Currency Focus

EUR - In EZ the news was generally positive with German retail sales and unemployment both beating expectations by a wide margin, but the data was from December - before the increase in the VAT taxes - so players took the news with a grain of salt. Overall, retail sales were still down -0.3% quarter on quarter basis, but this slowdown was anticipated and should have no impact on EZ monetary policy going forward.

GBP - UK consumer confidence released this morning showed some resilience, but GBP continues to suffer some corrective pressure and this could extend a little further in the short-term. However, 0.6650 is likely to remain intact on EUR-GBP. Support on cable is at 1.9450-1.9500.

US GDP Reading

US Q4 GDP up by 3.5% against the 3% expected. For the full year of 2006 the US Economy grew by 3.4%. The fastest in 2 years.

US GDP Reading

US Q4 GDP up by 3.5% against the 3% expected. For the full year of 2006 the US Economy grew by 3.4%. The fastest in 2 years.

FX Trading Signals for Jan 31

1. Wednesday, January 31st, 2007 (5:30 am New York Time) SWITZERLAND
We have KOF Swiss Leading Indicator coming out, and it's expected to come out at 1.54 If the reading comes out at 1.34 or lower, that would match the lowest reading that came out all the way back in October of 2005, and would be short term bad for Swiss Frank, so I may possibly go long on USD/CHF. If the reading comes out at 1.75 or higher, that would be the first time in the last seven months, when this monthly indicator is actually coming out better than previous month. It's been on consistent decline since June of 2006. So a reading of 1.75 or higher, would mean a bounce back to November's reading or better, and it should be good for Swiss Frank short term, and I may possibly go short on USD/CHF.

2. Wednesday, January 31st, 2007 (8:15 am New York Time) USA
Then we have U.S. ADP Employment report coming out. This report is supposed to give hints of what non-farm payroll is, because it samples similar data as non-farm payroll, except much smaller amount of that data. However, it's had some very major screw ups, and was completely off base. Last month was another example, when ADP Employment came out at -40K, and Non-Farm payroll came out at 167K. It did provide an interesting situation. A lot of very serious traders took speculative dollar short positions before the non-farm, based on ADP reading, and they got totally creamed. My subscribers and I took dollar long position as soon as the number was released and most people got absolutely fantastic fills, because of that speculative dollar short liquidity, and we made a lot of pips. So to make the long story short, this ADP Employment is expected at 140K this month. If it comes out at 200K or more, I may possibly go short on GBP/USD. If it comes out at 50K or less, I may possibly go long on GBP/USD. This will probably be a relatively short move. In addition to trading the initial spike on this report, you can also try to trade first retracement strategy that's mentioned in my free signals tutorial video in the beginning of this email.

3. Wednesday, January 31st, 2007 (8:30 am New York Time) USA
Then we have US GDP coming out of the U.S. It'll be the first GDP estimate for 4th quarter, and it's expected to have a relatively strong reading of 3.0%. If the reading is at 3.5% or higher, it should be good for the dollar short term, so I may possibly go short on GBP/USD. If the reading is at 2.5% or lower, it should be bad for the dollar short term, and I may possibly go long on GBP/USD. If my triggers are hit, I am expecting a move of at least 50 pips on GBP/USD. In addition to the initial spike, you can also try to catch the second wave, and second wave retracement, that are explained in my free signals tutorial video in the beginning of this email.

4. Wednesday, January 31st, 2007 (10:00 am New York Time) USA
Then we have Chicago PMI coming out at 52. If it comes out at 50 or lower, it would signify that there is no expansion in this particular reading, because a reading of 50, signifies that 50% of manufacturers reported expansion, and the other 50% reported contraction. A reading below 50 would signify contraction in this sector. So if it reads at 50 or below, I may possibly go long on GBP/USD, since it would be bad for the dollar short term. If the reading is at 55.0 or higher, it would be extremely unexpectedly high reading. I've looked at opinions of around 60 different economists, and not one is expecting a reading of better than 55. So such reading would be a surprise, and I may possibly go short on GBP/USD, since it would be good for the dollar short term. In addition to the spike, you can try trading the 2nd wave strategy if you like, that's mentioned in my tutorial video, keep in mind 100% retracement possibility on this one.

5. Wednesday, January 31st, 2007 (2:15 pm New York Time) USA
We have FOMC interest rate decision out of U.S. It's expected that interest rate will stay the same, at 5.25%. If for some reason, the interest rate is hiked to 5.50%, it would be good for the dollar, and I may possibly go short on GBP/USD. If the interest rate is lowered to 5.00%, I may possibly go long on GBP/USD, because it would be bad for the U.S. dollar. It's extremely unlikely that the Fed will do anything with the rates. The housing market is starting to rebound, inflation seems to show first signs of slowing, so I think the Fed will consider current rate perfect for the time being. However, even if they keep the rate unchanged, but mention something about a possibility of another rate hike in the near future, that would be bullish for the dollar, so short on GBP/USD. Or if they mention a possibility of a cut coming, it would be bearing for the dollar, so a long on GBP/USD. If for some reason a rate is raised or cut, I would expect a move of at least 100 to 150 pips on GBP/USD pair, and in addition to trading the spike, you can trade a 2nd wave strategy.

FX Trading Signals for Jan 29

1. Monday, January 29th, 2007 (6:50 pm New York Time) JAPAN
We have Japanese Industrial Production coming out for the month of December. This is a relatively important report for Japan. They actually release it twice per month. The first one is preliminary report, which is the one we are getting tomorrow. The second one is final report, which is basically a revision of the preliminary report, which is coming out on February 13th. Preliminary reports are usually a lot more important. First of all, because they give the first taste and the first clues on how the Industrial sector in Japan did during the last month, and not only that, but there are also much bigger chance of a huge surprise in the reading of preliminary report. Japan industrial production has been reading very strong throughout the first two months of 4th quarter. After coming out reading at 1.6% in the month of October, and then 0.8% in the month of November, it's expected that same output will maintain, and there will be an even further growth of 0.4%. In my opinion, if industrial production reads at 0.8% or higher, it would match or better than previous month's reading, and would signify the biggest growth in industrial sector for 2006, so it would be good for the yen, and I may possibly go short on USD/JPY or EUR/JPY. If the reading is 0% or negative, it would mean that industrial growth stayed the same in the month of December or even shrank, and it would be negative for the yen, so I may possibly go long on USD/JPY. If my triggers are hit, I am expecting a move of 30 pips or more in the USD/JPY OR EUR/JPY pair, but it may take up to 30 minutes for the move to fully manifest itself. Of course the price levels before the report, and the readings of jobless rate and household spendings that are coming out 20 minutes before this report may also play a role on how this report needs to be traded.

Currency Update

GBP/USD - Currently trading at 1.9630. USD strengthen against GBP ever since making the high of 1.9916 and the shocking BoE Minutes of Meeting vote of 5-4. A fall of 300 pips.
EUR/USD - This pair is still holding above 1.2900. EUR is trading weaker after the German IFO Buisness Climate data came in below the expectations. Now here USD is waiting for the 2 heavyweights data like Core Durable Goods Order and New Home Sales. So in the mean time lets see how this pair take care of 1.2900 level.
USD/JPY - After a series of high volatile of 100 pips each side and testing the low of 120 level and now this pair back into the 121 level and trading firm above the 121. And for some time this pair is consolidating between 121.30 and 121.60. In Yen stil many players worried about the interest rate.
USD/CHF - After seeing the high resistence at 1.2500 now this pair is trading above the 1.2500 level. On the charts we used to see too many spikes above the 1.2500 but without sustaining there. Once we see the strength above 1.2500 then we can see the level of 1.2700 quite faster.
USD/CAD - Trading above 1.1800 and on Monthly chart we can see the rounding bottom formation. 1.1840 is the strong resistence area for this pair.
NZD/USD - RBNZ kept it interest rate unchanged at 7.25% and they retained the hawkish stance and this hawkish stance from Bollar helped the NZD to touch the 0.7000 level and but later NZD shed all its gain to USD. And now well below 0.7000. Now trading at strong support at 0.6950 if this support takes off then it kiss 0.6925.
AUD/USD - Aussies inflation impacted AUD by 200 pips and trading at 0.7730. On weekly chart this pair is forming Dark Cloud Cover. Now 0.7900/50 is major top for this pair.
EUR/CHF - This pair gradually inching towards 1.6200 after making the low of 1.6130. Still i believe that 1.6200 will be crucial for both this pair.
EUR/JPY - Yen is still trading bit stronger against Euro and now trading below 157, earlier Yen was stronger by nearly 300 pips, on that occasion Yen made the high of 155.80.
GBP/JPY - This pair keep finding high resistence at 239. At one stage GBP was weaker by 500 pips against Yen after making the high of 241.5 and the low 236.4.
AUD/NZD - Really this pair looking very interesting, coz AUD is trading weaker after it soft inflation data and riding fear of no rate hike on Feb 06 and NZD is getting harder against AUD after the hawkish stance from RBNZ Governor Bollard. Currently trading just above the 1.1100 after making the low just below 1.050

FX Trading Signals for Jan 26

1. Friday, January 26th, 2007 (8:30 am New York Time) USA
We have Durable Goods coming out of the US. This is a crazy report that can deviate greatly. We have two main numbers. The headline number and the core number, also known as the number X transportation. My focus will be the core number. The expectations is that December Durable Goods X Transportation will come out at 0.5%. A slight rebound after two big declines is expected. Remember...back in October, we saw a decline in this number by a huge -1.8%, and then in November by -1.1%. If the number tomorrow comes out at 0% or negative, it would signify either flat reading or a decline after two huge declines and would be bad for the dollar short term, and I may possibly go long on GBP/USD. Especially that December is a Christmas month...no good. If the number rebounds and reads 1.0% or higher, it would be good for the U.S. dollar short term, and I may possibly go short GBP/USD. It would be ideal if the headline number didn't conflict, but even if it does by a little, the X transportation should still pull out the move after a bit of whipsaw action. If my triggers are hit, and there are no large conflicts, I would expect a move of at least 30 pips on GBP/USD.

2. Friday, January 26th, 2007 (10:00 am New York Time) USA
Then we have New Home sales coming out. Even though new home sales constitutes for only about 15% of all home sales in the U.S., they are extremely important, because when new home sales are booming, the manufacturing and construction industries are booming, and it says something about people's confidence, because if people are buying new homes, that generally means that they are picking them over existing homes that are cheaper, and therefore are confident about their future financial situation. It's expected that new home sales for the month of December will come out at 1050K or so, which is a little bit better than they came out last month. Last month was 1047K. This is a very interesting indicator that seems to be important, but the market reacts to it in a weird way. We really need a big deviation in order to see a decent size move. If the number comes out at 1122K or higher, it would be the highest reading since January of 2006, and should be good for the dollar short term, so I may possibly go short on GBP/USD. If the reading is at 978K or lower, it would be the lowest reading since February of 2003, so I may possibly go long on GBP/USD. If my triggers are hit, I would expect a move of at least 30 pips.

FX Trading Signals for Jan 25

1. Thursday, January 25th, 2007 (4:00 am New York Time) GERMANY
We have German IFO index coming out. We have three numbers coming out. Generally they don't conflict, and the main number is the main German IFO business climate, which is expected at 109. If the number comes out at 110 or higher, it would be the highest reading in many years, and I may possibly go long on EUR/USD. If the number comes out at 106.7 or lower, it would be a big drop from previous reading of 108.7, and it would be below the reading before that at 106.8, so I may possibly go short on EUR/USD. This trade may take 10 to 15 minutes to fully manifest, and I wouldn't expect a move of more than 30 pips on this one.

2. Thursday, January 25th, 2007 (10:00 am New York Time) USA
Then we have Existing Home Sales coming out of the U.S. This is a very steady and accurately calculated indicator, so the deviations from consensus are usually minimal. Expectations are 6.25M, versus 6.28M last month. If the number comes out at 6.5M or higher, that would mean a growth in home sales by a whopping 4%, so it could be good for the dollar, so I may possibly go short on GBP/USD short term. A number of 5.99M or lower would be a huge drop in housing, and would possibly be bad for the dollar, so I may possibly go long on GBP/USD.

3. Thursday, January 25th, 2007 (6:30 pm New York Time) JAPAN
We have CPI figures coming out of Japan. We have ten different numbers coming out, and who knows which one is going to be released first, and which one is going to be released last. The most important number is probably Tokyo CPI, excluding food, which is expected to come out at 0.2%. Trading Japanese reports is very tricky, especially the CPI. A couple of months ago, their CPI was high, which allowed international countries to put pressure on Japan to raise interest rates. So what did the Japanese do? They simply removed some of the items from their CPI basket, which were causing most inflation, so they came up with a new number. So when the number was released, it read extremely low, and in parenthesis, it had the number according to their old standards, which was as expected. Extremely confusing, and if confusing equals risky in trading forex news. So the main focus is Tokyo core CPI, and National Core CPI, and both are expected at 0.2%. If any of these numbers come out at 0.4%, it would mean that the inflation is high, and would put further pressure for Japanese government to hike the rate, and it would be strengthening for the yen. If the reading is at 0% or lower, then a rate hike will probably not come for a while, so it would be weakening for the yen. I personally won't even set up the Secret News Weapon for this trade. I'll just look at the numbers, and act on the first one that I see first, assuming that it gives such big deviation. If you are confused, please stay out of trading this report.

Currency Focus

USD - There is talk of dollar selling by central banks as well as diversification of reserves by the Chinese central bank, which are hardly new topics. The US economic data is moving in the right direction, so the dollar should not weaken much further.

GBP - Now the odds now probably move away from a further rate hike in February as the Monetary Policy Committee will want to wait and see how inflation spans out this month. There is still a tightening bias implied to policy and a move to 5.50 pct rates is probably in the frame by the end of the first quarter. As i thought the odds will come in at 7-2, as usuall Blanchflower and Lomax will join to oppose the rates, but surprisingly Bean and Tucker too joined to oppose the rate and this is bad for GBP.
The GDP figures were slightly more than the market had anticipated and reflected our own view that industrial production had shrunk slightly but this was offset by a robust services sector. With GDP above consensus, there is probably still a 65 percent chance the MPC will do one further hike to 5.5 percent, but 5.75 percent looks highly unlikely on this evidence. It does suggest that the case for further rate hikes is not as solid as the market seemed to believe.

JPY - The Japanese currency remains weak versus its counterparts, particularly the dollar, euro and sterling as a result of markets’ continuing to discount additional unchanged decisions from the Bank of Japan in the coming months. The BoJ’s gradual approach and data dependency will likely prevent the central bank from lifting its refi rate above the current 0.25-basis point in the first half of this year. As a result, we continue to look further gains in the carry trades, such as EUR/JPY, GBP/JPY and to a lesser extent USD/JPY.

AUD - AUD tumbled against USD after the softer inflation data - easing the need for policy tightening from the Reserve Bank of Australia. Consumer price inflation fell to 3.3% on an annual basis in Q4, declining further than estimates for a decline to 3.6% from 3.9% in the previous year. Meanwhile, on a quarterly basis CPI dipped by 0.1% falling short of calls for a rise of 0.2% versus 0.9% in the prior quarter.

FX Trading Signals for Jan 24

1. Wednesday, January 24th, 2007 (4:30 am New York Time) UK
We have GDP coming out of UK for the 4th quarter. Expectations is that the number will come out at 0.7%. A trigger of 0.1% deviation either direction would normally be sufficient, however, during this time, we also have BOE meeting minutes coming out, which could cause a conflict. Therefore the triggers must be more conservative. If the number comes out at 0.9% or higher, I may possibly go long on GBP/USD. If the number comes out at 0.5% or lower, I may possibly go short on GBP/USD. It's hard to identify a conflict out of the minutes. I would just have to look and see. But basically if my trigger is hit, just try to catch the initial spike.

2. Wednesday, January 24th, 2007 (3:00 pm New York Time) New Zealand
Then we have New Zealand interest rate statement coming out. After such negative CPI and retail sales last week, it's expected that New Zealand will keep the rates unchanged. If there is a hike to 7.50%, I may possibly go long on NZD/USD. There is a possibility that NZD/USD will weaken if the rates are unchanged...but it may be too risky to short it. If you participate in carry trades, just look for a dip in NZD/JPY to get that pair at a good price, in case there is no hike. Going short New Zealand dollar on no rate hike would be too risky in my opinion. I'll do more research about that. I'll see what the New Zealand newspapers are talking about, and may change my opinion, but at this point, I think only a long in case of a hike is safe.

FX Trading Signals for Jan 23

1. Tuesday, January 23rd, 2007 (7:00 am New York Time) CANADA
We have Canadian CPI coming out for the month of December. We have both the headline numbers and the core numbers coming out. My focus will be on core month over month number. Most expectations is that the number will come out at either 0% or 0.1%. Prior number was at 0.3%. If the number comes out at -0.1% or more negative, it would signify deflation in the Canadian economy, and therefore may mean a rate cut rather sooner than later, therefore it would be negative for the Canadian dollar short term, and I may possibly go long on USD/CAD. If the number comes out at 0.2% or higher, that would mean that inflation is still strong, especially a 0.2% decrease right after 0.3% increase. That would mean that Canadian inflation is high, therefore expansion is probably high, and they may keep the rates at where they are or may consider doing another rate hike, so that would be good for the Canadian dollar, and I may possibly go short on USD/CAD. I will also look for conflicts on the headline numbers or the core annual number, and if I see conflicts, I may exit rather sooner than later. If my triggers are hit, I would expect a move on USD/CAD of at least 30 pips to 50 pips or more. The size of the move will depend on how big the deviation from consensus is, whether there are any conflicts from other numbers, and the price levels before the report.

2. Tuesday, January 23rd, 2007 (8:30 am New York Time) CANADA
Then we have Retail Sales coming out of Canada for the month of November. My focus will be on the month over month Retail Sales less autos. We've seen two big drops in a row on this number in September and October. We saw a decline in September by -0.9%, and then right after that we saw a decline of -0.7%. After such huge decline, a rebound is usually normal, therefore most economists expect the number to come out at around 0.4%. If the number comes out at 0.7% or higher, I may possibly go short on USD/CAD, since it would be good for the Canadian dollar short term. If the number comes out at 0.1% or lower, I may possibly go long on USD/CAD, since it would be bad for the Canadian dollar. Will definitely watch out for any revisions, and the headline retail sales number, which is expected at 0.8%. If there are any conflicts, I will definitely be looking to exit rather sooner than later. The move on this one should be at least 30 pips if my triggers are hit...however it may take up to 30 minutes or a bit longer for the move to fully unfold.

3. Tuesday, January 23rd, 2007 (7:30 pm New York Time) AUSTRALIA
Then we have quarterly CPI coming out of Australia. The expectations for the 4th quarater are very low...only at 0.2%. If the CPI comes out at 0.4% or higher, I may possibly go long on AUD/USD, since it would be good for the Australian dollar. If the CPI comes out at 0.0% or negative, I may possibly go short on AUD/USD, since it would be bad for the Australian dollar. If my triggers are hit, I am expecting a move of at least 30 pips or more on this report.

Talk on Interest Rate

The Bank of Japan is scheduled to announce its next interest rate decision towards the end of next week, where many feel rate-setters will opt for a further quarter point rate rise which may help the yen to recover after reaching 13-month lows against the dollar yesterday. Speculation is now intensifying that the BoE will deliver a further hike in the coming months, possibly as soon as next month.
With the hawks so clearly in the ascendancy, and the Bank in a pre-emptive mood, these factors mean another rate hike is likely to be delivered during the second quarter. The BoE's rate hike contrasted with the European Central Bank's decision to leave euro zone rates on hold and comments by ECB president Jean-Claude Trichet suggesting that euro zone interest rates will rise in March rather than February, which allowed the pound to break out of its recent trading range against the euro.

FX Trading Signals for Jan 12

1. Friday, January 12th, 2007 (8:30 am New York Time) USA
We have Import Prices and Retail Sales coming out of the U.S. The Core Retail Sales, also known as Retail Sales Less Autos, is going to be the main number that I am going to be focusing on. Most consensus on this report fall in between 0.4% to 0.6% range, 0.5% being the average. If this number comes out at 0.8% or higher, it would be good for the dollar short-term, and I may possibly go short on GBP/USD. If this number comes out at 0.2% or lower, it would be bad for the dollar short-term, and I may possibly go long on GBP/USD. If this report goes against the market sentiment that develops during London Session, that may mean a quick move of 30 pips or so. If this report goes together with the market sentiment, and there are not too many conflicts on the import prices and headline retail sales, then we may see a move of as much as 70-80 pips. Let's see what happens. Where the price is at before the report will play a big difference.

FX Trading Signals for Jan 11

1. Thursday, January 11th, 2007 (4:30 am New York Time) UK
We have Industrial Production coming out of UK, which basically measures both industrial and manufacturing activity in the UK. This report has been coming out very predictably since June of this year, at 0% to 0.1%. However, last month, it shocked everyone after the reading came out at -0.8%. That was the lowest month over month reading since March. So consensus for tomorrow is kind of all over the place. The question stands...was last month's number a fluke, and now we'll have a big upside surprise? Or was last month's number valid and we'll have minimal recovery? Most economists are expecting a recovery to either 0.2% to 0.3%. If the number comes out at 0.6% or higher, it would mean that last month's number was more or less a fluke, and the Industrial Production in the UK is still going strong, and GBP/USD may possibly increase by 30 pips or more. If the number comes out flat, or 0% or lower, that would mean that even after such huge drop last month, this month there was no recovery, so it would signify a weakening industrial section in the UK, and GBP/USD may possibly decrease by 30 pips or more. Just watch out for any big conflicts on the Manufacturing Production.

2. Thursday, January 11th, 2007 (7:00 am New York Time) UK
We have interest rate decision coming out of UK. Expectations are that they'll keep the rate unchanged at 5%. There is pretty much 99.99% chance that they will keep the rates unchanged and it will be a no trade. However, if for some reason the rate is hiked to 5.25% unexpectedly, GBP/USD may possibly go up by 150 pips or more. On the other hand, if rate is cut to 4.75%, GBP/USD may possibly go down by 150 pips or more. But to be honest, this is just idiot's dreams :) They probably won't change the rate. There will probably be some comments out of BOE, accompanying the rate decision, and that may cause some volatility in the GBP/USD, but usually those comments are so obscure that it's very difficult to trade.

3. Thursday, January 11th, 2007 (7:45 am New York Time) E-12
Then we have Euro Zone interest rate statement. Same thing...most likely it will be no rate hike, and they'll keep the rate at 3.50%. If the rate is hiked to 3.75%, EUR/USD may possibly go up by 100 pips or more. If the rate is cut to 3.25% or less, EUR/USD may possibly go down by 100 pips or more, but again, that's just idiot's dream, the chances of changed rate are slim to none. There will be no comments accompanying this rate decision, so not much should happen if the rate stays the same, which it probably will.

4. Thursday, January 11th, 2007 (8:30 am New York Time) E-12
Then we have speech from Trichet coming out of the Euro Zone. Trichet is a very conservative and flaky speaker that's afraid of commitment...so his speeches are extremely difficult to trade. There are so many up in the air conflicting things that are said and they are very difficult to interpret, that most of the time the market just goes up and down, up and down from one little fart from Trichet to the next. Generally speaking if Trichet is talking about inflation being a threat, and a need for another interest rate hike, that should be bullish for EUR/USD. If he is talking about that inflation is moderating, and there is no need for another interest rate hike, that should be bearish for EUR/USD. But since it's a speech, and anything goes, I can't really tell you much more than that.

FX Trading Signals for Jan 10

1. Wednesday, January 10th, 2007 (4:30 am New York Time) UK
We have UK Trade Balance coming out. We have the total trade balance, the visible trade balance, and the non-EU trade balance. The most important number will be the visible trade balance. The expectations are mostly that the visible trade balance will come out somewhere between -6,400 million and -6,500 million. If the number comes out at -7,000 million or more negative, it would be bad for the pound, so the GBP/USD may possibly decrease by around 50 pips or so. If the trade balance comes out at -6,000 million or less negative, it would be good for the pound, and the GBP/USD may possibly increase by around 50 pips or so. If you are feeling a little bit riskier, then you can possibly go short on GBP/USD if the number comes out at -6,800 or more negative, or go long on GBP/USD if the number comes out at -6,200 or less negative. In such scenario, I would expect GBP/USD to still move by at least 30 pips or so.

2. Wednesday, January 10th, 2007 (8:30 am New York Time) USA
Then we have Trade Balance coming out of the U.S. Market tends to care a lot less about this report than it cares for the GBP Trade Balance. Last month we had a huge shock in the trade balance out of the U.S. It came out deviating by over 4 billion on the positive side. It was the most positive reading in well over a year, and what did the GBP/USD do? It barely blipped down by 30 pips, and then went back to the pre-release price, shrugging this report off as if it had no meaning. This month, the expectation is that this report will come out at -60 billion or so. If it comes out at -62 billion or more negative, not only will it be by 2 billion worse than consensus, but it would also register a gap from previous release by almost 4 billion, so I may possibly go long on GBP/USD. If it comes out at -58 billion or less negative, I may possibly go short on GBP/USD, since it would be even a more positive reading than last month by almost a billion. Again, my expectations are 30 pips on this report worst case scenario, and as much as 80 pips or more best case scenario. Market sentiment will play a big role. Don't be surprised if the price goes back to the pre-release price shortly after the report, and then makes a huge move.

3. Wednesday, January 10th, 2007 (7:30 pm New York Time) AUSTRALIA
Then we have Australia Employment index coming out. By far the most watched and traded economic report out of Australia. The expectations by most economists is that this report will read between 10K to 20K, 15K being the median. If this report comes out at 30K or more positive, it would be good for the Australian dollar, so I may possibly go long on AUD/NZD or AUD/USD. If the report comes out at 0K or negative, I may possibly go short on AUD/NZD or AUD/USD. Don't expect NFP miracles on this report, if my triggers are hit, I expect only about 30 pips move on AUD/USD and perhaps 40-45 pips move on AUD/NZD.

FX Trading Signals for Jan 08

1. Monday, January 8th, 2007 (7:30 pm New York Time) AUSTRALIA
We have Australian retail sales coming out of Australia for the month of November. The expectations are that the retail sales will come out at 0.3% growth from the previous big jump of 0.8%. If the number comes out flat, at 0%, that would signify that there was no growth in the retail sector in November versus October, so it would be short terms bad for the Australian dollar, so I may possibly go short on AUD/NZD. If the number comes out at 0.7% or higher, it would mean that throughout November, Australian retail sales kept up the big sales that were recorded in October, and gained another 0.7%, so it would be short term good for the Australian dollar, and I may possibly go short on AUD/NZD. If you don't have the AUD/NZD pair on your broker, you can also consider trading AUD/USD in the same manner. If my triggers get hit, I expect a move in the AUD/NZD by about 45 pips or so, and a move of around 25 to 30 pips in AUD/USD.

FX Trading Signals for Jan 05

1. Friday, January 5th, 2007 (7:00 am New York Time) CANADA
We have net change in employment coming out of Canada. This report has been forecasted at 15K for the last few months, and this month it's no different. Economists are again expecting the Employment figure to come out at 15K. I've looked at opinions of around 20 different economists, and only one of them is expecting the number to come out at 0K, nobody is expecting a negative number. At the same time, nobody is expecting a reading of over 21K either. In the last 6 months of trading this report, I had 4 excellent forex trades, because three times, the number came out negative, and once it came out above 50. the other two times, it came out at 16.2K and 22.4K last month, so it gave no trade signals. So why am I saying all this? I am saying all this, because this is a high probability report to give a trade, so I suggest watching it, and looking for trading opportunities. Here is what I am going to do. If this number comes out at 30K or higher, that would be good for the Canadian dollar, and it would mean a short trading signal for me on the USD/CAD pair. If it comes out at 0K or negative, it would be bad for the Canadian dollar, and it would mean a long trading signal for me on the USD/CAD pair. Anything in between would signify a no trade signal for me. I'll also keep my eye on the Unemployment rate, which is expected at 6.3%. This number is derived through different data sampling than employment change, and it could conflict. So if this number conflicts with the employment data, I would be looking to exit my trade with whatever profit I have rather sooner than later.

2. Friday, January 5th, 2007 (8:30 am New York Time) USA
Then we have the forex event of the month...the Non-Farm Payroll report. Earlier this week, we had the ADP Employment figure coming out. It was expected to come out at 120K, but shockingly came out at -40K. ADP is supposed to give us hints on what's going on with the Non-Farm payroll, because it samples the same employment data, just in much smaller quantity. Since the release of the ADP Employment, the average Non-Farm consensus was revised from 120K to 100K, and I think it should be even lower. I honestly think that a lot of the economists that gave their consensus on non-farm payroll in the last couple of weeks, simply were too busy or lazy to revise it. Another reason the ADP number was kind of discounted and the consensus was more or less kept the same was because this report already had a fluke in June of last year, coming out at 368K, and the non-farm payroll few days later came out at 134K. It'll be interesting to see what happens tomorrow :) A reading of -40K is extremely radical...I can't wait to see whether it'll be more or less confirmed. So here is what I will do tomorrow. If Non-Farm payroll will come out at 50K or less, it would be bad for the dollar and would possibly be a long trading signal for me on GBP/USD. 50K or lower reading would be the lowest reading since October of 2005. If Non-Farm payroll number reads 150K or more, it would be a very healthy reading, and good for the dollar, so it would possibly be a short trading signal for me on GBP/USD. I am going to watch out for conflicting revisions of previous number at 132K, and will also watch out for conflicts in unemployment figure, which is expected to come out at 4.5%. A big conflicting revision, can reverse the trade direction. So watch out :)

FX Trading Signals for Jan 04

1. Thursday, January 4th, 2007 (4:30 am New York Time) UK
We have Services PMI coming out of UK. This is the second most important indicator after UK PMI Manufacturing, and though this indicator can be tradable, it's very tricky. This indicator can deviate from consensus by 1 point and cause a big move of over 50 pips on the pound, and another month, it could deviate by the same 1 point, but cause a small quick blip of only a few pips. We really have to take into consideration the market sentiment during the London session before this report, price levels, and most recent history of this indicator. From April to August of 2006, this indicator was a on steady decline every single month until August. Back in August of 2006, this indicator came out at a record low of 56.7, and since then it was on a steady increase every month, peaking out in November at record high of 59.8. Tomorrow, this indicator will be released for the month of December. In December, most economists are expecting this indicator to come out very close to what it came out in November. So the expectations are that Services PMI will read approximately 59.5 or so. If Services PMI comes out at 57.9 or lower, it would be a significant drop from previous month, so I may possibly go short on GBP/USD. If it comes out at 61.0 or higher, it would set another record high, with a much higher reading than last month, so I may possibly go long on GBP/USD. If my triggers are hit, I expect GBP/USD to move by around 30 pips or more, however it may take about 5 minutes for the whole move to manifest.

2. Thursday, January 4th, 2007 (10:00 am New York Time) USA
Then we have U.S. ISM Non-Manufacturing index coming out of the U.S. Basically, this index is like Services PMI out of UK, but instead it measures services industry in the United States. This report is relatively young, compared to its brother ISM Manufacturing index, however this report is significantly older than UK Services PMI report. If the shock is sufficient this report can cause a nice move on the GBP/USD pair. Though, don't mistake this for the ISM Manufacturing report. This one is significantly less important. It's expected that this report will read at 57.0, after a big positive shock last month at 58.9. If this report comes out at 60 or above, I may possibly go short on GBP/USD, because it would be good for the dollar. If it comes out at 54 or below, I may possibly go long on GBP/USD, because it would be bad for the dollar.

FX Trading Signals for Jan 03

So yesterday, the manufacturing PMI came out lower than expected. Probably because of the extreme pound strength, it's not giving the manufacturers of UK more hope. Staying out of the markets yesterday on this report was a very smart decision in my opinion. As you probably remember, the pound gained a lot of ground before the report, and when the manufacturing PMI was released below expectations, with the 2nd lowest reading in a year, it didn't do much, it caused a very small spike down, and the GBP/USD bounced back up and rallied some more.

Okay, let's talk about today, in terms of fundamentals. We have three tradable reports tomorrow.

1. Wednesday, January 3rd, 2007 (8:15 am New York Time) USA We have ADP Employment report coming out of the U.S. This report will be heavily scrutinized, because it may give hints about the non-farm payroll report on Friday. The ADP Employment report is expected to come out at approximately 120K. If this report comes out at 180K or more, it would be a positive surprise for the U.S. dollar, so I may possibly go short on GBP/USD. If this report comes out at 60K or less, it would be considered bad for the dollar, so I may possibly go long on GBP/USD.

2. Wednesday, January 3rd, 2007 (10:00 am New York Time) USA Then we have ISM Manufacturing report coming out, which is a very important report that measures manufacturing activity in the U.S. for the month of December. Last month, this report came out extremely low at 49.5. This month, it's expected to come out a bit higher, somewhere between 50 and 50.5, due to the dollar weakness, which benefits the U.S. manufacturing and exports. If this reading shows 49 or lower, it would be bad for the dollar, so I may possibly go long on GBP/USD. If this reading shows 52 or higher, it would be good for the dollar, so I may possibly go short on GBP/USD.

3. Wednesday, January 3rd, 2007 (4:45 pm New York Time) New Zealand Then we have New Zealand Trade Balance coming out, which is expected at -0.85 billion. If it comes out at -1.3 billion or more negative, it would be bad for the New Zealand dollar, so I may possibly go short on NZD/USD. If it comes out at -0.5 billion or less negative, it would be good for the New Zealand dollar, so I may possibly go long on NZD/USD. You can also trade other pairs on this, like AUD/NZD. If you choose to trade AUD/NZD, you have to do everything opposite to NZD/USD. AUD/NZD tends to have a move of at least 1.5 times bigger than NZD/USD.

Todays Economy Data Wrap-up

1. UK December PMI
The UK's manufacturing sector, which accounts for around 15 pct of the country's GDP, saw growth ease unexpectedly in December to its slowest rate in nine months at 51.9 below the expectations. combination of higher domestic interest rates and a strong pound appears to have taken the momentum out of manufacturing. The index measuring output dropped to 52.1, its lowest since March, from 53.6 in November, while the new orders sub-index slipped to 53.1 from 53.6. Meanwhile, the index measuring employment rose to 49.0 from 47.7. Elsewhere, the indices measuring prices also fell. Input prices fell to 58.3, its lowest since August 2005, from 62.5 in November, while the output prices sub-index dropped to 53.5 from 53.8.

2. Euro-Zone December PMI
Euroznes PMI data slips to its 9 month low at 56.5. Despite the PMI's fall, the sector continues to grow at a solid pace. Input price and employments sub-index led to this 9 month low reading of PMI and output prices and output component supported the further fall in PMI.

3. German December PMI
increased to 59.4 points in December from 58.3 in November and came in well above expectations. A reading above 50 indicates that the manufacturing sector is expanding, while one below 50 indicates contraction.

Before I continue with my signal for the first trading day of the year, let me talk about how we ended the month of December. The month of December for news trades was excellend in the first two weeks, but in the third and fourth week was horrible. Due to Christmas, the 4th week was pretty much gone, because most of 4th week's reports were stuffed into the 3rd week of December, so we had a lot of big conflicting reports released together, and couldn't really have any clean trades. This week is very light on the economic reports for Monday and Tuesday, but very heavy on the news on Wednesday, Thursday, and Friday. Monday of course is the first of January holiday, and Tuesday is a memorial/funeral for Gerald Ford, the U.S. president who replaced Nixon during the WaterGate scandal. So the stock market in the U.S. is closed both days, so the forex volume will still be thinner than normal on Tuesday, January 2nd.

I personally want to stay out of the markets on January 2nd. First of all, because it's the first trading day of the year, second of all, the U.S. volume is going to be thinner than normal, and third of all, because we only have one report, which is definitely important, but I can't say that it has flawless trading history, and I'd rather observe everything on January 2nd, and plunge into the markets on January 3rd, when everything settles down and things return to normal. That report that I am talking about is UK Manufacturing PMI, and in case you want to trade it, here is what you can do...

1. Tuesday, January 2nd, 2007 (4:30 am New York Time) UK
We have UK Manufacturing PMI coming out. This is a private report that measures manufacturing activity in the UK for the month of December. This report has been on a steady decline since September of this year. In September the reading peaked out at 54.4, which was the second highest reading this year, then it was on a steady decline coming out at 53.7 in October, and 52.6 in November. This month, most economists are expecting the reading to be somewhere between 52.5 and 53.0. If this number comes out at 53.8 or higher, that would be a surprising break of the steady decline, and it would mean that the number is reading higher than in September, so I may possibly go long on GBP/USD. If the number comes out at 51.9 or lower, it would be the second lowest reading this year, it would be below the psychologially important 52.0 level, and only about 2 out of 30 economists think that the number will come out below 52, so in that case, I may possibly go short on GBP/USD. If my triggers are hit, I would expect a move between 30 to 50 pips, but of course important price levels before the release of this important will play an important role as always.

Again, I am not planning to trade this report, but rather just watch and see what happens. See how the spreads are reacting on various brokers, see what the price does, and all that. This is the first report of the year, on thinner volume than normal. If I were you, I would do the same.