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Play The Trend As Economic Speakers Move The Markets

Discussion in 'Forex Daily News & Outlook' started by mercaforex, Nov 17, 2009.

  1. mercaforex

    mercaforex New Member

    Jul 1, 2009
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    By Mercaforex

    Retail Sales number came out higher then expected at 1.4% as opposed to a forecasted 1.00%. Coupled with Bernanke pointing towards an “extended” period of low borrowing costs and “significant economic challenges” still on the horizon, the dollar touched its lowest value since August 2008. “Of course” traders took this wheelbarrow of good news the only way they know how: weak dollar equals strong everything else, and pushed the S&P to the highest we have traded all year. As the guest writer today, I don’t want to upset anyone, but personally I think that like most High school relationships, this one cannot and will not last. At some point reality will slap investors across the face. People will realize that you cannot build a 50 story building where the first 5 floors are built out of hope and good intentions.
    Today’s data is expected to be relatively light. PPI, TIC Net Long Term Transactions, and the NAHB Housing Market Index are all forecasted to come out higher then last month. The market may be biding its time until Wednesday when Core CPI and Crude Oil inventories are expected to come out.
    While yesterday we saw the dollar trade lower, at the end of the day we managed to close near its open suggesting that investors are unsure of what will happen next. With an increasing amount of risk appetite sending equities and commodities higher we have to acknowledge that while not all the pieces of the puzzle fit into place, the picture is still the same. Simply put this means that the trend is your friend, and if you live by this one rule of logic, you will have made, and will continue to make money over the next few months.

    Not much in the way of data coming out of Europe today. The only item on the agenda is the Trade balance, which is expected to come out weaker. Yesterday’s CPI came out as expected and the European Currency was able to keep much of its gains against the greenback closing just below 1.50. Analysts are suggesting that we could see this currency trading at 1.5285 in the next little while. I tend to agree with that line of thinking and maintain that as long as the dollar continues to weaken, it will take a significant fumble by the ECB before we begin to see any Euro weakness. Tomorrow Trichet will share his thoughts on the economic situation adding to the pot and inevitably there will be market volatility surrounding his comments.

    Fueled by a weaker American dollar and bullish comments by Bank of England Policy Maker Andrew Sentance, the Pound traded higher yesterday. Sentance suggested that inflation is a growing danger and must be dealt with before it becomes a significant factor in the UK economy. We are still waiting to see what the official BOE Inflation Letter has to say regarding his thoughts. It’s more than likely that both Sentance’s stance and the BOE’s are in line, and that could be the necessary catalyst to push the Pound towards the higher end of its trading channel. Adding to the mix tomorrow the MPC Meeting Minutes will be made public and we will see how the BOE attempts to “dictate” trading over the next few weeks.

    The Yen continues to gain strength against the Dollar as risk appetite remains strong. Expected dollar weakness today will only push this currency pair lower, and Gold higher. As Gold breaks records like an Olympic athlete on Steroids it would be wise to continue to play the up trend. There has not been significant weakness in this market since the summer, and none is expected over the next few weeks. Be cautious as it seems everybody is jumping on the Bandwagon, and that usually signals the end of a trend. However, I would not play this trade on the short side as long as we continue to show such strength.

    The Trend Is Your Friend! Let It Guide You

    With the USD trading to its lowest value of 2009 it’s not surprising that the S&P 500 rallied like it did. A gap up on the open quelled the bear inside of me, and threw me back on the bullish bandwagon. I repeat once again that any weakness in this market is immediately met by eager buyers. It almost seems like the only time this market shows weakness is on profit taking. In the meantime we continue to trade higher and the ever so true axiom “the trend is your friend” is the way to trade until we see a significant change in market sentiment. Support 1100.4, 1097.8, 1093.5, 1092.6, 1087.4, 1081.5, 1077, 1071.5.1059.3 1052.4, 1045.5, 1029.4, 1019.6, 1009.1, 992.25 Resistance 1113.45, 1132.2, 1153.8

    Some people ask me whether or not it’s boring writing the same thing over and over, and the answer is a simple yes. However, the Gold market is anything but! While many recent posts have sounded similar, this market continues to be as exciting as riding a bull! (No pun intended, but seeing as it’s a good one, I will let it stand) Nothing seems to be able to get in the way of this precious metal. The trend is definitely your friend! Fortunes have been lost trying to catch tops in this market and I do not suggest trying to be a hero! I am waiting for some consolidation before I add to my positions. In the meantime keep adjusting your stops and protecting profits. Support 1111.14, 1100.30, 1104.5, 1100, 1096.15, 1092.87, 1087.65, 1081.05, 1078.37, 1070.6, 1066.1, 1051.3, 1046.7 Resistance 1118.75, 1122.82….

    The Pound found solid support at 1.6515 and is currently trading 3 cents higher. With continued dollar weakness a strong possibility we may really see this currency pair move towards the higher echelon of its trading range, and perhaps even a break out of it. I continue to maintain that since we are trading within a well established trading channel, we must continue to trade the sterling as such, and try be positioned to be positioned. Meaning, buying off the support, and holding onto only part of the position when we near resistance, in the hope that we continue to trade higher, and vice versa.1.6741, 1.6515, 1.6485, 1.6249, 1.6119, 1.5776 Resistance 1.6741, 1.6842, 1.7042

    Yesterday’s buying tail confirmed the strength begin this market. While we are trading lower today, and considering yesterday’s recommendation that the Euro could trade lower this week, I am still not ready to become a buyer. At this point I will continue to stand aside until I believe we are ready to move higher once again. If we do trade lower to the 1.48, or even 1.47 areas, we will be looking for a good entry on the long side. However, as always it will be a cautious entry because when these markets trade lower, no matter how much strength we have seen in the past, it always feels like it may be a turning point. We will have to place our confidence in the charts, and in the belief that the “trend is your friend”. Once the up move continues I do expect us to trade up towards 1.5284. Support 1.4918, 1.4880, 1.4810, 1.4701, 1.4683, 1.4626 1.4449 Resistance 1.5020, 1.5062, 1.5144, 1.5284, 1.5343, 1.546

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