Forex Trading Signal 05/13/09

Hey folks,

Many USD pairs like the EUR/USD, GBP/USD, NZD/USD and some others are approaching some former high fibbonacci resistance on the daily chart. While the picture continues to highlight some nice bullish momentum, with many USD pairs overextended into resistance, it looks like a good setup for a short to medium term short. Watch the video for more details there. After pushing through 919, gold is looking potentially short term bullish, but the potential for a medium to long term significant decline is still quite palpable, so I'd play it with either a short term buy looking for the 935-950 range to take profits, or wait for a potential rally to that region to get short for a longer position/swing trade. Stocks are starting to exhibit signs of waning momentum and this time sentiment is really starting to flip a bit negative along with it. I think a 100 point or so pullback is inevitable on the S&P and with lower highs and lower lows on the hourly chart, I think it may be brewing even now.

Tuesday saw the UK Claimant Count Change released "accidentally" early in the NY session and came out much better than expected, although that did not benefit the GBP greatly. Because of that there is no 0430 EST release out of the UK, and all eyes will be focused on the 0530 BoE Inflation Report.

0530 BoE Inflation Report - The last 4 straight quarters have produced very large down moves on GBP on a consistent basis; however, the picture seems to be changing in the UK and this could really go either way. I'm expecting a little bit of early buying on GBP/USD early in the session, but it likely be met with some stiff selling heading into this report as people could fear some sobering projections. Fundamentally, there are 3 aspects to look at in this report:
Quantitative Easing Language - This is the main thing the market is looking for on this report. Reassurring language that makes it seem as though the Asset Purchases are working well and further expansions are not needed will be GBP bullish, while language either concerned about its effectiveness or hints that the program is likely to be expanded either further will be GBP bearish.
Growth and Inflation Forecasts - Very pessimistic language on growth and worries about deflation will lead to selling pressure while more optimistic outlooks on growth and more concern on inflation will likely lead to buying pressure.

0830 US Core Retail Sales (0.2% expected) - This should have a good reaction out of the yen crosses as it did last month, but I expect some prenews buying pressure on those pairs like EUR/JPY, GBP/JPY and AUD/JPY as many news items like these have been surprising to the upside and some speculators may want to get in on it early.
If it comes out at 1.0% or higher, EUR/JPY should rally by 40-50 pips (if there is very noticable prenews buying though, those gains may be shortlived)
If it comse out at -0.8% or lower, EUR/JPY should sell off by 40-50 pips regardless of whether prenews buying materialized.

To our success,