the market direction.
We have a few interesting reports coming out today that I will be watching and possibly trading.
1. Tuesday, October 17th, 2006 (4:30 am New York Time) UK We have UK CPI coming out. This number becomes especially important this month, because 90% of economists are expecting UK to do another interest rate hike in November, which would bring UK interest rates from current 4.75% to 5.00%. Expected monthly CPI number is 0.1%. Any negative number would signify that the economy is cooling off, which may cause the government to rethink the hike, and would possibly be bad for GBP/USD. So if the number comes out at -0.1% or more negative, I may possibly go short on GBP/USD. If the number comes out at 0.3% or higher, it should be good for the pound, so I may possibly go long on GBP/USD. If my triggers get hit, I am expecting a move in the GBP/USD of at least 50 pips.
2. Tuesday, October 17th, 2006 (8:30 am New York Time) USA
We have PPI coming out of the U.S. We have the regular headline number, and we have the number, less food and energy, which is the core number. The core number is expected to come out at 0.2%. If it comes out at -0.3% or more negative, it would be bad for the dollar, so I may possibly go long on GBP/USD. If the core comes out at 0.7% or higher, it would be good for the dollar, so I may possibly go short on GBP/USD. I would be extra careful trading this report, even if my triggers get hit, especially if the number is conflicting the UK CPI number earlier. Catch as much as you can on the spike, and exit as soon as you start seeing considerable retracement.
3. Tuesday, October 17th, 2006 (8:30 am New York Time) CANADA
We have Interest Rate decision coming out of Canada. Currently the Canadian interest rate is at 4.25%. It's expected to stay unchanged. If for some reason it's hiked to 4.50% or more, it would be a nice possible sell on USD/CAD. If it gets cut to 4% or less, it would be a good possible buy on USD/CAD. But again, that's just day dreaming. 99% is that they'll keep it where it is. What's more important is the comments accompanying the interest rate statement. If they say something about possibly doing another rate hike in the next few months, that would be a possibly good short on USD/CAD, probably worth at least 50 pips. If they give some confirmative answer that there will be no more rate hikes, or that they may start possibly cutting the rates, that would be a good long on USD/CAD, possibly worth at least 50 pips as well.
4. Tuesday, October 17th, 2006 (9:00 am New York Time) USA
We have TIC report coming out of the U.S. TIC stands for Treasury International Capital. This report is expected to come out at around 55 billion or so. My trigger would be 25 billion either direction. So if the number comes out at 75 billion or more, I would possibly go short on GBP/USD. If the number comes out at 30 billion or less, I may possibly go long on GBP/USD. Again, be extra careful on this report, especially if it comes out against the general trend, established by the UK CPI number. Look to grab as much as you can from the initial spike, and if you start seeing strong price move in the opposite direction, just get out.

KEY EVENTS FOR THIS WEEK

This are the key Economic Data that i'm going to watch thru out this week. And this week is purely belongs to the inflation data from UK, USA, Euro-Zone and Canada. And the most key week for the Sterling Pound. On this week i'll be looking for the Economic Data like CPI, ILO Unemployment Rate, Retail Sales, BoE Minutes Of Meeting and GDP all this data will be very important and BoE will be closely monitor this data before they go for Interest Rate decision in the next month of November. Some analysts and BoE policy makers are expecting one more hike in rate in November by 25bps to 5.00% from 4.75%. And i feel BoE Minutes of Meeting will reinforce this picture. Currently Uk inflation is at 2.5% and consensus estimate is at 2.4%. And from the USA i'll keep eyes on PPI, CPI, NAHB Housing Market Index and Hosing Starts & Building Permits. And Fed is still highlighting the uncertainity and risks associated with the slow down in housing market. Fed is still on the way to tighten the rate of inflation. In the long run the current higher inflation rate is really unacceptable to the Fed. And from Eur theres not too much of data to look out for, i'll be looking for German ZEW Survey and Euro-Zone CPI thats is from E12. German industrial production and orders are firing on all cylinders and i'm not seeing any sort of coming down, even though the despite fall in surveys such as ZEW and IFO index. August German industrial production of 7% in August is the highest since 1991. And from Swiss the only data that really count is Trade Balance. And from Canada i'll watching for Interest rate decision, most of the analysts are expecting is unchanged at 4.25% and another data is CPI. And therez is nothing to lookout for in Aussie or Kiwi. And from Yen the one data that i'll keep eye on BoJ Minutes Of Meeting this will provide some insight how far off a second rate hike is.
Thats all...

Currency Weekly Wrap-up

The Federal Reserve minutes from the September FOMC meeting stated that the decision was easier than at the August meeting as there was some signs of moderating inflation although the Fed was still concerned over inflationary pressure. There was a prolonged discussion over the growth outlook, especially in view of the sharp slowdown in housing.

Comments from Fed officials during the week were generally firm on inflation, although Governor Poole stated that the risks of a slowdown in growth were now higher than the risks of a further increase in inflation.

As far as economic data is concerned, retail sales fell 0.4% in September, primarily due to the impact of a sharp gasoline sales and underlying demand was firmer. Jobless claims remained below the 310,000 in the latest week which reinforced confidence over the labour market. Futures markets moved to indicate that an unchanged level of interest rates for the next few months was the most likely outcome.

The US trade deficit rose to a record US$69.9bn in August from US$68.0bn the previous month. Exports posted solid growth for the month while imports also remained high as oil imports rose to a record level with the overall oil price strengthening from July levels.

The ECB continued to take a tough stance on monetary policy with Trichet pointedly not discouraging market speculation that there will be another interest rate increase in December. There was little in the way of major Euro-zone economic data, although there was firm industrial production data across the region.

The US dollar strengthened to highs around 1.25 against the Euro on a revision to interest rate expectations and the US currency held firm after the US retail sales report.
The Bank of Japan left interest rates unchanged following the latest policy meeting and the bank also left its economic outlook unchanged. Bank of Japan governor Fukui refused to rule out an interest rate increase before the end of 2006. The yen weakened to near 120.0 against the dollar before finding some support.

The UK trade deficit fell slightly to GBP6.7bn in August from a revised GBP6.8bn the previous month, although the impact was limited as markets remain concerned over the quality of the data, in particular the difficulties in measuring exports.

The Bank of England governor and deputy governor both warned over the inflation risks during the week, reinforcing market expectations that interest rates would be increased in November. There was little in the way of UK data releases over the week and Sterling weakened to lows below 1.8550 against the US dollar as the US currency strengthened.

The Australian data was stronger than expected with employment increasing by over 30,000 in September while unemployment dipped to 4.8% from 4.9%. The Reserve Bank governor also warned that interest rates were still more likely to rise than fall in the short term and this combination pushed the Australian currency stronger with gains back above the 0.7520 level against the US dollar. The Canadian dollar weakened to near 1.14 against the US currency as oil prices continued to weaken.

Today TX Trading

Okay...yesterday we had U.S. Trade Balance coming out really bad. It deviated by over 3 billion, and was bad for the dollar. We saw GBP/USD spike up by about 30 pips or so, then relatively quickly retracing down, then again going back up by another 40 pips. Today is Friday the thirteenth :) Excellent day for trading :) Here is what's happening today, and here is what I am going to do.

1. Friday, October 13th, 2006 (8:30 am New York Time) USA
We have three reports coming out this day. However, since they are all coming out at the same time, and the plan is to get in before the spike starts happening, we need to focus on one. The reports are Advance Retail Sales, Retail Sales Less Autos, and Import Price Index. What I am going to be doing, is looking for an entry based on Retail Sales Less Autos, and then looking at other numbers to judge where to exit. But mostly, of course, I'll be looking to exit, based on price, trailing my mental exit point by 5 pips. The Retail Sales Less Autos is expected to come out at 0%, so no improvement...if it comes out at 0.3% or higher, it would be good for the dollar, so I may possibly go short on GBP/USD. If it comes out at -0.3% or lower, it would be bad for the dollar, so I may possibly go long on GBP/USD.

Again, with all these different numbers coming out, including revisions and all that, it's impossible to predict all the possible scenarios. So the best suggestion I can make if you are trading it with your own news service, is to enter based on my triggers on the X Autos, and exit purely on the price action by taking a profit, if you see a price retracing by 5 pips or more after the initial spike.

Today Fx Trading Signals

Yesterdays Highlights :

Okay first of all, as you know, today we were watching FOMC minutes out of U.S. The comments were somewhat hawkish, and GBP/USD did drop by about 20 pips, however it wasn't clear enough. They mentioned that inflation is still high, and mentioned a couple of other U.S. positive things. Basically, they didn't say anything new, so there was no surprise, that's the reason why the move was so little, and it kept on retracing back and forth. I was looking for clear statement of another interest rate hike in order to take a short on GBP/USD, which would probably move the pound down by over 50 pips. But since it didn't happen, I didn't take a trade.

We have Australian Employment report coming out tonight at 9:30 pm New York Time. Yesterday, I gave you some preliminary triggers for this report, if you are to trade, but after doing some more research, I want to go more conservative. So basically the expectation is that this report will come out at 5K. If it comes out at 50K or higher, I may possibly go long on AUD/USD. If it comes out at -40K or more negative, I may possibly go short on AUD/USD. Anything in between will be a no trade, and even if the trigger gets hit, I am not counting on a move of more than 30 pips from the pre-release price. 30-40 pips is expected move.

Here Todays Happenings :
1. Thursday, October 12th, 2006 (8:30 am New York Time) USA
We have Trade Balance coming out of USA. Expected number is approximately at -66.5 billion. If the number comes out at -65 billion or less negative, I may possible go short on GBP/USD. If the number comes out at -68 billion or more negative, I may possible go long on GBP/USD. If the triggers get hit, this should be a decent move of possibly 50 pips or more.

2. Thursday, October 12th, 2006 (10:00 am New York Time) E-12
We have Trichet speaking in a press conference with head of the Bank of Russia, and head of the Deutsche Bundesbank. Again, we are looking for clues on European interest rate decisions. Basically, E-12 is planning to do one more rate hike before the end of the year. If Trichet in any way plans to say that there is going to be more than one rate hike by the end of the year, EUR/USD may possibly increase by around 50 pips or more. If Trichet in any way mentions that there is probably going to be no rate hikes this year, EUR/USD may possibly decrease by around 50 pips. I will only be reacting and trading based on confirmative interest rate statements that are not already expected.

Today - FX Trading Signals

Okay, so yesterday we had an EXCELLENT trade on the UK trade balance. It came out hitting my short signal, and the GBP/USD dropped by around 50 pips slowly and steadily, without retracing much.

Here is what's happening today.

1. Wednesday, October 11th, 2006 (2:00 pm New York Time) USA
Tomorrow, we have only one tradable report according to my standards. And that's FOMC meeting minutes at 2:00 pm NY Time. Basically, there is only one thing I will be looking in that report, and one thing only. Is the U.S. planning to do another rate hike? If that's confirmed or mentioned, GBP/USD may possibly drop by about 50 pips or more, since a rate hike would be positive for the dollar.

2. Wednesday, October 11th, 2006 (9:30 pm New York Time) AUSTRALIA
We have employment change coming out of Australia. Expected number is at approximately 5K. If the number comes out at 25K or higher, AUD/USD may possibly increase by 30 pips or more. If the number comes out at -10K or more negative, AUD/USD may possible decrease by 30 pips or more.

2Days FX Trade

I'll make this alert short and sweet. There are no news trades today. UK PPI at 4:30 am NY Time might create a move, however, because of a holiday in Asia, Columbus Day in the U.S., and Thanksgiving day in Canada, the volume in the market will be thinner than normal, and London traders are notorious for hunting stops and manipulating price, so I'll just stay out today.

FX Majors The Week Ahead

US - the trade deficit, retail sales, import prices, Michigan sentiment and business inventories/sales are the data features, while the Fed releases the minutes of the last meeting and the latest Beige Book (in preparation for the next meeting on October 25). It seems unlikely that the Fed releases will do much to alter current thinking on Fed policy, although any reiteration of their dissatisfaction with current core CPI rates could weigh a little further on talk of rate cuts early next year. Other than that, the market will remain focused on data relating to the extent of the current slowdown in economic activity, although oil price weakness will continue to cushion the blow of any weakness in the data. Retail sales are probably the main focal point, although Michigan sentiment will be watched to see whether there has been any further uplift as a result of low fuel prices. The trade deficit data will also interesting to see how much of last month's widening (to $68bn from $64.8bn) has been sustained.Eurozone - data features include German trade, French/German/Italian industrial output and French CPI, although none of these are likely to affect market sentiment on key issues. The ECB monthly report is also due and as is typically the case, will likely reiterate the message from Trichet at the ECB press conference - namely that there are upside risks on inflation and that further withdrawal of monetary stimulus will be likely if conditions develop in line with ECB assumptions.Japan - machinery orders are due and the market will be keen to see what sort of bounce back there is after the very sharp 16.7% m/m decline seen last month. Before this drop the series was in a solid uptrend, but if such depressed levels are sustained this would change. Given the natural volatility in this series a strong rebound seems the most likely outcome. Bank lending, current account, consumer confidence and CGPI data are also due, while the BoJ meets to discuss policy. Policy is likely to be left unchanged, although the market will be keen to see how vigorously they reiterate the case for gradual policy tightening.UK - data on PPI, BRC retail sales, the trade deficit and the British Chambers of Commerce quarterly survey are the only features. Last month's core PPI output eased back to +2.0% y/y from +2.4% and the status of this number (along with CPI and average earnings in coming weeks) will influence market sentiment about the perceived inflation threat going into the next MPC meeting. The BCC survey is a well respected and fairy comprehensive survey of business, as it takes into account both service sector and manufacturing companies, so anything notable could have some impact.Australia - a speech by RBA governor Stevens and this week's Australian data - housing finance, consumer sentiment, employment - will help to determine whether the RBA will be raising rates as soon as next month. RBA governor Stevens is likely to make it clear that while the US economy is showing signs of weakness, there is a clear risk of a further rate rise in Australia. Thus far only private sector credit has shown any meaningful response to tighter policy and even this was just one month of data. Employment has been strong in recent months, while consumer sentiment bounced back 12.5% in September after the "rate-hike prompted" 16.2% drop recorded in August.

FX Majors Weekly Wrap-up

The dollar found it difficult to break out of narrow ranges for most of the week, but strengthened sharply on Friday after the US employment report.The September US ISM surveys suggested a slowdown in growth with the manufacturing index falling to 52.9 from 53.7, the lowest reading since May 2005, while the services-sector index fell to 52.9 from 57.0 the previous month. The prices components dipped sharply in both surveys while the employment indicators were mixed with a drop in the manufacturing index and a rise in the services index.Fed officials, including Chairman Bernanke, offered no clear evidence on US interest rate policy with Bernanke voicing concerns over the housing sector, but also expressing confidence in the remainder of the economy. Fed officials continued to warn over inflationary pressure.The US employment increase for September was lower than expected at 51,000, but the August figure was revised up by around 60,000 and unemployment fell to 4.6% while earning growth was held to 0.2%.The ECB increased interest rates by 0.25% to 3.25% at the October council meeting, again citing underlying inflation concerns. The bank gave no clear indications over future policy, although ECB Chairman Trichet suggested that a further increase in December was the most likely outcome.The Euro-zone data was generally close to expectations with a slightly softer tone early in the week. The PMI index for the manufacturing sector was unchanged at 56.6 while the services-sector PMI fell to 56.7 from 57.4 and unemployment edged higher for August. German factory orders strengthened sharply in August, however, to produce a 5.0% increase for the last two months which boosted confidence in the German industrial sector.The unwinding of long positions pushed the Euro down to 1.26 against the dollar following the US employment data on Friday.The Bank of England left interest rates unchanged at 4.75% following the latest policy meeting on Thursday. The UK economic data was generally firm with the manufacturing CIPS index rising to 54.4 from 53.0 the previous month while the services-sector index rose to 57.0 from 56.7. Manufacturing production also strengthened for the seventh consecutive month with a 0.4% increase for August. Sterling hit selling pressure above 1.8880 against the US dollar, but strengthened to 0.6715 against the Euro on Friday in volatile trading.The yen remained under pressure on yield grounds with further tests of support beyond the 118.0 level against the US dollar and it weakened to 118.60 after the Friday US payroll report. The yen was unsettled by North Korean warnings that it might conduct a nuclear test, but the currency also gained intermittent support from speculation over intervention to curb yen losses against the Euro.Energy and commodity prices were an important focus over the week with prices falling sharply in mid week as oil prices dropped to lows around US$58 per barrel. The drop in oil prices weakened the Canadian dollar to 1.13 against the US currency before a correction and the Australian dollar also weakened to lows near 0.7420 against the US currency. The Reserve Bank of Australia left interest rates unchanged at 6.0% following the latest policy meeting with the currency gaining some support from a drop in the trade deficit.