Friday, June 1st, 2007

1. Friday, June 1st, 2007 (1:45 am New York Time) SWITZERLAND
First report that I will be watching and possibly trading will be Swiss CPI m/m at 1:45 am NY time. CPI stands for Consumer Price Index, and this indicator measures inflation in Switzerland. It is expected that it will come out at 0.2% versus 1.1% from previous month. In my opinion,
if Swiss CPI comes out at 0.5% or higher it would be positive for Swiss Frank, and USD/CHF may possibly go down by 40 pips or more in the first hour of the report. On the other hand, if it comes out at -0.1% or lower, it would probably be not so good for Swiss Frank because lower inflation means no incentive for the Swiss government to raise the interest rates so a lower CPI would probably be bad for the Frank, and USD/CHF may possible go up by 40 pips or more in the first hour of the report. We may even get a move of 30 pips or more if the deviation is 0.2% either direction, but that would be kind of a risky trade that I may consider depending on price levels that we see on the USD/CHF and some other pairs right before the report.

2. Friday, June 1st, 2007 (4:30 am New York Time) UK
Next, we will have UK Manufacturing PMI coming out at 4.30 am NY time, and it stands for Manufacturing Purchasing Managers Index. It is expected to come out at approximately 53.8 versus previous moths of 53.9. So they are expecting Manufacturing PMI to come out the same as the last months. Manufacturing PMI measures manufacturing activity in the UK, and it is an important indicator that can cause relatively large
moves depending how much it deviates. Since the reading is expected at about 54, I believe if the number comes out at 56 or higher, it may possibly drive GBP/USD up by about 40 pips or more in the first hour of the report. On the other hand, if the number comes out at 52 or lower, we may see GBP/USD go down by about 40 pips or more in the first hour of the report. Anything in between could also be tradable, but it could cause a smaller move, and it will largely depend on where the price is before the report, and how the market is reacting to the report. I have seen even a deviation of 1 cause a move of around 30 pips on the GBP/USD, but I think deviation of 2 will be safer.

3. Friday, June 1st, 2007 (8:30 am New York Time) USA
Then, at 8.30 am NY time we have a big boy U.S. Non-Farm Payroll. It measures employment situation in the US, and it is a very timely indicator. It is coming out for the month of May, and it is the most watched indicator that gives the biggest move. Also, we have Unemployment rate coming out, we have average hourly earnings, we have Core PCE price index, which is an inflationary index, we will have personal
spending and personal income coming out all at the same time. The Non-Farm Payroll is the most important out of all of them, and it is going to take most of the attention. Last month it came out at 88K, and this month it is expected to come out at approximately 135K or so. Not only the actual number is important, but the revision is also important, and
Unemployment rate can cause some conflicts if it is deviating too much. If it comes out at 180K or above, deviating 40K or more, we may see GBP/USD move down by 80 pips or more in the first hour of the report. Obviously it will be because more positive number on Non-Farm payroll would be positive for the dollar. On the other hand, if the number comes out at 85K or below, we may see GBP/USD gain at 80 pips or more in the first hour of the report simply because at this point they are expecting the number to come out at 135K versus 88K last
month, and if it comes out at 85K it wouldn't gain the jobs they are expecting, and that would be negative for the dollar. Watch out for revisions; if the revision is 15-20K or less, and it is conflicting, it may create some temporary volatility, and it may give you the opportunities to possibly put more money or enter at better price after the spike starts happening. On the other hand, if the revision is bigger, it may even completely reverse the whole trend, so be careful on this one.

4. Friday, June 1st, 2007 (10:00 am New York Time) USA
Then, at 10 am NY time, we have ISM Manufacturing Index coming out. It will be coming out together with ISM Manufacturing Prices, and also University of Michigan Consumer Sentiment. The most important out of the three is ISM Manufacturing Index. ISM stands for Institute for Supply Management. It is a private report that has been around since 1930s and it is extremely important because it measures manufacturing activity in the US. Many times GBP/USD reacts to this report by 70 pips or more. That's what we want. Some reports may be theoretically important, but the market doesn't react to them, and we
don't care about those reports. So ISM Manufacturing Index is
expected to come out at 54 versus 54.7 last month. At the same time ISM Manufacturing Prices are expected to come out at 73, same as last month. Safe deviation for the Manufacturing Index is 2 also. So I believe it comes out at 56 or higher it would probably be positive for the dollar, and we may see GBP/USD go down by 50 pips or more in the first hour of the report. On the other hand, if it comes out at 52 or lower, it would probably be negative for the dollar and GBP/USD may possibly go up by 50 pips or more in the first hour of the report. ISM Prices Paid many times conflicts with the actual number. That report may come out conflicting, which means, it may come out higher
while the other reports come out lower, and vice versa. If that
happens, you could take advantage of possible retracement. And of course, as always, watch out for possible revisions for that report, and on this one if the revision is less than 20K, it may provide a temporary retracement. The University of Michigan Consumer Sentiment is the second, final revision of the report that came out 2 weeks ago. It is expected to come out the same at 88.7 versus 88.7. This report is a dog so you may ignore it if you like. Now it is very rare that ISM Manufacturing comes out right after Non-Farm Payroll, and Non-Farm
payroll is a huge report. So if Non-Farm Payroll deviates largely and it creates a large move, people may use ISM Manufacturing to get into the Non-Farm payroll move an hour and a half later at better price, so watch out for that. It may move 40 or 50 pips at the opposite direction, and the bulls or bears may take advantage of the better price, and you will see a quick retracement of almost 100%.
And again, I cannot predict what is going to happen, because I don't know what Non-Farm payroll will be, and I don't know what ISM Manufacturing will be. You may possibly use deviation of less than 2 either direction to trade ISM Manufacturing, and lesser deviation may create lesser movements like 20 or 30 pips or whatever, but be careful on those - the moves may be smaller and quicker. You want to try to avoid quick spiky moves because those are very difficult to get in on. You want a sustained move, or at least a move that is going to make an adjustment and will start to consolidate so that if you can get
a good entry you have enough time to exit.

I think that's all for tomorrow. I hope this information was useful, and I hope you will make money with it. Wait for the next info with review of this information, and more reports with some more trading possibilities next time.

Thank you so much and have a wonderful day.