Trading News Events

- U.K. Consumer Price Index (CPI) to Slow for Fourth Time in 2014.
- Core Inflation to Fall Back From 2.0%- Marked Fastest Rate of Growth Since September.

Trading the News: U.K. Consumer Price Index

A marked slowdown in the U.K.’s Consumer Price Index (CPI) may generate a larger pullback in the GBP/USD as it limits Bank of England (BoE) scope to normalize monetary policy sooner rather than later.

What’s Expected:

Why Is This Event Important:

Nevertheless, the BoE Minutes due out later this week may reveal a growing dissent within the Monetary Policy Committee (MPC) as U.K. officials see a stronger recovery in 2014, and the market reaction to the U.K. CPI print could be short-lived should we see a growing number of central bank officials adopt a more hawkish tone for monetary policy.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Average Weekly Earnings inc Bonus (3MoY) (APR)	1.2%	0.7%
Net Consumer Credit (APR)	0.8B	0.7B
CBI Trends Selling Prices (MAY)	10	4

U.K. firms may offer discounted prices amid weak wage growth paired with the slowdown in private sector credit, and a weak inflation print may undermine the near-term outlook for the GBP/USD as it drags on interest rate expectations.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Jobless Claims Change (MAY)	-25.0K	-27.4K
Private Consumption (QoQ) (1Q P)	0.6%	0.8%
Retail Sales inc. Auto (MoM) (MAR)	0.4%	1.3%

Nevertheless, the resilience in private sector consumption along with the ongoing improvement in the labor market may limit the downside risk for price growth, and a stronger-than-expected CPI print may heighten the bullish sentiment surrounding the sterling as it fuels bets for a rate hike.

How To Trade This Event Risk

Bearish GBP Trade: U.K. CPI Slips to 1.7% or Lower

• 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: Headline Reading for Inflation Exceeds Market Forecast

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

Potential Price Targets For The Release
GBP/USD Daily

• Carves Series of Higher-Lows in June; Higher-High in Place?
• Interim Resistance: 1.7000 Pivot to 1.7030 (100.0% expansion)
• Interim Support: 1.6720 (61.8% expansion) to 1.6730 (50.0% retracement)

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)
APR 2014	05/20/2014 8:30 GMT	1.7%	1.8%	-23	-15

April 2014 U.K. Consumer Price Index
GBPUSD M5 : 34 pips price movement by GBPUSD - CPI news event:

U.K. consumer prices increased an annualized 1.8% in April after expanding 1.6% the month prior, while the core rate of inflation climbed 2.0% to mark the fastest pace of growth since September. Despite the stronger-than-expected CPI print, the GBP/USD slipped below the 1.6825 region following the release, but the British Pound pared the decline during the North American trade to close at 1.6836.

--- Written by David Song, Currency Analyst

More...

- Federal Open Market Committee (FOMC) to Reduce QE by Another $10B.
- Fed Chair Janet Yellen to Hold Press Conference at 18:30 GMT.

Trading the News: Federal Open Market Committee Meeting and Federal Funds Rate

Despite expectations for another $10B reduction in the Federal Open Market Committee’s (FOMC) asset-purchase program, the central bank’s updated forecasts (growth, inflation & interest rate) may have a greater impact in driving the U.S. dollar as market participants weigh the outlook for monetary policy.

What’s Expected:

Why Is This Event Important:

Indeed, there’s limited scope of seeing a material shift in the Fed’s policy outlook as Chair Janet Yellen remains reluctant to normalize monetary policy, and the interest rate decision may spur a bearish dollar reaction (bullish EUR/USD) should we get more of the same from the central bank.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (MAY)	2.0%	2.1%
Change in Non-Farm Payrolls (MAY)	215K	217K
Personal Consumption Expenditure Core (YoY) (APR)	1.4%	1.4%

Sticky inflation paired with the ongoing improvement in the labor market may encourage the FOMC to soft its dovish tone for monetary policy, and the fresh developments coming out of the central bank may generate a bullish outlook for the dollar should we see a greater dissent within the committee.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Housing Starts (MoM) (MAY)	-3.9%	-6.5%
Pending Home Sales (APR)	1.0%	0.4%
Gross Domestic Product (Annualized) (QoQ) (1Q P)	-0.5%	-1.0%

However, the slowdown in the housing market along with the dismal 1Q GDP reading may push the FOMC to lower its fundamental projections for the U.S. economy, and the updated forecasts may heighten the bearish sentiment surrounding the greenback should the calculations drag on interest rate expectations.

How To Trade This Event Risk

Bullish USD Trade: FOMC Cuts Another $10B & Shows Greater Willingness to Normalize

• Need red, five-minute candle following the release to consider a short EUR/USD trade
• If market reaction favors a long dollar trade, short EUR/USD with two separate position
• Place 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: Fed Continues to Highlight Dovish Tone for Monetary Policy

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

Potential Price Targets For The Rate Decision
EUR/USD Daily

• Sideways Price Action in Focus as EUR/USD Holds Monthly Range
• Interim Resistance: 1.3650 (78.6% expansion) to 1.3670 (61.8% retracement)
• Interim Support: 1.3490 (50.0% retracement to 1.3500 Pivot

Impact that the FOMC Interest Rate Decision 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)
APR 2014	04/30/2014 18:00 GMT	0.25%	0.25%	+9	+2

2013-09-18 18:00 GMT (or 20:00 MQ MT5 time| [USD - Federal Funds Rate] :

As expected, the Federal Reserve cut its asset purchase program by $10B in April leaving the total monthly purchase total to $45B per month, but pledged to keep rates on stay on hold for a considerable period of time even after its quantitative-easing (QE) program comes to an end. The relatively dovish tone for monetary policy dragged on the greenback, with the EUR/USD spiking to a high of 1.3875, but the market reaction was short-loved as the pair ended the day at 1.3864.

--- Written by David Song, Currency Analyst

More...

- Canada Consumer Price Index to Hold Steady at 2.0% for Second Straight Month.
- Core Rate of Inflation to Increase 1.5%- Fastest Pace of growth Since August 2012.

Trading the News: Canada Consumer Price Index

Despite expectations of seeing a 0.6% rebound in Canada Retail Sales, the Consumer Price Index (CPI) may play a greater role in driving the USD/CAD as the Bank of Canada (BoC) retains a rather dovish tone for monetary policy.

What’s Expected:

Why Is This Event Important:

A further pickup in core price growth may encourage the BoC to adopt a more hawkish tone for monetary policy, and we may see Governor Stephen Poloz continue to talk down bets for a rate cut should the data print curb the threat for disinflation.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Existing Home Sales (MoM) (MAY)	--	5.9%
Net Change in Employment (MAY)	25.0K	25.8K
Average Weekly Earnings (YoY) (MAR)	--	3.1%

The pickup in wage growth paired with the ongoing recovery in private sector activity may limit the downside risk for inflation, and a strong CPI print may generate fresh monthly lows in the USD/CAD as market participants scale back bets of seeing lower borrowing costs in Canada.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Ivey Purchasing Manager Index s.a. (MAY)	56.0	48.2
Gross Domestic Product (Annualized) (1Q)	1.8%	1.2%
Retail Sales (MoM) (MAR)	0.3%	-0.1%

However, firms may offer discounted prices amid the slowdown in economic activity along with the downturn in private sector spending, and a weaker-than-expected inflation print may spur a near-term correction in the USD/CAD as it raises the risk for a rate cut.

How To Trade This Event Risk

Bullish CAD Trade: Core Inflation Rises 1.5% or Greater

• Need red, five-minute candle following 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 Price Growth Disappoints

• 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 the opposite direction

Potential Price Targets For The Release
USD/CAD Daily

• Fails to Retain Series of Higher-Highs/Lows; Bearish RSI Break Favors Downside Target
• Interim Resistance: 1.1000 (1.618% expansion) to 1.1020 (23.6% retracement)
• Interim Support: 1.0710 (100.0% expansion) to 1.07309

Impact that the Canada CPI report has had on CAD during the last month

Period	Data Released	Survey	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
APR 2014	05/23/2014 12:30 GMT	2.0%	2.0%	-15	-27

April 2014 Canada Consumer Price Index (CPI)
USDCAD M5 : 24 pips price movement by CAD - CPI news event:

The headline reading for Canada inflation climbed an annualized 2.0% in April to mark the fastest pace of growth since April 2012, while the core Consumer Price Index (CPI) advanced 1.4% after expanding 1.3% the month prior. The uptick in price growth propped up the Canadian dollar, with the USD/CAD slipping back below the 1.0900 handle, and the dollar-loonie continued to trade lower throughout the day as the pair closed at 1.0864.

--- Written by David Song, Currency Analyst

More...

- U.S. Final 1Q GDP Print to Show Another Downward Revision/Larger Contraction.
- 1.8% Decline Would Mark the Biggest Drop Since 1Q 2009 (-5.4%).

Trading the News: U.S. Gross Domestic Product (GDP)

The final 1Q Gross Domestic Product (GDP) report may heighten the bearish sentiment surrounding the U.S. dollar as market participants anticipate another downward revision in the growth rate.

What’s Expected:

Why Is This Event Important:

A more meaningful decline in the growth rate may spark a bearish reaction in the greenback (bullish EUR/USD) as it gives the Federal Reserve greater scope to retain its highly accommodative policy stance, and the reserve currency may face additional headwinds throughout the summer months as central bank Chair Janet Yellen continues to endorse a dovish tone for monetary policy.


Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Building Permits (MoM) (MAY)	-0.9%	-6.4%
Housing Starts (MoM) (MAY)	-3.9%	-6.5%
ISM Manufacturing (MAY)	55.5	55.4

The ongoing slack in business outputs paired with the slowdown in housing activity may prompt a larger-than-expected decline in 1Q GDP, and a dismal print may generate a more meaningful rebound in the EUR/USD as the data drags on interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Credit (APR)	$15.000B	$26.847B
Change in Non-Farm Payrolls (MAY)	215K	217K
Durable Goods Orders (APR)	-0.7%	0.8%

However, stronger job growth along with the pickup in private sector credit may have helped to limit the downturn in economic activity, and a positive development may generate a bullish outlook for the greenback as it puts increased pressure on the Fed to normalize monetary policy sooner rather than later.

How To Trade This Event Risk

Bearish USD Trade: U.S. 1Q GDP Contracts 1.8% or Greater

• Need green, five-minute candle following the GDP print to consider a long EUR/USD trade
• If market reaction favors a bearish dollar trade, long EUR/USD with two separate position
• Place 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

Bullish USD Trade: Growth Rate Exceeds Market Expectations

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

Potential Price Targets For The Release
EUR/USD Daily

• Continues to Threaten Trendline Resistance; Bullish Breakout Brings Up June High (1.3676)
• Interim Resistance: 1.3650 (78.6% expansion) to 1.3670 (61.8% retracement)
• Interim Support: 1.3490 (50.0% retracement to 1.3500 Pivot

Impact that U.S. GDP has had on EUR/USD during the last quarter

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
4Q F 2014	03/27/2014 12:30 GMT	2.7%	2.6%	+10	-18

The final 4Q GDP report showed an upward revision in the growth rate as the U.S. economy expanded an annualized 2.6% amid an initial forecast of 2.4%. The greenback struggled to hold its ground following the release as the EUR/USD climbed towards the 1.3775 region, but the dollar regained its footing during the North American trade, with the pair ending the day at 1.3739.

--- Written by David Song, Currency Analyst

More...

- European Central Bank (ECB) to Keep Rates on Hold & Retain Dovish Tone
- Will Governing Council Provide Further Details on Non-Standard Measures?

Trading the News: European Central Bank (ECB) Interest Rate Decision

The EUR/USD may struggle to maintain the rebound from June should the European Central Bank (ECB) adopt a more dovish tone for monetary policy.

What’s Expected:

Why Is This Event Important:

Indeed, ECB President Mario Draghi make a greater effort to weaken the Euro as the resilience in the single-currency heightens the threat for deflation, but the central bank may refrain from laying out a more detailed easing schedule as the central bank monitors the impact of negative deposit rates.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Unemployment Rate (MAY)	11.7%	11.6%
Employment (QoQ) (1Q)	--	0.1%
Retail Sales (MoM) (APR)	0.0%	0.4%

We may get more of the same from the ECB as the pickup in private sector consumption paired with the downtick in unemployment raises the fundamental outlook for the monetary union, and the EUR/USD may continue to appreciate in July should the Governing Council adopt a more neutral tone for monetary policy.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (JUN A)	0.5%	0.5%
Economic Confidence (JUN)	103.0	102.0
Purchasing Manager Index- Composite (JUN P)	53.4	52.8

Nevertheless, the ECB may sounds increasingly dovish this time around amid the persistent weakness in private sector lending along with the downturn in confidence, and the Euro may come under increased pressure in the second-half of the year should the central bank show a greater willingness to implement the non-standard measures (T-LTRO & QE) ahead of schedule.

How To Trade This Event Risk

Bullish EUR Trade: ECB Softens Dovish Tone & Sticks to Current Policy

• Need green, five-minute candle following the policy statement to consider a long EUR/USD position
• If market reaction favors a long trade, buy EUR/USD with two separate position
• Set stop at the near-by swing low/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

Bearish EUR Trade: Governing Council Provides Further Details on Non-Standard Measures

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

Potential Price Targets For The Release
EUR/USD Daily

• Watching Opening Monthly Range as Ascending Channel Takes Shape
• Interim Resistance: 1.3770 (38.2% expansion) to 1.3780 (38.2% retracement)
• Interim Support: 1.3490 (50.0% retracement) to 1.3500 Pivot

Impact that the ECB 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)
JUN	06/05/2014 11:45 GMT	0.10%	0.15%	-72	+57

June 2014 European Central Bank Interest Rate Decision
EURUSD M5 : 82 pips range price movement by EUR - Interest Rate news event :

The European Central Bank pushed into uncharted territory as the Governing Council cut the benchmark interest rate to 0.15%, pushed deposit rates into negative territory, and saw scope for more non-standard measures (T-LTRO & QE) in an effort to stem the risk for deflation, while encouraging private-sector lending to small and medium-sized enterprises (SME). The EUR/USD tumbled to 1.3501 following the initial announcement, but the single currency traded higher following the press conference with President Mario Draghi as the central bank refrained from announced a detailed schedule for its easing cycle.

--- Written by David Song, Currency Analyst

More...

- U.S. Non-Farm Payrolls (NFP) to Increase 200+K for Fifth Straight Month.
- Would Mark Longest String of 200+K Prints Since 1999-2000

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

U.S. Non-Farm Payrolls (NFP) are projected to increase another 215K in June, but the European Central Bank (ECB) interest rate decision may spark a mixed reaction in the EUR/USD as market participants weigh the outlook for monetary policy.

What’s Expected:

Why Is This Event Important:

Despite expectations of seeing the longest stretch of 200K+ prints since 1999-2000, it seems as though we would need a more meaningful pickup in job growth for the Federal Open Market Committee (FOMC) to soften its dovish tune for monetary policy, and the bearish sentiment surrounding the greenback may continue to take shape going into the Fed’s July 30 as Chair Janet Yellen remains reluctant to move away from the highly accommodative policy stance.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
ADP Employment Change (JUN)	205K	281K
ISM Manufacturing- Employment (JUN)	--	52.8
NFIB Small Business Optimism (MAY)	95.8	96.6

The pickup in private sector hiring along with the ongoing improvement in business confidence raises the scope for a better-than-expected NFP print, and a strong employment read may mitigate the bearish sentiment surrounding the USD as it puts increased pressure on the Fed to move away from its easing cycle.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Durable Goods Orders (MAY)	0.0%	-1.0%
Gross Domestic Product (Annualized) (QoQ) (1Q F)	-1.8%	-2.9%
Advance Retail Sales (MoM) (MAY)	0.6%	0.3%

However, the slowdown in private sector consumption paired with the persistent slack in the real economy may continue to drag on job growth, and a weak NFP figure may trigger selloff in the greenback as it raises the Fed’s scope to retain the zero-interest rate policy (ZIRP) beyond 2015.

How To Trade This Event Risk

Bullish USD Trade: NFPs Rises 215K+; Unemployment Holds Steady

• Need 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: 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

• Preserve Ascending Channel for Now While RSI Retains Long-Term Bearish Trend
• Interim Resistance: 1.3770 (38.2% expansion) to 1.3790 (38.2% retracement)
• Interim Support: 1.3490 (50.0% retracement) to 1.3500 Pivot

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)
MAY 2014	6/06/2014 12:30 GMT	215K	217K	+8	+2

May 2014 U.S. Non-Farm Payrolls

The U.S. economy added another 217K jobs in May following a revised 282K expansion the month prior, while the jobless rate unexpectedly held steady at an annualized 6.3% amid forecasts for a 6.4% print. Despite the downtick in unemployment, the EUR/USD climbed back above the 1.3650 region following the release, but the market reaction was short-lived as the pair ended the day at 1.3640.

--- Written by David Song, Currency Analyst

More...

- Canada Employment to Increase Another 20.0K in June .
- Jobless Rate to Hold at an Annualized 7.0% for Second-Month.

Trading the News: Canada Net Change in Employment

Another 20.0K rise in Canada employment may trigger fresh monthly lows in the USD/CAD as it limit’s the risk of seeing the Bank of Canada (BoC) further embark on its easing cycle.

What’s Expected:

Why Is This Event Important:

An upbeat job report may spur a material shift in the policy outlook as BoC Governor Stephen Poloz scales back his willingness to deliver another rate cut, and the central bank may adopt a more neutral tone for monetary policy as the rise in employment highlights an improved outlook for growth and inflation.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Housing Starts (JUN)	190.0K	198.2K
Building Permits (MoM) (MAY)	2.0%	13.8%
Retail Sales (MoM) (APR)	0.6%	1.1%

The pickup in household spending along with the expansion in building activity may pave the way for a positive employment print, and a pickup in job growth may heighten the appeal of the Canadian dollar as it raises the BoC’s scope to normalize monetary policy sooner rather than later.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Business Outlook Future Sales (2Q)	30.00	24.00
Ivey Purchasing Manager Index s.a. (JUN)	52.0	46.9
Gross Domestic Product (MoM) (APR)	0.2%	0.1%

However, the data print may fall short of market expectations as businesses confidence wanes, and a dismal jobs report may generate a larger correction in the USD/CAD as it drags on interest rate expectations.

How To Trade This Event Risk
Bullish CAD Trade: Core Inflation Rises 1.5% or Greater

• Need red, five-minute candle following 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 Price Growth Disappoints

• 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 the opposite direction

Potential Price Targets For The Release
USD/CAD Daily

• Fails to Retain Bullish Trend from 2013; Bearish RSI Momentum Favors Lower Highs & Lows
• Interim Resistance: 1.0820 (61.8% retracement) to 1.0830 (61.8% retracement)
• Interim Support: 1.0580 (61.8% retracement) to 1.0610 (78.6% expansion)

Impact that the Canada CPI report has had on CAD during the last month

Period	Data Released	Survey	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
MAY 2014	06/06/2014 12:30 GMT	25.0K	25.8K	+37	+19

May 2014 Canada Consumer Price Index (CPI)
USDCAD M5 : 39 pips price movement by USD - Non-Farm Employment Change news event

Employment increased 25.8K in May after the Canadian economy shed 28.9K jobs the month prior, while the jobless rate unexpectedly up ticked to an annualized 7.0% from 6.9% in April. Despite the better-than-expected print, the U.S. Non-Farm Payrolls (NFP) played a greater role in driving the USD/CAD as the exchange rate climbed to a daily high of 1.0947, but we saw the dollar-loonie consolidate ahead of the weekend as the pair closed at 1.0925.

--- Written by David Song, Currency Analyst

More...

- U.K. Consumer Price Index (CPI) to Increase for Second-Time in 2014.
- Core Rate of Inflation to Rise for the Third-Time This Year.

Trading the News: U.K. Consumer Price Index

A pickup in the U.K.’s Consumer Price Index (CPI) may generate fresh monthly highs in the GBP/USD as it fuels expectations for a Bank of England (BoE) rate hike later this year.

What’s Expected:

Why Is This Event Important:

The bullish sentiment surrounding the British Pound should gather pace in the second-half of the year as the BoE looks normalize monetary policy sooner rather than later, and the fundamental developments coming out of the region may continue to prop up interest rate expectations as a growing number of central bank officials adopt a more hawkish tone for inflation.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
NISER GDP Estimate (JUN)	--	0.9%
Jobless Claims Change (MAY)	-25.0K	-27.4K
ILO Unemployment Rate (3M) (APR)	6.7%	6.6%

Expectations for a faster recovery paired with the ongoing improvement in the labor market may prompt a stronger-than-expected CPI print, and a marked pickup in the headline reading for inflation may generate a bullish reaction in the GBP/USD as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Mortgage Approvals (MAY)	61.8K	61.7K
Retail Sales inc. Auto (MoM) (MAY)	-0.5%	-0.5%
Average Weekly Earnings inc. Bonus (3Moy) (APR)	1.2%	0.7%

However, subdued wages along with the slowdown in private sector credit may drag on consumer prices, and a dismal inflation report may spur a larger correction in the GBP/USD as it dampens bets of seeing a rate hike later this year.

How To Trade This Event Risk
Bullish GBP Trade: U.K. Inflation Climbs to 1.6% or Higher

• Need green, five-minute candle following the release to consider a long British Pound trade
• If market reaction favors buying sterling, go long 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: CPI Falls Short of Market Forecast

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

Potential Price Targets For The Release
GBP/USD Daily

• Topside Targets Remain Favorable as Price & RSI Retain Bullish Trend
• Interim Resistance: 1.7200 Pivot to 1.7220 (100.0% expansion)
• Interim Support: 1.6890 (38.2% expansion) to 1.6900 (61.8% 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)
MAY 2014	06/17/2014 8:30 GMT	1.7%	1.5%	-20	+27

May 2014 U.K. Consumer Price Index
GBPUSD M5 : 38 pips price movement by GBP - CPI news event

U.K. consumer prices slowed to an annualized 1.5% in May from 1.8% the month prior, while the core rate of inflation narrowed to 1.6% during the same period after expanding 2.0% in April, which marked the fastest pace of growth since August 2013. The British Pound struggled to hold its ground following the weaker-than-expected CPI print, with the GBP/USD slipping back below the 1.6950 region, but the sterling regained its footing during the North American trade, with the pair ending the day at 1.6990.

--- Written by David Song, Currency Analyst

More...

- New Zealand Consumer Price Index (CPI) to Increase for First-Time in 2014.
- Headline Inflation of 1.8% Would Mark the Fastest Pace of Growth Since 4Q 2011.

Trading the News: New Zealand Consumer Price Index

Heightening price pressures in New Zealand may push the NZD/USD to fresh record-highs as it puts increased pressure on the Reserve Bank of New Zealand (RBNZ) to take a more aggressive approach in normalizing monetary policy.

What’s Expected:

Why Is This Event Important:

Indeed, RBNZ Governor Glenn Stevens may sound increasingly hawkish at the July 23 policy meeting as the faster recovery raises the risk for inflation, and the central bank may do little to halt the ongoing appreciation in the local currency as it helps to achieve price stability.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
ANZ Consumer Confidence (MoM) (JUN)	--	3.4%
Producer Price Index- Input (QoQ) (1Q)	--	0.9%
Employment Change (QoQ) (1Q)	0.6%	0.9%

Rising input prices along with the pickup in household confidence may encourage New Zealand firms to pass on higher costs, and a stronger-than-expected CPI print may heighten the bullish sentiment surrounding the kiwi as it fuels bets for additional rate hikes in the second-half of 2014.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product s.a. (QoQ) (1Q)	1.1%	1.0%
Retail Sales ex Inflation (QoQ) (1Q)	0.9%	0.7%
Average Hourly Earnings (QoQ) (1Q)	1.0%	0.7%

Nevertheless, the headline reading for inflation may disappoint amid subdued wage growth paired with the slowdown in private consumption, and a dismal inflation print may spark a larger correction in the NZD/USD as it drags on interest rate expectations.

How To Trade This Event Risk
Bullish NZD Trade: 2Q CPI Climbs 1.8% or Greater

• Need green, five-minute candle following the release to consider a long New Zealand dollar trade
• If market reaction favors buying sterling, go long NZD/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 NZD Trade: Headline Reading for Inflation Disappoints

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

Potential Price Targets For The Release
NZD/USD Daily

• Outlook Remains Bullish as Price Continues to Carve Higher Highs & Lows
• Interim Resistance: 0.8841 (2011 High) to 0.8850 (61.8% expansion)
• Interim Support: 0.8600 (23.6% retracement) to 0.8630 (61.8% expansion)

Impact that the New Zealand CPI report has had on NZD during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
1Q 2014	04/15/2014 22:45 GMT	1.7%	1.5%	-36	-10

The headline reading for New Zealand inflation unexpectedly slowed during the first three-months of 2014, with the CPI figure slipping to an annualized 1.5% from 1.6% in the fourth quarter. The New Zealand dollar struggled to hold its ground following the dismal print, with the NZD/USD moving back below the 0.8600 handle, but the higher-yielding currency pared the losses during the North American trade to close at 0.8622.

--- Written by David Song, Currency Analyst


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- Canada Headline Inflation to Hold at 2.3%- Fastest Pace of growth Since 2012.
- Core Consumer Price Index to Expand 1.7% for Second Straight Month.

Trading the News: Canada Consumer Price Index (CPI)

Canada’s Consumer Price Index (CPI) may generate a key turn in the USD/CAD as heightening price pressures puts increased pressure on the Bank of Canada (BoC) to adopt a more hawkish tone for monetary policy.

What’s Expected:

Why Is This Event Important:

Even though BoC Governor Stephen Poloz talked down the risk for inflation, sticky prices in Canada may continue to prop up interest rate expectations as the central bank adopts a more balanced view for the economy.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Manufacturing Sales (MoM) (MAY)	1.0%	1.6%
Building Permits (MoM) (MAY)	2.0%	13.8%
Retail Sales (MoM) (APR)	0.6%	1.1%

The pickup in private sector consumption may encourage faster price growth in Canada as the BoC looks to achieve a ‘soft landing’ in the housing market, and a stronger-than-expected CPI print may spur a more material shift in the policy outlook as the central bank softens its dovish tune.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Net Change in Employment (JUN)	20.0K	-9.4K
Business Outlook Future Sales (2Q)	30.00	24.00
Gross Domestic Product (MoM) (APR)	0.2%	0.1%

Nevertheless, the ongoing slack in the real economy may continue to dampen the outlook for inflation, and an unexpected slowdown in price growth may generate a further advance in the USD/CAD as it drags on interest rate expectations.

How To Trade This Event Risk
Bullish CAD Trade: Canada CPI Rises an Annulized 2.3% or Higher

• Need red, five-minute candle following 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: Headline Reading for Inflation Disappoints

• 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 the opposite direction

Potential Price Targets For The Release
USD/CAD Daily

• Despite bullish break in RSI, downside remains favored given series of lower highs & lows.
• Interim Resistance: 1.0820 (61.8% retracement) to 1.0850 (38.2% retracement)
• Interim Support: 1.0580 (61.8% retracement) to 1.0600 (61.8% retracement)

Impact that the Canada CPI report has had on CAD during the last month

Period	Data Released	Survey	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
MAY 2014	06/20/2014 12:30 GMT	2.0%	2.3%	-55	-63

May 2014 Canada Consumer Price Index (CPI)

The headline reading for Canada inflation climbed to an annualized 2.3% in May to mark the fastest pace of growth since February 2011, while the core CPI increased 1.7% during the same period amid forecasts for a 1.5% print. The stronger-than-expected prints spurred a bullish reaction in the Canadian dollar, with the USD/CAD slipping below the 1.0800 handle, and the pair traded lower throughout the North American trade as the pair ended the day at 1.0751.

--- Written by David Song, Currency Analyst

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