Trading Signals for Wednesday, 16th Jan, 2007

Hello, how are you doing today, I hope you are great.

Let's first review what happened on Tuesday.

On Tuesday we had two reports that were worthy watching and possibly trading.

At 4:30 a.m. we had UK CPI y/y headline coming out. It came out 0.1 higher than expected so it did not let us trade it. Because at the same time the core number was down by 0.1 it was definitely a no trade. The price went up about 20 pips on the headline number and then it retraced completely and went the other way because of the core number. It was a good idea to stay away.

Then we had German ZEW. Nothing really to take about.

Then we had U.S. Retail Sales X Autos coming out. We were looking to sell USD/JPY if it came out -0.6 or lower with -0.1 consensus. Although the trigger was not hit, we did get a negative deviation but I did not think it would be enough to enter the trade. USD/JPY moved about 92 pips in the first hour of the report. However, I personally stayed out as it was a no trade for me. Well, better safe than sorry, there will be plenty other opportunities.

Let's talk about Wednesday.

1. Wednesday, January 16th, 2008 (4:30 a.m. New York Time) UK
At 4:30 a.m. we will have the U.K. Average Earnings + Bonus. I will be trading it with 0.2 trigger. If it comes out at 4.1 or higher, I would buy GBP/USD. If it comes out at 3.7 or lower, I would sell GBP/USD. If there is a conflict with unemployment rate, I would stay out of the trade. Ideally, you want to see unemployment number coming out as expected or coming the opposite direction than the Average Earnings. Last month we had 0.2 deviation and it moved the market about 30 pips in the first couple of minutes.

2. Wednesday, January 16th, 2008 (8:30 a.m. New York Time) USA
Then at 8:30 we will have U.S. Core CPI coming out. I would trade this on EUR/USD. We did not have a lot of deviations on the core CPI but if we get a deviation, I believe the EUR/USD will perform best. Stay away from USD/JPY on this report as it is a quite unpredictable pair on this report. On 0.1 trigger expect about 40 pips price action. If the Core CPI (also known as CPI X Food and Energy) comes out at 0.3% or higher, it would be good for the dollar so I would sell EUR/USD. If it comes out at 0.1 or lower, it is going to be bad for the dollar, and I would buy EUR/USD. As always, keep an eye on y/y and headline numbers. Sometimes when the core number is flat but headline gives a big deviation, you may see a nice move. Also, if you see conflicts, you may want to exit early although the core should be able to take over the headline number.

3. Wednesday, January 16th, 2008 (9:00 a.m. New York Time) USA
At 9:00 a.m. we will have U.S. TIC Index coming out. If it comes out at 20 or lower, I would sell USD/JPY. If it comes out at 120 or higher, I would buy the USD/JPY. This indicator can be traded only if there is a big surprise. If the trigger is hit, expect about 30 pips move.

4. Wednesday, January 16th, 2008 (9:15 a.m. New York Time) USA
Then at 9:15 a.m. we will have U.S. Industrial Production. This is not a big deal although sometimes you can scalp a few pips. Don't worry about this one too much.

5. Wednesday, January 16th, 2008 (4:45 p.m. New York Time) NEW ZEALAND
Then we will have New Zealand CPI quarterly release. It is expected to come out at 1%. With this indicator you can use 0.2 trigger. If it comes out at 1.2% or higher, it would be strong for the New Zealand dollar and you want to buy NZD/USD, looking for 40 to 50 pips or more in the first hour. If it comes out at 0.8% or lower, that would be weak for the New Zealand dollar and you may want to sell NZD/USD and expect 40 to 50 pips or more in the first hour of the report.

6. Wednesday, January 16th, 2008 (7:30 p.m. New York Time) AUSTRALIA
Then we will have Australian Employment Change. It is expected to come out at 20K. You can use 15K trigger on this report. If it comes out at 35K or higher, I would buy AUD/USD, looking for 30 pips or more. If it comes out at 5K or lower, I would sell AUD/USD, looking for 30 pips or more in the first hour of the report.

That's all for Wednesday.

Have a great day.