Forex Fundamental Analysis - 04 January 2008



Fundamental Analysis



Friday, January 4th, 2008 (1:45 a.m. New York Time) SWITZERLAND
First, at 1:45 a.m. we will have Swiss CPI coming out. I recommend you to trade y/y number with 0.2 triggers. If the Swiss CPI comes out at 2.00% or higher, then it would be strengthening the Swiss Frank, and I would short either USD/CHF for 30 pips price action, or GBP/CHF for 40 to 50 pips price action. If it comes out at 1.6% or lower, that would be weakening the Swiss Frank, and I would go long on USD/CHF or GBP/CHF, looking for 30 and 40 to 50 pips, respectively. You can make more pips on GBP/CHF but sometimes the spread is too big to take a risk. Choose a pair wisely based on your broker.

Friday, January 4th, 2008 (4:30 a.m. New York Time) UK
At 4:30 a.m. New York time we will have UK Services PMI. It is expected to come out at 51.5. I would trade it with 1.0 trigger so if it comes out at 50.5 or lower, I would short GBP/USD, looking for 30 pips price action. On the other hand, if it comes out at 52.5 or higher, then it would be strengthening the pound, and we should see 30 pips or more move up.

Friday, January 4th, 2008 (5:00 a.m. New York Time) EURO ZONE
At 5:00 a.m. New York time we will have the ECB Estimate CPI y/y. It is expected to come out at 3.1%. If it comes out at 3.3% or higher, that would be strengthening the Euro so you can go long EUR/USD, looking for 25-30 pips price action, or more. On the other hand, if it comes out at 2.9% or lower, that would be weakening the Euro, and I would go short on EUR/USD.

Friday, January 4th, 2008 (8:30 a.m. New York Time) USA
At 8:30 a.m. we will have U.S. Non-Farm Payroll and Unemployment Change. It is expected to come out at 70K. This indicator can give a great opportunity but is very risky as well. I would trade this with 50 trigger so 120K or higher would be a strengthening the U.S. dollar and you can go long on USD/JPY or short on GBP/USD - it would depend on the technicals right before the report. GBP/USD should be OK, and I would look for 50 pips price action. If it comes out 20K or lower, that would be weakening the U.S. dollar, and you can go short on USD/JPY or long on GBP/USD. What makes this report risky is the revision to the prior month. If the revision's deviation is greater than the actual deviation and goes the other direction, it can move the price the other way. For example: if the Non-Farm Payroll comes out at 170K it would be a big potential buy signal on USD/JPY, but if at the same time the prior month was revised down by 120K, then you actually are getting a net negative surprise because you are up 100K this month and down 120K last month, and this could actually be dollar weakening. Be careful with this indicator, then.

Friday, January 4th, 2008 (8:30 a.m. New York Time) USA
At 8:30 a.m. there is also the Unemployment Change number. Usually it is not a big deal but if it deviates by 0.1 and especially by 0.2, it can take over the move, especially if the deviation on Non-Farm Payroll is small or none. If it comes out at 5.0%, it would be bad for the dollar and you may want to sell USD/JPY, and if it comes out at 4.6% or lower, you may want to buy USD/JPY.

Friday, January 4th, 2008 (10:00 a.m. New York Time) USA
At 10:00 a.m. we will have the U.S. ISM Non-Manufacturing. It is not that great indicator, and you would be lucky to grab 20 to 25 pips of it. I would say USD/JPY is the best one to trade it; however, if the USD/JPY looks weird, you can shift to EUR/USD or GBP/USD. I would use 2.5 trigger so if it comes out at 51 or lower, that would be bad for the U.S. dollar, and you may want to sell USD/JPY, looking for 20-25 pips. If it comes out at 56.0 or higher, it would be good for the dollar, and you may want to buy USD/JPY, looking for 20-25 pips price action.

Friday, January 4th, 2008 (10:00 a.m. New York Time) CANADA
Canadian Ivey PMI comes out at the same time but is usually late by 5 seconds - that's what I noticed from my own experience. It is expected to come out at 51.0 would trade 3.5 trigger on this one. If you get a signal on both report, USD/CAD may move very well. If it comes out at 54.5 or higher, that would be strengthening for the Canadian dollar, and I would sell the USD/CAD or EUR/CAD, looking for 20 pips and 30 pips, respectively. If it comes out at 47.5 or lower, it would be wakening the Canadian dollar, and you may want to buy USD/CAD or EUR/CAD, and look for 20 and 30 pips, respectively.



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