Usd was stable in Asian session after a massive sell off consecutive to Trichet's comments yesterday. EurUsd was range bound from 1.5580 to 1.5605 while UsdJpy bounced around from 105.56 to 106.25. Crude prices were slightly stronger trading to $128.50bll and gold also took advantage of the Usd weakness reaching $880.40oz. Commodity Bloc was firmer as AudUsd traded up to a high of 0.9610 while pressure on UsdCad eased slightly to 1.0163. Nok was the bigggest gainer as crude rallied with UsdNok breaking below the psychological 5.1000 lvl.

US Stocks snapped a three-day loosing streak to end higher Thursday after weekly jobs claims dropped more than expected and on upbeat May sales data from retailers Wal-Mart and Costco. Asian markets traded higher this morning. Energy producers and resource stocks climbed on a rebound in crude-oil prices. Shipping stocks rallied in Japan after a report in the Nikkei said growing demand could cause shippers to beat earnings expectations this year. The weaker yen was also supporting exporters. Korea is closed for Memorial Day.

As was universally expected the ECB held rates steady at 4.00% during yesterday meeting. However, it was Trichet comments in the post rate decision press conference which rapidly reversed the Eur decline. The first wave of buying occurred when he noted that risks to price stability had created an increased “state of alertness”. The second wave hit when Trichet would not rule out a hike in July. A signal to the market which sent the EurUsd up a big figure from 1.5440 to 1.5565. In late Asian trading the Eur seems to be gaining renewed momentum and today we expect Eur to stay firm through US data release.

The BoE MPC held rates at 5.0% as the market anticipated and released no statement accompanying statement. This decision was consistent with the previous inflation report which warned of increasing price pressure and headline CPI which hit 3.0% last month. While we don’t see rates heading lower in the near term the BoE will need to keep an eye on crashing economic data especially in the housing market.

While the RBNZ held rates steady at 8.25%, as was expected, the central bank accentuated its easing bias with a press release stating “we [RBNZ] are now likely to be in a position to lower the OCR later this year." The NZD came under considerable selling pressure as the market priced in a full 25bp cut by September. The combination of monetary policy easing and tougher domestic economic conditions will have the NZD on a weak footing.

The key data release today will be US private sector payrolls. An inherently volatile figure has only become more uncertain with Wenesdays ADP surveys showing a +40k rise. An important caveat is that ADP has overestimated the official forecast by roughly 80k average over the last 6 months but while the report has had some spectacular misses, it has at time has been spot on.

Trade the News Action Calendar

1. Thursday, March 6: The Bank of England and European Central Bank announce interest rates, starting at 7 AM (EST). The BoE has surprised the markets before, and you can often watch the markets move with ECB President Trichet’s words as he speaks to reporters.
2. Friday, March 7: Non-Farm Payrolls, a.k.a. “NFP.” The currency markets’ most-watched indicator of US economic health is released at 8:30 (EST).
3. Thursday, March 13: US Retail Sales. After years of non-stop borrowing and spending, many analysts worry that the US consumer is finally tapped out. Find out at 8:30 AM (EST).
4. Friday, March 14: CPI. With oil now well clear of $100 per barrel, and sky-high food and gold prices, inflation is a big concern. Find out the rate in the euro zone at 6 AM (EST) and the U.S. at 8:30 AM (EST).
5. Tuesday, March 18: The Federal Reserve sets rates. The biggest question of them all is What will Bernanke and the FOMC do this time? Rates are announced at 2:15 PM (EST).

ECB left rate at 4% and BoE cut by 25bp at 5.25% on weak economic outlook

The Euro dropped against the Dollar on Thursday after European Central Bank President Jean-Claude Trichet said euro zone growth risks are to the downside, paving the way for lower interest rates this year. The Euro is now on track for its biggest weekly decline against the Dollar in two-and-a-half years. It was pressured from early in the session as the ECB left benchmark borrowing costs unchanged at 4% and Trichet, at a post-meeting press conference, also dropped his threat to act ahead of possible rising prices. The Euro has come under pressure in the past couple of sessions amid growing signs the economy in the 15-member bloc looks weak. In another rate-setting meeting on Thursday, the Bank of England cut borrowing costs by 25bp at 5.25%, citing a weak economic outlook.
At yesterday close, EurUsd was down 0.94% at 1.4476 after dropping as low as 1.4440. It has lost 2.11% this week, heading for its biggest weekly fall since June 2006. UsdJpy rose 0.87% to 107.32, mostly on technical trading. EurJpy was little changed at 155.36 though it had traded between a low of 154.06 and a high of 156.19. Cable (GbpUsd) fell to a two-week low against the greenback at 1.9422 as the Bank of England cut rates by a 25bp to 5.25%, as expected, in a bid to head off a sharp consumer-led slowdown, and signaled further gradual policy easing ahead. In contrast to the United States, Canada and Britain, the ECB has not yet gone down the path of cutting interest rates because of price pressures in the 15 countries using the Euro. In January, euro-zone inflation hit a record high. Recent signs of faltering growth in Spain, Italy and elsewhere in the bloc, however, suggest the ECB may soon have to switch its attention to supporting the euro zone economy. The US Federal Reserve has already slashed rates by 225bp and is seen cutting rates at least another 75bp by the end of the year.
Going into the weekend, investors may be looking to any currency-related comments from the meeting of Group of Seven finance ministers and Central bankers in Tokyo.

The Dollar slid against the Euro on Thursday as tough inflation comments by a European Central Bank official and strong German business confidence data dashed hopes for a near-term interest rate cut in the euro zone. An improvement in investors' appetite for risk, following a sharp rebound in European stocks and gains in US equities, pushed down the Dollar versus high-yielding currencies such as the British pound and the Australian and Canadian dollars.
ECB governing council member Axel Weber said the Federal Reserve's surprise decision to cut its key overnight lending rate by 75bp to 3.50% on Tuesday had not shifted the ECB focus on euro zone inflation, dampening rising expectations that it too will have to cut rates soon.
On Thursday, EurUsd rose 0.98% at 1.4772. EurJpy rose 1.36% to 158.25. UsdJpy was up 0.41% at 107.19, after earlier slipping to 105.94 intraday low. UsdChf fell 0.32% to 1.0884. GbpUsd rose 1.08% at 1.9779, after hitting an intraday 1.9500 low. GbpJpy was up 1.47% to 211.97.
The euro was under selling pressure in recent weeks as signs emerged that weakness in the US economy was having a knock-on effect on the euro zone, fueling the argument for a rate cut by the ECB. Some of those concerns eased slightly on Thursday after the Ifo economic research institute reported that German corporate sentiment unexpectedly rose in January, bolstering policy-makers' assertion that the euro zone economy can withstand turmoil in financial markets. Euro zone rate futures, which were pricing in 75bp earlier this week, now price in about 40bp of easing this year. The ECB's benchmark rate is currently 4%.
The Australian dollar benefited from the improvement in risk appetite and a surge in the price of Gold by 2.33% at 913.65 an ounce. AudUsd rose 1.18% to 0.8829, while NzdUsd went up 0.48% to 0.7671. There was little reaction to a report showing that the pace of existing-home sales in the United States fell 2.2% in December to a slower-than-expected 4.89 Mio-unit annual rate.

actually today, we are going to have a very important, hot
indicator. At 7:00 a.m. New York time we will have Canadian Core CPI m/m.
I don't want to give signals but based on my own experience, 0.1 deviation
can move market well but to play safe, 0.2 deviation should be good enough.
If the CPI comes out higher BY 0.2 (so expectations + 0.2) (or even higher),
USD/CAD and EUR/CAD should go down by around 40 to 50 pips for USD/CAD and
even more for EUR/CAD. If the CPI comes out lower by 0.2 (expectations - 0.2)
or even lower, USD/CAD and EUR/CAD should go up around 40 to 50 pips
or more.

EurUsd Rebounded on yesterday 1.4366 low for a clear return over 1.4500 pivot point. Current trading range is set 1.4366 – 1.4922. Market traded as high as 1.4922 last week, in sight of 1.4967 resistance November high. Further strength might open the door up to 1.5000 key level. Yesterday 1.4366 low marks support. With 1.4500 as major pivot level, market might look down for 1.4280 next support after trendline support holding 1.4311 December low.

GbpUsd remains weak having dropped yesterday down to 1.9337 before recovering up to 1.9604. Further downtrend pressure might open the door toward 1.9105 (50% retracement of 1.7049 – 2.1162 advance). Longs will only lock within a return over 1.9800 short term Trendline and 2.0000 key level ahead 2.0100 resistance. Initial supports hold 1.9483 11th January low and 1.9337 yesterday low.

UsdJpy remains weak having tested 105.63 Monday low. In recent downtrend, pressure opened the way toward 106 support. Initial support holds 105.92 last week low ahead of 104.20 trendline support. Strong resistance holds 110.10 last week double top ahead of 111.92 early January high.

UsdChf Even with yesterday sharp drop below 1.1000, with 1.0970 at close, January downtrend seems to come to an end rebounding from 1.0838 last week low. Market might look for 1.1130 (38.2% of 1.1603 – 1.0838 decline). But further weakness below 1.1019 will reopen the way down to 1.0759 trendline low. Initial resistance holds 1.1123 yesterday high. Early January double top 1.1191 marks strong resistance.

Wednesday, January 23rd, 2008 (4:30 a.m. New York Time) UK
At 4:30 a.m. we are going to have UK GDP as well as BOE Minutes. Because M. King spoke today at 3.10 and said enough about inflation like it may be over 3%, a lot of people think they will not do an emergency cut, implying they are going to cut but not an emergency cut. This makes the Minutes a little less important than usually it is. However, if they vote 9-0 to hold the rates steady on January 10, that would be bullish for the British pound, and if they voted 5-4, then it would be weakening for the pound. We will also have the GDP indicator at the same time. Last time the BOE Minutes dominated; this time, I think, the GDP may be more important. However, you have to look at the whole picture and try to get a good sense what is going on. Even 0.1 trigger is significant on the advanced GDP out of the UK but to be safe due to BOE Minutes coming out at the same time, I would trade 0.2 trigger. If the GDP q/q comes out at 0.7% or higher, we should see GBP/USD going up by 40 to 50 pips (assuming there is no conflict with the BOE Minutes), and it if comes out at 0.3% or lower, that would be weakening the GBP/USD, and it should drop by 40 to 50 pips in the first hour (if there is no conflict).

Wednesday, January 23rd, 2008 (3:00 p.m. New York Time) NEW ZEALAND
At 3:00 p.m. we are going to have New Zealand Interest Rate statement. They are expected to keep the rates steady at 8.25%. If they cut the rates, you can sell NZD/USD and look for 50 to 70 pips price action. If the price drops a lot before the report, you may consider buying NZD/USD if there is no cut, and I would take quick 20 pips only. If they hike the rates, then of course you can buy NZD/USD, and expect 50 to 70 pips price action. The real potential is if they either hike or cut, no change can be tradable only if there is a big down move right before the report.

One of the key elements of any trading system is market timing. Many traders fail to account for timing when making trading decisions, and those who do often rely on their instinct of market timing rather than empirical data. The sophisticated investor uses advanced timing techniques to optimize market entry and exit.
ANALYSIS
• Hour: Which hours of the day will produce the best trades?
• Session: Which trading session has the most action?
• Day: What is the range for particular days of the week?
• Month: Do the days of the month differ?
ACTION
• Correlate your engines to optimal trading ranges
• Test your engines according to a specific entry schedule