Trade Team Update

The big event for the of course was the U.S. Retail Sales data, which printed weaker than expected.Now this didn't have quite the negative effect on the USD as I thought it would, but provided great trading opportunities nonetheless.

Both gold and crude stayed well supported today as well and this too took pressure off the EUR. Volatility in the equities and securities markets continue, but most of the effect of those markets are being absorbed by the yen crosses.

Tomorrow:

Fundamentally, tomorrow looks like a trainwreck waiting to happen... we have key growth data out of Europe and of course both U.S. and Eurozone inflation data, which all markets will be watching closely.

German and Eurozone GDP should print at or below expectations in my view. The growth slowdown in the Eurozone has been picking up steam all summer long and tomorrow's data should be ugly. Now if we get downside GDP data for both the Eurozone and Germany, this will likely look to hammer the euro again.

I don't believe hot CPI data out of Europe will do much to save the euro should the growth data be as ugly as I'm expecting. The pattern the past three weeks has basically been to kick the crap out of the euro everytime a piece of bad EUR data comes out. I don't expect to see anything different tomorrow. I've seen no clear break of this data.

The 1+2 punch knock-out combo that the EUR needs to avoid is getting a weak print on both inflation and CPI data, which I'm not at all ruling out and will be prepared for accordingly.

Turning to the Core CPI and CPI data for the U.S. my forecast is to see a print at or slightly above expected. I don't have to tell you what that means for the USD... on the Core I believe we can see a print of 0.3% or better.

A hot print on the USD data combined with a cool print on the EUR data will likely send the pair to lows we haven't seen in awhile. Don't forget that we're getting July's inflation data tomorrow and during July overall prices on everything from fuel to fuel to discretionary and non-discretionary goods were running at serious highs.

The price's paid component on the manufacturing data during July was heightened, the Import Price Index printed very hot, and the USD was weak while commodities were running at extended levels.

When I piece all the components together, I get a forecast that shows me we'll see hot CPI data, even the part of CPI that doesn't account for food and fuel should print hot.

EUR/USD:

Clearly all risk is on the EUR heading into tomorrow's fundamental events. As a trader I like to play out all the possible scenarios in my head when we have a day like tomorrow -- growth and inflation data which directly correlate to interest rates and central bank monetary policy.

Most the scenarios basically involve the euro taking a beating should the data print the way I believe it will. Should there but upside surprises, that's great, but I'm preparing for the worst and I think all traders should prepare for the worst.

The only other scenario I can see playing out, which has happened many times in the past, is that the market reacts like a deer caught in the headlights... it's so overloaded with monumental data that it doesn't know what to do and it basically does nothing at all.

In the euro's defense, price action patterns have shown clear signs that the slide is over and support has been found at the 1.4860 level.

Right now the euro is remaining supported above the 1.4900 level. While this is a good sign, as we know things can change in a heartbeat once the market either squares up before the data or trades the data as it's released.

Resistance remains between 1.4980 and 1.5010 under current market conditions while we're seeing support between 1.4860 and 1.4840. Within the real-time price action I continue to see buyers emerge on each dip below 1.4900 and during all attempts to go even lower than that.

There should be some good ranging and scalping opportunities the next few hours but be ready for some price swings after 0200 EST all the way through the NY session tomorrow.

If you're tight on margin, I strongly reccommend you think about all the possible scenarios and come up with a gameplan for tomorrow. In fact all traders should have a gameplan whether your margin's tight or not.

Be smart with your trades and please do not overleverage.