Trading News Events

- U. of Michigan Confidence to Improve for Second Time in 2014.
- Household Sentiment Survey Has Held Above 80.0 Since November.

Trading the News: U. of Michigan Confidence

A rebound in the U. of Michigan Confidence survey may spur a larger pullback in the EUR/USD as it raises the outlook for the U.S. economy.

What’s Expected:

Why Is This Event Important:

Indeed, positive developments coming out of the world’s largest economy may put increased pressure on the Federal Open Market Committee (FOMC) to normalize monetary policy sooner rather than later, but it seems as though Fed Chair Janet Yellen remains reluctant to move away from the zero-interest rate policy as the central bank head continues to highlight the ongoing slack in the real economy.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Consumer Credit (FEB)	$14.000B	$16.489B
Durable Goods Orders (FEB)	0.8%	2.2%
Advance Retail Sales (MoM) (FEB)	0.2%	0.3%

The resilience in private sector consumption along with the pickup in consumer credit may generate a meaningful rebound in household sentiment, and an upbeat print may generate a bullish reaction in the USD as it limits the Fed’s scope to retain its highly accommodative policy stance for an extended period of time.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Non-Farm Payrolls (MAR)	200K	192K
Average Hourly Earnings (YoY) (MAR)	2.3%	2.1%
Pending Home Sales (MoM) (FEB)	0.2%	-0.8%

However, subdued wage growth paired with the persistent slack in the real economy may spark a further downturn in consumer confidence, and a dismal development may heighten the bearish sentiment surrounding the greenback as the FOMC retains a rather cautious outlook for the region.

How To Trade This Event Risk

Bullish USD Trade: Household Sentiment Rises to 81.0 or Higher

• Need to see red, five-minute candle following the release to consider a short trade on EUR/USD
• If market reaction favors a long dollar trade, sell EUR/USD with two separate position
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit; set reasonable limit

Bearish USD Trade: Consumer Confidence Survey Disappoints

• Need green, five-minute candle to favor a long EUR/USD trade
• Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release
EUR/USD H4

• Outlook Remains Bullish After Carving Higher Low around 1.3650-60
• Break of Bearish Trend Favors Topside Targets as RSI Preserves Long-Term Upward Momentum
• Interim Resistance: 1.3960-70 (61.8% expansion)
• Interim Support: 1.3650 (78.6 expansion) to 1.3660 (23.6 retracement)

Impact that the U. of Michigan Confidence has had on EUR/USD during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
MAR P 2014	03/14/2014 13:55 GMT	82.0	79.9	+10	+3

March 2014 U. of Michigan Confidence Survey

AUDUSD M5 : 26 pips price movement by USD - Michigan Consumer Sentiment news event :

GBPUSD M5 : 38 pips price movement by USD - Michigan Consumer Sentiment news event :

NZDUSD M5 : 26 pips price movement by USD - Michigan Consumer Sentiment news event :

The University of Michigan Confidence survey missed estimates last month to come in at 79.0 vs. 82.0 as surveyed by economists. The figure has been on the general decline since hitting a high over summer not seen since 2007. February’s reading led to a slight uptick in the EUR/USD, but small move did not hold into the close.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- U.K. Consumer Price Index (CPI) to Narrow for Six Consecutive Month.
- Core Inflation Unexpectedly Held Steady at 1.7% in February.

Trading the News: U.K. Consumer Price Index

Slowing inflation in the U.K. may spur a larger correction in the GBP/USD as it allows the Bank of England (BoE) to retain its highly accommodative policy stance for an extended period of time.

What’s Expected:

Why Is This Event Important:

The BoE may further delay its exit strategy in an effort to address the ongoing slack in the U.K. economy, but Governor Mark Carney may show a greater willingness to normalize monetary policy sooner rather than later as the central bank anticipates a stronger recovery in 2014.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Net Consumer Credit (FEB)	0.7B	0.6B
BRC Shop Price Index (YoY) (MAR)	-1.5%	-1.7%
Producer Price Index- Output n.s.a. (YoY) (FEB)	0.7%	0.5%

Easing input prices paired with the slowdown in private sector credit may prompt businesses to offer discounted prices to U.K. households, and a weaker-than-expected inflation print may generate a larger pullback in the GBP/USD as it raises the BoE’s scope to retain its highly accommodative policy stance for an extended period of time.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
GfK Consumer Confidence (MAR)	-6	-5
Retail Sales ex Auto (MoM) (FEB)	0.1%	1.8%
Average Weekly Earnings ex Bonus (3MoY) (JAN)	1.2%	1.3%

Nevertheless, the resilience in household consumption along with the pickup in wage may encourage U.K. firms to raise consumer prices, and a stronger-than-expected CPI print may heighten the bullish sentiment surrounding the British Pound as it fuels interest rate expectations.

How To Trade This Event Risk

Bearish GBP Trade: U.K. CPI Slows to 1.6% or Lower

• Need red, five-minute candle following the release to consider a short British Pound trade
• If market reaction favors selling sterling, short GBPUSD with two separate position
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bullish GBP Trade: Headline & Core U.K. Inflation Exceeds Market Expectations

• Need green, five-minute candle to favor a long GBPUSD trade
• Implement same setup as the bearish British Pound trade, just in opposite direction

Potential Price Targets For The Release

GBP/USD Weekly

GBP/USD H4

• Failure to Push Above February High (1.6821) Raises Risk for Double-Top Formation
• Bullish RSI Momentum Continues to Favor Series of Higher Highs & Higher Lows
• Interim Resistance: 1.6850-60 (78.6% expansion)
• Interim Support: 1.6400 (61.8% expansion) to 1.6430 (23.6% expansion)

Impact that the U.K. CPI report has had on GBP during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
FEB 2014	03/25/2014 9:30 GMT	0.5%	0.5%	+17	+45

February 2014 U.K. Consumer Price Index
GBPUSD M5 : 24 pips price movement by GBP - CPI news event :

The YoY figure for U.K. CPI came in at 1.7% as expected and the MoM figure at 0.5%. The Pound saw a move to the upside that was quickly retraced, but the GBPUSD pair ended the day up 45 pips from the release. As for insight into this print, if we do see CPI come in under market expectation it is likely that we may see GBP weakness. This may be especially pronounced in the context of a possible double top and resurgence of USD strength post-Retail Sales that came in better than expected on Monday morning in NY.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- Canada Headline & Core Inflation to Rebound in March.
- Consumer Price Index (CPI) has Held Above 1.0% for Last Three-Months.

Trading the News: Canada Consumer Price Index

A rebound in Canada’s Consumer Price Index (CPI) may spur a near-term pullback in the USD/CAD as it dampens bets of seeing the Bank of Canada (BoC) further embark on its easing cycle.

What’s Expected:

Event Important:

Heightening price pressures may keep the BoC on the sidelines as it limits the threat for deflation, and Governor Stephen Poloz may endorse a more neutral tone for monetary policy as the central bank head sees a ‘soft landing’ in the Canadian economy.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Manufacturing Sales (MoM) (FEB)	1.0%	1.4%
Raw Materials Price Index (MoM) (FEB)	3.0%	5.7%
Retail Sales (MoM) (JAN)	0.7%	1.3%

Rising input costs paired with the pickup in private sector consumption may encourage Canadian firms to boost consumer prices, and a marked uptick in the CPI may spur a near-term pullback in the USD/CAD as it limits the threat for deflation.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Housing Starts (MAR)	192.0K	156.8K
Business Outlook Future Sales (1Q)	31.00	27.00
Ivey Purchasing Manager Index s.a. (MAR)	59.0	55.2

However, the headline reading for inflation may continue to undershoot amid the slowing housing market along with the downturn in business sentiment, and a weaker-than-expected CPI print may heighten the bearish sentiment surrounding the Canadian dollar as it puts increased pressure on the BoC to further embark on its easing cycle.

How To Trade This Event Risk

Bullish CAD Trade: Price Growth Climbs 1.4% or Greater

• Need red, five-minute candle after the CPI report to consider short USD/CAD entry
• If the market reaction favors a bullish Canadian dollar trade, establish short with two position
• Set stop at the near-by swing high/reasonable distance from cost; use at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish CAD Trade: Canada Consumer Prices Disappoint

• Need green, five-minute candle following the release to look at a long USD/CAD trade
• Carry out the same setup as the bullish loonie trade, just in reverse

Potential Price Targets For The Release
USD/CAD Daily

• Carves Higher Low (1.0857) in April; Long-Term Bias Remains Bullish
• Need Topside Break in Relative Strength Index for Conviction on Higher High
• Interim Resistance: 1.1310 Pivot to 1.1320 (61.8% expansion)
• Interim Support: 1.0850 (61.8% retracement) to 1.0870 (100% expansion)

USDCAD M5 : 55 pips price movement by CAD - CPI news event :

More...

- Reserve Bank of New Zealand to Raise Rates for Second Straight Meeting.
- Market Participants Pricing 97% Chance for 25bp Rate Hike According to OIS.

Trading the News: Reserve Bank of New Zealand Interest Rate Decision

According to a Bloomberg News survey, all of the 15 economists polled anticipate the Reserve Bank of New Zealand (RBNZ) to deliver another 25bp rate hike in April, but the statement accompanying the rate decision may have a greater impact on the NZD/USD as market participants weigh the outlook for monetary policy.

What’s Expected:

Why Is This Event Important:

Indeed, fresh commentary from RBNZ Governor Graeme Wheeler may keep the New Zealand dollar afloat as the board retains a hawkish tone for monetary policy, and NZD/USD may continue to carve higher highs & higher lows should the central bank continue to deliver a series of rate hikes in 2014.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
ANZ Consumer Confidence (MoM) (APR)	--	1.1%
Trade Balance (FEB)	600M	818M
Westpac Consumer Confidence (1Q)	--	121.7

The RBNZ may lay out a more detailed exit strategy amid the pickup in global trade along with the ongoing improvement in the labor market, and a further shift in the policy outlook should prop-up the higher-yielding currency as the central bank moves away from its easing cycle.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (1Q)	1.7%	1.5%
REINZ House Sales (YoY) (MAR)	--	-10.0%
Gross Domestic Product s.a. (QoQ) (4Q)	0.9%	0.9%

However, the RBNZ may sounds less hawkish this time around as the cooling housing market reduces the threat of an asset-bubble, and the New Zealand dollar may face a larger decline in the days ahead should the central bank soften its approach in normalizing monetary policy.

How To Trade This Event Risk

Bullish NZD Trade: RBNZ Pledges More Rate Hikes for 2014

• Need green, five-minute candle following a hawkish statement to consider a long NZD/USD trade
• If market reaction favors a long Kiwi trade, buy NZD/USD with two separate position
• Set stop at the near-by swing low/reasonable distance from cost; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is met, set reasonable limit

Bearish NZD Trade: Governor Wheeler Softens Hawkish Tone for Monetary Policy

• Need red, five-minute candle to favor a short NZD/USD trade
• Implement same strategy as the bullish New Zealand dollar trade, just in opposite direction

Potential Price Targets For The Rate Decision
NZD/USD Daily

• Fails to Preserve Ascending Channel; Searching for Higher Low?
• Bearish RSI Divergence Highlights Risk for Larger Decline
• Interim resistance: 0.8750-60 (78.6% expansion)
• Interim support: 0.8430 (23.6% retracement) to 0.8460 (38.2% expansion)

Impact that the RBNZ Interest Rate Decision has had on NZD during the last meeting

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
MAR 2014	03/12/2014 20:00 GMT	2.75%	2.75%	+60	+80

March 2014 Reserve Bank of New Zealand Interest Rate Decision

NZDUSD M5 : 115 pips price movement by NZD - Interest Rate :

As expected, the RBNZ upped its official cash rate to 2.75% at the March meeting from 2.50% previously. Although we saw chop at the print, the NZD/USD rate went as high as 130 pips from the rate at the release. Once again it is expected that we will see a 25bps hike in rates, although weaker than expected CPI data for the month of March does pose a risk. The RBNZ could choose to hold back on a rate hike and let such a failure to raise rates weaken the Kiwi exchange rate. A surprise of more than 25bps in hikes could help the Kiwi regain strength lost over the past two weeks.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- U.S. Durable Goods Orders to Rise for Second Consecutive Month.
- Non-Defense Capital Goods Orders to Rebound Following 1.4% Decline in February.

Trading the News: U.S. Durable Goods Orders

Another 2.0% rise in orders for U.S. Durable Goods may generate a bullish reaction in the dollar as it raises the outlook for growth and inflation.

Why Is This Event Important:

Data prints pointing to a stronger recovery may put increased pressure on the Federal Open Market Committee (FOMC) to normalize policy sooner rather than later, and we may see Fed Chair Janet Yellen soften her dovish tone for monetary policy as a growing number of central bank turn increasingly upbeat towards the economy.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Advance Retail Sales (MAR)	0.9%	1.1%
U. of Michigan Confidence (APR P)	81.0	82.6
Consumer Credit (FEB)	$14.000B	$16.489B

The expansion in private sector credit along with the ongoing improvement in household sentiment may highlight increased demand for large-ticket items, and a positive development may foster a bullish outlook for the greenback as growth prospects improve.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (MAR)	1.4%	1.5%
Average Hourly Earnings (YoY) (MAR)	2.3%	2.1%
Gross Domestic Product (Annualized) (QoQ) (4Q F)	2.7%	2.6%

However, subdued wage growth paired with the persistent slack in the real economy may continue to drag on private consumption, and a dismal Durable Goods report may heighten the bearish sentiment surrounding the greenback as it drags on interest rate expectations.

How To Trade This Event Risk

Bullish USD Trade: Orders Climb 2.0% or Greater

• Need to see red, five-minute candle following the print to consider a long dollar trade
• If market reaction favors a short EUR/USD position, sell pair with two separate position
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit; set reasonable objective

Bullish USD Trade: Demand for Large-Ticket Items Falter

• Need green, five-minute candle to favor a short dollar trade
• Implement same setup as the bullish USD trade, just in reverse

Potential Price Targets For The Release
EUR/USD Daily

• Remains in Bullish Trend, But Currently Stuck in Wedge/Triangle Formation
• Interim Resistance: 1.3960-70 (61.8% expansion)
• Interim Support: 1.3650 (78.6 expansion) to 1.3660 (23.6 retracement)

Impact that the U.S. Durable Goods Orders report has had on EUR/USD during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
FEB 2014	03/26/2014 13:30 GMT	0.8%	2.2%	-7	flat

February 2014 U.S. Durable Goods Orders

With volatility at lows not seen since just before the financial crisis in the EUR/USD pair, it is no surprise that the last Durable Goods orders figure did not move markets substantially. The release came in at 2.2%, above market expectations calling for a 0.8% increase. In the context of yesterday’s disappointing housing print, we may see greater follow through if we do see the print diverge from market expectations of 2.0% for March.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- U.K. Retail Sales to Contract for Second Time in 2014
- Private Sector Spending Increased 7 of the 12 Months in 2013

Trading the News: U.K. Retail Sales

The British Pound may face a larger correction over the remainder of the week as U.K. Retail Sales are expected to contract 0.5% in March.

What’s Expected:

Why Is This Event Important:

A decline in private sector consumption may prompt a bearish reaction in the GBP/USD as it limits the Bank of England’s (BoE) scope to normalize monetary policy sooner rather than later, but the data print may exceed market expectations as Governor Mark Carney sees a stronger recovery in 2014.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Consumer Price Index Core (YoY) (MAR)	1.6%	1.6%
Producer Price Index- Output n.s.a. (YoY) (MAR)	0.3%	0.5%
Net Consumer Credit (FEB)	0.7B	0.6B

Sticky price growth along with the slowdown in private sector credit may drag on consumption, and a marked decline in retail sales may prompt a larger pullback in the GBP/USD as it dampens the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
CBI Reported Sales (APR)	17	30
Jobless Claims Change (MAR)	-30.0K	-30.4K
Average Weekly Earnings inc Bonus (FEB)	1.8%	1.7%

Nevertheless, positive real wage growth paired with the ongoing improvement in the labor market may prompt a further expansion in household spending, and a better-than-expected print may heighten the appeal of the sterling as it puts increased pressure on the BoE to raise the benchmark interest rate off of the record-low.

How To Trade This Event Risk

Bearish GBP Trade: U.K. Retail Sales Disappoints

• Need red, five-minute candle following the release to consider a short British Pound trade
• If market reaction favors selling sterling, short GBP/USD with two separate position
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bullish GBP Trade: Household Spending Unexpectedly Picks Up

• Need green, five-minute candle to favor a long GBP/USD trade
• Implement same setup as the bearish British Pound trade, just in opposite direction

Potential Price Targets For The Release
GBP/USD Daily

• Bullish RSI Momentum Continues to Favor Fresh Highs
• Interim Resistance: 1.6850-60 (78.6% expansion)
• Interim Support: 1.6400 (61.8% expansion) to 1.6430 (23.6% expansion)

Impact that the U.K. Retail Sales report has had on GBP during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
FEB 2014	03/27/2014 9:30 GMT	0.5%	1.7%	+57	+54

February 2014 U.K. Retail Sales

GBPUSD M5 : 64 pips price movement by GBP - Retail Sales news event

Retail sales out of the U.K. beat across the board in February and sent GBP over 50 pips higher against the greenback. Textiles saw heavy weakness relative to other stores while predominantly food stores had a healthy 1.9% gain vs. a 3.7% decline in January. After the Pound pulled off key resistance levels on Wednesday, room remains for another test of resistance if we do see another beat this month. Note that we have U.K. GDP data to kick off event risk on Tuesday of next week.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- U.K. 1Q GDP to Expand 0.9%- Fastest Pace of Growth Since 2Q 2010
- Annualized Growth Rate of 3.2% Would Be the Highest Since 4Q 2007

Trading the News: U.K. Gross Domestic Product

The advance U.K. 1Q Gross Domestic Product (GDP) report may generate fresh highs in the GBP/USD as the stronger recovery in Britain puts increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later.

What’s Expected:

Why Is This Event Important:

A pickup in economic activity may heighten the bullish sentiment surrounding the British Pound as it puts increased pressure on the Bank of England (BoE) lift the benchmark interest rate off the record-low, and Governor Mark Carney do little to halt the appreciation in the sterling as it helps to achieve the 2% target for inflation.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Retail Sales inc Auto (MoM) (APR)	-0.4%	0.1%
Jobless Claims Change (MAR)	-30.0K	-30.4K
Manufacturing Production (MoM) (FEB)	0.3%	1.0%

The resilience in private sector consumption along with the ongoing improvement in the labor market may prompt a marked pickup in the growth rate, and an upbeat GDP report may spur fresh highs in the GBP/USD as it raises the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Price Index Core (YoY) (MAR)	1.6%	1.7%
Construction Output s.a. (MoM) (APR)	-1.3%	-2.8%
Mortgage Approvals (FEB)	75.3K	70.3K

Sticky price growth paired with efforts to cool the housing market may generate a weaker-than-expected GDP print, and a dismal development may spur a larger correction in the GBP/USD as it drags on interest rate expectations.

How To Trade This Event Risk

Bullish GBP Trade: U.K. Economic Recovery Accelerates

• Need green, five-minute candle following the GDP print to consider a long British Pound trade
• If market reaction favors a bullish sterling trade, buy GBP/USD with two separate position
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish GBP Trade: 1Q GDP Disappoints

• Need red, five-minute candle to favor a short GBP/USD trade
• Implement same setup as the bullish British Pound trade, just in opposite direction

Potential Price Targets For The Release
GBP/USD Daily

• Need RSI to Retain Bullish Momentum to See Fresh Highs
• Interim Resistance: 1.6850-60 (78.6% expansion)
• Interim Support: 1.6400 (61.8% expansion) to 1.6430 (23.6% expansion)

Impact that the U.K. GDP report has had on GBP during the last quarter

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
1Q 2014	01/28/2014 9:30 GMT	0.7%	0.7%	-12	-7

1Q 2014 U.K. Gross Domestic Product (GDP)

GBPUSD M5 : 35 pips price movement by GBP - GDP news event

The GBPUSD pair was almost unchanged on the hour and day following fourth quarter GDP results for 2013. The that print the pair traded lower until February 5th and has been on the rise ever since. The breakdown of the results show that distribution, hotels % restaurants outperformed last quarter while electricity/gas, forestry & fishing lagged compared with the third quarter. Current market expectations are calling for a 0.9% QoQ and 3.2% YoY rise.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- U.S. Non-Farm Payrolls (NFP) to Increase 215K- Largest Rise Since November (274K).
- Unemployment Rate to Narrow to 6.6%- Lowest Since January.

Trading the News: U.S. Non-Farm Payrolls

The U.S. Non-Farm Payrolls (NFP) report may spark a bullish reaction in the dollar (bearish EUR/USD) as the economy is expected to add another 215K jobs in in April, while the jobless is projected to narrow to 6.6% from 6.7% the month prior.

What’s Expected:

Why Is This Event Important:

A pickup in job growth paired with a further decline in unemployment may put increased pressure on the Federal Open Market Committee (FOMC) to normalize monetary policy sooner rather than later, but the data may do little to alter the Fed’s policy outlook as Chair Janet Yellen remains reluctant to move away from the zero-interest rate policy (ZIRP).

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
ADP Employment Change (APR)	210K	220K
Personal Consumption (1Q A)	2.0%	3.0%
NFIB Small Business Optimism (MAR)	92.5	93.4

The ongoing strength in private sector consumption paired with the uptick in business sentiment may prompt a sharp rise in job growth, and a better-than-expected print may generate a near-term pullback in the EUR/USD as it raises the fundamental outlook for the U.S. economy.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product (1Q A)	1.2%	0.1%
Building Permits (MoM) (MAR)	-0.4%	-2.4%
Producer Price Index (YoY) (MAR)	1.1%	1.4%

However, rising input prices paired with the persistent slack in the real economy may push businesses to scale back on hiring, and a dismal NFP print may heighten the bearish sentiment surrounding the reserve currency as it drags on interest rate expectations.

How To Trade This Event Risk

Bullish USD Trade: NFPs Advance 215K+; Unemployment Slips to 6.6%

• Need to see red, five-minute candle following the NFP print to consider a short trade on EUR/USD
• If market reaction favors a long dollar trade, sell EUR/USD with two separate position
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit; set reasonable limit

Bearish USD Trade: April Employment Report Disappoints

• Need green, five-minute candle to favor a long EUR/USD trade
• Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release
EUR/USD Daily

• Risks Larger Breakout as RSI Fails to Preserve Bearish Momentum
• Interim Resistance: 1.3960-70 (61.8 expansion)
• Interim Support: 1.3650 (78.6% expansion) to 1.3660 (61.8 retracement)

Impact that the U.S. Non-Farm Payrolls report has had on EUR/USD during the previous month

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
MAR 2014	4/04/2013 12:30 GMT	200K	192K	+8	+14

March 2014 U.S. Non-Farm Payrolls

EURUSD M5 : 37 pips range price movement by USD - Non-Farm Employment Change news event :

At the March Non-Farm Payrolls release we saw a print of 192K vs. 200K estimates and the figure, largely in line, caused little follow through in the EUR/USD pair. Following chop on both sides, we the week slightly higher. On Wednesday we saw ADP Employment Change figures for April come in slightly above estimates at 220K vs. 2010K expected. This will be the last major event risk for the week a key for monthly opening ranges.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- European Central Bank (ECB)to Hold Benchmark Interest Rate at 0.25%
- ECB President Mario Draghi to Deliver Policy Statement at 12:30 GMT

Trading the News: European Central Bank Interest Rate Decision

According to a Bloomberg News survey, 56 of the 58 economists polled anticipate the European Central Bank (ECB) to retain its current policy in May, but the EUR/USD may struggle to hold its ground should President Mario Draghi show a greater willingness to further embark on the easing cycle.

What’s Expected:

Why Is This Event Important:Indeed, the ECB is coming under increased pressure to implement more non-standard measures amid the persistent threat for deflation, and we may see the central bank lay the groundwork to ease policy further in the coming months as the Governing Council struggles to achieve its one and only mandate to preserve price stability.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Euro-Zone Consumer Price Index (YoY) (APR A)	0.8%	0.7%
Euro-Zone Economic Confidence (APR)	102.9	102.0
Euro-Zone M3 Money Supply (YoY) (MAR)	1.4%	1.1%

Subdued price growth paired with the ongoing contraction in private sector lending may prompt the ECB to adopt a more dovish outlook for monetary policy, and we may see the EUR/USD give back the advance from the beginning of the month should the fresh batch of central bank rhetoric drag on interest rate expectations.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Euro-Zone Retail Sales (MoM) (MAR)	-0.2%	0.3%
Euro-Zone Unemployment Rate (MAR)	11.9%	11.8%
Euro-Zone Trade Balance s.a. (MoM) (FEB)	15.0B	15.0B

However, the ECB may stick to the sidelines amid the positive developments coming out of the monetary union, and the EUR/USD may continue to carve higher highs & higher lows in May should the central bank remain reluctant to implement more non-standard measures.

How To Trade This Event Risk

Trading the ECB interest rate decision may not be as clear cut as some of our other trade setups as the press conference with President Draghi ends with a Q&A session

Bearish EUR Trade: ECB Ramps Up Dovish Tone/Sets Expectations for More Easing

• Need red, five-minute candle following the decision/statement to consider a short Euro trade
• If market reaction favors a short trade, sell EUR/USD with two separate position
• Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is met, set reasonable limit

Bullish EUR Trade: Governing Council Retains Wait-and-See Approach

• Need green, five-minute candle to favor a long EUR/USD trade
• Implement same strategy as the bearish euro trade, just in the opposite direction

Potential Price Targets For The Rate Decision
EUR/USD Daily

• Bullish Breakout in Price & RSI Raises Scope for Higher High
• Interim Resistance: 1.3960-70 (61.8 expansion)
• Interim Support: 1.3600 Pivot to 1.3620 (23.6 retracement)

Impact that the European Central Bank Interest Rate Decision has had on EUR/USD during the last meeting

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
APR 2014	04/03/2014 11:45 GMT	0.25%	0.25%	+23	-26

April 2014 European Central Bank Interest Rate Decision
EURUSD M5 : 32 pips price movement by EUR - Interest Rate news event

The ECB kept rates on hold once more in April and stated that the central bank was not excluding the use of unconventional tools if needed. Although the rate decision sent the Euro higher, when Draghi took the stage and said that the use of unconventional tools was a possibility, we saw Euro weakness across the board. Volatility was relatively weak as has been the case over the last few weeks. Market participants will note Draghi’s language in regards to the Euro as he has become more comfortable in using his position to talk down the Euro.

--- Written by David Song, Currency Analyst and Gregory Marks


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- Bank of England (BoE) to Provide Updated Growth & Inflation Forecast
- Will BoE Comment on the British Pound?

Trading the News: Bank of England Inflation Report

The Bank of England’s (BoE) Inflation Report may generate fresh highs in the GBP/USD should the central bank show a greater willingness to normalize monetary policy sooner rather than later.

What’s Expected:

Why Is This Event Important:

The fresh developments coming out of BoE may boost interest rate expectations should the central bank raise its growth and inflation forecast, and Governor Mark Carney may do little to halt the ongoing appreciation in the British Pound as it helps the Monetary Policy Committee (MPC) to deliver price stability in the U.K.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Jobless Claims Change (MAR)	-30.0K	-30.4K
ILO Unemployment Rate (3M) (FEB)	7.1%	6.6%
Consumer Price Index Core (YoY) (MAR)	1.6%	1.6%

Sticky price growth paired with the ongoing improvement in the U.K. labor market may prompt the BoE to adopt a more hawkish tone for monetary policy, and the GBP/USD may continue to extend the advance from earlier this year should we see a growing number of central bank officials show a greater willingness to raise the benchmark interest rate later this year.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Mortgage Approvals (MAR)	72.0	67.1K
Gross Domestic Product (QoQ) (1Q A)	0.9%	0.8%
BBA Loans for House Purchases (MAR)	48950	45933

However, efforts to cool the housing market may limit the BoE’s scope to normalize monetary policy in 2014 as the central bank continues to highlight the persistent slack in the real economy, and the British Pound may face a larger correction in the days ahead should the committee further delay its exit strategy.

How To Trade This Event Risk

Bullish GBP Trade: BoE Adopts More Hawkish Tone- Presents More Detailed Exit Strategy

• Need green, five-minute candle following an upbeat statement to favor a long British Pound trade
• If reaction favors buying British Pound, long GBP/USD with two separate position
• Set stop at the near-by swing low/reasonable distance from entry; need at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bearish GBP Trade: BoE Monetary Policy Report Drags on Interest Rate Expectations

• Need red, five-minute candle to consider a short GBP/USD trade
• Implement same setup as the bullish British Pound trade, just in the opposite direction

Potential Price Targets For The Release
GBP/USD Daily

• Fails to Maintain Opening Monthly Range (1.6280); Bearish RSI Break Risks Larger Correction
• Interim Resistance: 1.7000 Pivot to 1.7030 (100.0% expansion)
• Interim Support: Interim Support: 1.6400 (61.8% expansion) to 1.6430 (23.6% expansion)

Impact that the BoE Inflation report has had on GBP/USD during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
FEB 2014	2/12/2014 10:30 GMT	--	--	+48	+130

February 2014 Bank of England Inflation Report

The BoE inflation report is likely to spur volatility in GBP crosses, especially in the context of the current situation with rate expectations. At the last release, Carney said that the BoE sees further rate increases as gradual and limited. At the release we saw the Pound rally as comments indicated that the central bank saw rate increases, although gradual, sooner rather than later. Since then we have seen the appreciating Pound help cap higher inflation and any further indication that expectations have been lowered may weigh negatively on GBP crosses.

--- Written by David Song, Currency Analyst and Gregory Marks


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