Friday, August 31, 2007

Trading Signals and News Update For Friday

1. Friday, August 31st, 2007 (8:30 a.m. New York Time) CANADA
At 8:30 a.m. New York time we will have Canadian GDP coming out of Canada, and it is expected to read flat 0% versus 0.3% last month. This indicator is last indicator out of Canada before the interest rate decision next week. Everybody thinks that Canada already made up their mind what they're going to do, and most people expect them to hold next week. However, this GDP reading may affect what Canada will do in October in terms of their interest rates. I think if that comes out same as last month at 0.3%, it would prove that their economy is performing very healthy and better than everybody is expecting, and I think based on that USD/CAD may possibly go down by 40 pips or more in the first hour of the report. On the other hand, if the GDP reads -0.2 or more negative, that would be a very disappointing reading, and that would mean the Canadian economy is actually slowing down, and there may be no need for further hikes. I think based on that a reading of -0.2 or lower (more negative) may move USD/CAD up by 40 pips or more in the first hour of the report. We will have some U.S. indicators coming up at the same time such as the PCE core but from my experience they most likely will come out exactly as expected.

2. Friday, August 31st, 2007 (9:42 a.m. New York Time) USA
Then, at 9:42 a.m. New York time we will have Chicago PMI coming out of the United States. This indicator comes out at 9:42 a.m. to the special subscriber group, and all the official news services get it at 9:45. It is expected to come out around 53 versus a reading around 53.3 last month. If it reads at 50 or below, that would be very significant because that means manufacturing is actually slowing, not growing. A reading below 50 means regress, and a reading above 50 means some progress. If the reading is at 50 or below, we may possibly see GBP/USD gaining around 18, maybe 20 pips or more in the first 10 minutes of the report; however, if the reading reads 56 or higher, then we may possibly see GBP/USD going down by 20 pips or more in the first 10 minutes of the report. I say 10 minutes because we will have Bernanke speech coming out at 10 a.m. New York time. I strongly recommend that you close all of your positions from Chicago PMI before the beginning of his speech, and not right at the beginning of his speech but preferably about 5 to 7 minutes before the speech because I believe the price may move a little because of people taking profits or cutting loses. It may play in your direction or against your direction. It is up to you if you want to take 50-50% chance but I suggest you to close your position before the speech.

3. Friday, August 31st, 2007 (10:00 a.m. New York Time) USA
As I said, at 10 a.m. New York time Bernanke will be talking to some banks about the current situation with housing and the monetary policy. I highly doubt that he will say anything new. I think everybody is just on hold waiting what is going to happen with the credit (carry trades, subprime mortgage stuff), and I think he will do his regular speech of being waiting and getting ready to react, and doing whatever it needs to do in order to not negatively affect the U.S. economy. It will probably be very little move in a market based on his speech; however, remember it's Friday, 10 a.m. is the end of the London session, and we may see some interesting price action not even related to the speech, or some reaction that would be difficult to predict. Basically I am not going to trade the speech. It is difficult as it is to try to trade the speech, and also it is the end of the week and the end of the month so some traders may want to close their positions.

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