Trading News Events

- U.S. Consumer Price Index to Hold at 2.1% for Second Month.
- Core Inflation to Retain Fastest Pace of Growth Since October 2012.

Trading the News: U.S. Consumer Price Index (CPI)

The U.S. Consumer Price Index (CPI) may spur a bullish reaction in the U.S. dollar (bearish EUR/USD) should the report undermine the Fed’s dovish outlook for monetary policy.

What’s Expected:

Why Is This Event Important:

Sticky price growth in the world’s largest economy may heighten the appeal of the greenback as it puts increased pressure on the Federal Reserve to move away from its easing cycle, and the next policy meeting on July 30 may generate an improved outlook for the reserve currency should a growing number of central bank officials show a greater willingness to normalize monetary policy sooner rather than later.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Producer Price Index ex Food and Energy (YoY) (JUN)	1.9%	2.0%
Average Hourly Earnings (YoY) (JUN)	1.9%	2.0%
Personal Income (MAY)	0.4%	0.4%

Higher input costs along with the pickup in wage growth may generate another stronger-than-expected inflation print, and an unexpected uptick in the CPI may fuel a near-term rally in the USD as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
U. of Michigan Confidence (JUL P)	83.0	81.3
Advance Retail Sales (MoM) (JUN)	0.6%	0.2%
Consumer Credit (MAY)	$20.000B	$19.602B

However, the persist slack in the real economy paired with the slowdown in private sector consumption may drag on price growth, and a weak inflation print may heighten the bearish sentiment surrounding the greenback as it gives the Fed greater scope to retain its highly accommodative policy stance for an extended period of time.

How To Trade This Event Risk

Bullish USD Trade: Headline Reading for Inflation Climbs 2.1% or Greater

• Need to see red, five-minute candle following the release to consider a short trade on EURUSD
• If market reaction favors a long dollar trade, sell EURUSD 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: U.S. CPI Falls Short of Market Forecast

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

Potential Price Targets For The Release
EUR/USD Daily

• Remains at Risk for a Lower-Low as Downward Trending Channel Takes Shape
• 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 U.S. CPI 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)
MAY 2014	06/17/2014 12:30 GMT	2.0%	2.1%	-23	-23

May 2014 U.S. Consumer Price Index (CPI)
EURUSD M5 : 33 pips price movement by USD - CPI news event

The headline reading for U.S. inflation unexpectedly climbed to an annualized 2.1% in May to mark the fastest pace of growth since October 2011, while the core Consumer Price Index (CPI) advance to 2.0% amid forecasts for 1.9% print. The stronger-than-expected print sparked a bullish reaction in the reserve currency, with the EUR/USD slipping below the 1.3550 region, and the greenback retained the gains throughout the North American session as the pair ended the day at 1.3545.

--- Written by David Song, Currency Analyst

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- RBNZ Expected to Raise the Cash Rate for the Fourth Consecutive Meeting.
- Benchmark Interest Rate of 3.50% Would Mark the Highest Level Since 2009.

Trading the News: Reserve Bank of New Zealand (RBNZ) Rate Decision

Despite expectations of seeing another 25bp rate hike from the Reserve Bank of New Zealand (RBNZ), the forward-guidancefor monetary policy will be the key focus as market participants see the central bank taking a pause from its normalization cycle.

What’s Expected:

Why Is This Event Important:

Indeed, the weaker-than-expected 2Q Consumer Price Index (CPI) has dragged on interest rate expectations as the resilience in the New Zealand dollar dampens the outlook for price growth, and the NZD/USD may face a larger correction over the near-term should the central bank soften its hawkish tone for monetary policy.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
ANZ Consumer Confidence (MoM) (JUN)	--	0.6%
Trade Balance (MAY)	250M	285M
Employment Change (QoQ) (1Q)	0.6%	0.9%

The pickup in household confidence along with the ongoing improvement in employment may encourage the RBNZ to retain a very hawkish tone for monetary policy, and the NZD/USD may recoup the losses from earlier this month should Governor Graeme Wheeler show a greater willingness to deliver another rate hike later this year.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (2Q)	1.8%	1.6%
Gross Domestic Product s.a. (QoQ) (1Q)	1.1%	1.0%
Retail Sales ex Inflation (QoQ) (1Q)	0.9%	0.7%

Nevertheless, the RBNZ may strike a more balanced tone for the region amid the slowdown in private sector consumption along with the limited pickup in price growth, and the New Zealand dollar continue to press fresh monthly lows should the fresh batch of central bank rhetoric drag on interest rate expectations.

How To Trade This Event Risk

Bullish NZD Trade: RBNZ Hikes to 3.50% & Retains Hawkish Forward-Guidance

• Need green, five-minute candle following the statement to consider a long New Zealand dollar trade
• If market reaction favors buying kiwi, 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: Governor Wheeler Adopts Neutral Tone & Talks Down Rate Expectations

• 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

• Will look for fresh highs should the NZD/USD carve a higher-low in July
• Interim Resistance: 0.8841 (2011 High) to 0.8850 (61.8% expansion)
• Interim Support: 0.8600 (23.6% retracement) to 0.8620 (50.0% retracement)

Impact that the RBNZ 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)
JUN 2014	06/11/2014 21:00 GMT	3.25%	3.25%	+75	+153

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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- U.S. Economy to Grow 3.0%- Fastest Pace of Growth Since 3Q 2013.
- Personal Consumption to Expand for 18-Consecutive Quarters.

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

The advance Gross Domestic Product (GDP) report may heighten the appeal of the U.S. dollar as the world’s largest economy is expected to grow an annualized 3.0% in the second-quarter.

What’s Expected:

Why Is This Event Important:

A marked rebound in the growth rate may spark a greater dissent within the Federal Open Market Committee (FOMC) as a growing number of central bank officials scale back their dovish tone for monetary policy, and Chair Janet Yellen may come under increased pressure to normalize monetary policy sooner rather than later as the outlook for growth and inflation improves.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Average Hourly Earnings (YoY) (JUN)	1.9%	2.0%
Change in Non-Farm Payrolls (JUN)	215K	288K
Personal Income (MAY)	0.4%	0.4%

The pickup in wage growth along with the ongoing improvement in the labor market may generate a better-than-expected GDP print, and a large uptick in the growth rate may generate a bullish reaction in the greenback (bearish EUR/USD) as it fuels interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
New Home Sales (MoM) (JUN)	-5.8%	-8.1%
Consumer Price Index (YoY) (JUN)	2.1%	2.1%
Housing Starts (MoM) (JUN)	1.9%	-9.3%

However, sticky inflation paired with the persistent slack in the housing market may weigh on the growth rate, and a disappointing GDP release may spur a near-term selloff in the reserve currency as it gives the Fed greater scope to retain its highly accommodative policy stance for an extended period of time.

How To Trade This Event Risk
Bullish USD Trade: U.S. Economy Expands 3.0% or Greater

• Need to see red, five-minute candle following the release to consider a short trade on EURUSD
• If market reaction favors a long dollar trade, sell EURUSD 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: 2Q GDP Reading Disappoints

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

Potential Price Targets For The Release
EUR/USD Daily

• Despite oversold RSI signal, downside targets remain favored
• Interim Resistance: 1.3650 (78.6% expansion) to 1.3670 (61.8% retracement)
• Interim Support: 1.3370 (38.2% retracement) to 1.3380 (38.2% expansion)

Impact that the U.S. GDP 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)
1Q A 2014	04/30/2014 12:30 GMT	1.2%	0.1%	+12	+19

The U.S. economy grew a lackluster 0.1% in the first-quarter after expanding an annualized 2.6% during the last three-months of 2013, and the persistent slack in private sector activity may continue to cast a bearish outlook for the greenback as the Fed retains a dovish outlook for monetary policy. The dollar struggled to hold its ground following the dismal GDP print, with the EUR/USD climbing above the 1.3850 region, and the reserve currency struggled to hold its ground throughout the North American session as the pair ended the day at 1.3864.

--- Written by David Song, Currency Analyst


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Originally Posted by TheNews

- U.S. Economy to Grow 3.0%- Fastest Pace of Growth Since 3Q 2013.
- Personal Consumption to Expand for 18-Consecutive Quarters.

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

The advance Gross Domestic Product (GDP) report may heighten the appeal of the U.S. dollar as the world’s largest economy is expected to grow an annualized 3.0% in the second-quarter.

What’s Expected:

Why Is This Event Important:

A marked rebound in the growth rate may spark a greater dissent within the Federal Open Market Committee (FOMC) as a growing number of central bank officials scale back their dovish tone for monetary policy, and Chair Janet Yellen may come under increased pressure to normalize monetary policy sooner rather than later as the outlook for growth and inflation improves.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Average Hourly Earnings (YoY) (JUN)	1.9%	2.0%
Change in Non-Farm Payrolls (JUN)	215K	288K
Personal Income (MAY)	0.4%	0.4%

The pickup in wage growth along with the ongoing improvement in the labor market may generate a better-than-expected GDP print, and a large uptick in the growth rate may generate a bullish reaction in the greenback (bearish EUR/USD) as it fuels interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
New Home Sales (MoM) (JUN)	-5.8%	-8.1%
Consumer Price Index (YoY) (JUN)	2.1%	2.1%
Housing Starts (MoM) (JUN)	1.9%	-9.3%

However, sticky inflation paired with the persistent slack in the housing market may weigh on the growth rate, and a disappointing GDP release may spur a near-term selloff in the reserve currency as it gives the Fed greater scope to retain its highly accommodative policy stance for an extended period of time.

How To Trade This Event Risk
Bullish USD Trade: U.S. Economy Expands 3.0% or Greater

• Need to see red, five-minute candle following the release to consider a short trade on EURUSD
• If market reaction favors a long dollar trade, sell EURUSD 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: 2Q GDP Reading Disappoints

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

Potential Price Targets For The Release
EUR/USD Daily

• Despite oversold RSI signal, downside targets remain favored
• Interim Resistance: 1.3650 (78.6% expansion) to 1.3670 (61.8% retracement)
• Interim Support: 1.3370 (38.2% retracement) to 1.3380 (38.2% expansion)

Impact that the U.S. GDP 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)
1Q A 2014	04/30/2014 12:30 GMT	1.2%	0.1%	+12	+19

The U.S. economy grew a lackluster 0.1% in the first-quarter after expanding an annualized 2.6% during the last three-months of 2013, and the persistent slack in private sector activity may continue to cast a bearish outlook for the greenback as the Fed retains a dovish outlook for monetary policy. The dollar struggled to hold its ground following the dismal GDP print, with the EUR/USD climbing above the 1.3850 region, and the reserve currency struggled to hold its ground throughout the North American session as the pair ended the day at 1.3864.

--- Written by David Song, Currency Analyst


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EURUSD M5 : 33 pips price movement by USD - GDP news event

NZDUSD M5 : 28 pips price movement by USD - GDP news event

AUDUSD M5 : 27 pips price movement by USD - GDP news event

- U.S. Non-Farm Payrolls (NFP) to Increase 200+K for Sixth Straight Month.
- Would Mark Longest String of 200+K Prints Since 1997

Trading the News: U.S. Non-Farm Payrolls (NFP)

U.S. Non-Farm Payrolls (NFP) are anticipated to increase another 231K in July, and a positive employment print may produce a further decline in the EUR/USD as it puts increased pressure on the Federal Reserve to normalize monetary policy sooner rather than later.

What’s Expected:

Why Is This Event Important:

The deviation in the policy outlook favors a bearish outlook for the EUR/USD as the European Central Bank (ECB) stands ready to implement more non-standard measures, and the NFP print may generate fresh 2014 lows in the euro-dollar should the release boost the interest rate outlook for the U.S.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product (Annualized) (QoQ) (2Q A)	3.0%	4.0%
Personal Consumption (2Q A)	1.9%	2.5%
Durable Goods Orders (JUN)	0.5%	0.7%

The resilience in private consumption along with the marked rebound in economic activity may encourage firms to further expand their labor force, and a better-than-expected NFP print should produce a bullish reaction in the U.S. dollar as puts increased pressure on the Federal Open Market Committee (FOMC) to move away from its zero-interest rate policy (ZIRP).

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Challenger Job Cuts (YoY) (JUL)	--	24.4%
ADP Employment Change (JUL)	230K	218K
NFIB Small Business Optimism (JUN)	97.0	95.0

However, the downturn in business confidence along with the rise in planned job cuts may produce further headwinds for the U.S. labor market, and a dismal employment report may undermine the bullish sentiment surrounding the reserve currency as it raises the Fed’s scope to retain the highly accommodative policy stance for an extended period of time.

How To Trade This Event Risk
Bullish USD Trade: NFPs Rises 231K+; Unemployment Holds at 6.1%

• 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 Print Falls Short of Market Forecast

• 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

• Remains at Risk for Further Decline as Long as RSI Holds Below 30
• Interim Resistance: 1.3580 (23.6% expansion) to 1.3600 Pivot
• Interim Support: 1.3300 Pivot to 1.3310 (78.6% expansion)

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)
JUN 2014	7/03/2014 12:30 GMT	215K	288K	-34	-34

June 2014 U.S. Non-Farm Payrolls

EURUSD M5 : 48 pips price movement by USD - Non-Farm Employment Change news event

AUDUSD M5 : 40 pips price movement by USD - Non-Farm Employment Change news event

The U.S. economy added another 288K jobs in June following a revised 224K advance the month prior, while the jobless rate unexpectedly narrowed to an annualized 6.1% from 6.3% in May. The better-than-expected NFP print propped up the greenback, with the EUR/USD slipping below the 1.3625 region, and the reserve currency retained the bullish reaction going into the end of the week as the pair closed at 1.3608.

-- Written by David Song, Currency Analyst


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- Bank of England (BoE) Updated Growth & Inflation Forecast in Focus.
- Will BoE Governor Mark Carney Look to Normalize in 2014 or 2015?

Trading the News: Bank of England (BoE) Inflation Report

The Bank of England’s (BoE) Inflation report is likely to heavily influence the near-term outlook for the GBP/USD as the central bank looks to move away from its easing cycle.

What’s Expected:

Why Is This Event Important:

Indeed, the updated forecasts for growth and inflation is likely to spur increased volatility in the British Pound, but we would need to see Governor Mark Carney show a greater willingness to normalize monetary policy in 2014 for the GBP/USD to resume the upward trend carried over from the previous year.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Construction Output s.a. (MoM) (JUN)	1.0%	1.2%
Jobless Claims Change (JUN)	-27.0K	-36.3K
Consumer Price Index Core (YoY) (JUN)	1.7%	2.0%

Sticky inflation paired with the ongoing improvement in the labor market may spur a greater dissent within the Monetary Policy Committee (MPC), and the GBP/USD may carve a key low in August should the fresh batch of central bank rhetoric boost interest rate expectations.

Bearish Argument/Scenario

Release	Expected	Actual
Manufacturing Production (MoM) (JUN)	0.6%	0.3%
GfK Consumer Confidence (JUL)	2	-2
Retail Sales inc Auto (MoM) (JUN)	0.3%	0.1%

Nevertheless, the BoE may introduce a more relaxed approach in normalizing policy amid the ongoing slack in the U.K. economy, and the GBP/USD may face a larger decline over the remainder of the month if Governor Carney adopts a more neutral tone for monetary policy.

How To Trade This Event Risk

Bullish GBP Trade: BoE Sees Scope to Raise Benchmark Interest Rate in 2014

• Need green, five-minute candle following the statement 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: Governor Carney Talks Down Rate Expectations

• 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

Despite break of bullish RSI momentum, scope remains for a higher-low in long-term series.

• Interim Resistance: 1.7200 Pivot to 1.7220 (100.0% expansion)
• Interim Support: 1.6697 (June low) to 1.6730 (61.8% expansion)

Impact that the BoE Inflation 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	05/14/2014 9:30 GMT	--	--	-38	-51

The Bank of England (BoE) struck an improved outlook for the U.K. economy and said that spare capacity has ‘narrowed’ somewhat, but the fresh batch of central bank rhetoric did little to boost interest rate expectations as Governor Mark Carney argued that there needs to be a further reduction in the economic slack before the Monetary Policy Committee (MPC) can start to normalize monetary policy. The British Pound struggled to hold its ground following the statement, with the GBP/USD dipping below the 1.6800 handle, and the sterling continued to weaken during the U.S. trade as the pair ended the day at 1.6764.

--- Written by David Song, Currency Analyst


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- U. of Michigan Confidence Survey to Rebound Following Unexpected Decline in July.
- Expected to Hold Above 80.0 for Ninth Consecutive Month.

Trading the News: U. of Michigan Confidence

A rebound in the U. of Michigan Confidence survey may generate a bullish reaction in the U.S. dollar (bearish EUR/USD) as it raises the outlook for growth and inflation.

What’s Expected:

Why Is This Event Important:

A pickup in household sentiment may spur a larger dissent within the Federal Open Market Committee (FOMC) as central bank officials look for a stronger recovery in the second-half of the year, and the Fed may show a greater willingness to normalize monetary policy sooner rather than later as the committee turns increasingly confident in achieving the dual mandate for full-employment & price stability.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Personal Income (JUN)	0.4%	0.4%
Gross Domestic Product (Annualized) (QoQ) (2Q A)	3.0%	4.0%
Consumer Confidence (JUL)	85.4	90.9

Higher wage growth paired with marked rebound in 2Q GDP may prop up household confidence, and an upbeat U. of Michigan print may heighten the bullish sentiment surrounding the U.S. dollar as the Fed looks to move away from its easing cycle later this year.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Advance Retail Sales (MoM) (JUL)	0.2%	0.0%
Wholesale Trade Sales (MoM) (JUN)	0.7%	0.3%
Consumer Credit (JUN)	$18.650B	$17.255B

However, the slowdown in private sector credit along with the recent weakness in household consumption may warn of a further decline in consumer sentiment, and another unexpected decline in the confidence survey may trigger a near-term correction in the greenback as it drags on interest rate expectations.

How To Trade This Event Risk

Bullish USD Trade: U. of Michigan Survey Climbs to 82.5 or Higher

• Need to see red, five-minute candle following the release to consider a short trade on EURUSD
• If market reaction favors a long dollar trade, sell EURUSD 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 Sentiment Continues to Disappoint

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

Potential Price Targets For The Release
EUR/USD Daily

• Will continue to look for string of lower-highs as descending triangle takes shape.
• 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 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)
JUL P 2014	07/18/2014 13:55 GMT	83.0	81.3	+6	+19

July 2014 U. of Michigan Confidence Survey

The U. of Michigan Confidence survey unexpectedly weakened in July, with the index slipping to 81.3 from 82.5 the month prior, while 12-month inflation expectations climbed to an annualized 3.3% from 3.1% in June. Nevertheless, the greenback struggled to hold its ground following the dismal confidence report, with the EURUSD trading back above the 1.3500 handle, and the reserve currency continued to trade heavy throughout the North American trade as the pair ended the day at 1.3521.

--- Written by David Song, Currency Analyst


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- U.K. Consumer Price Index (CPI) to Slow for Fifth Time in 2014.
- Core Rate of Inflation to Fall Back From Fastest Pace of Growth This Year.

Trading the News: U.K. Consumer Price Index

A slowdown in the U.K.’s Consumer Price Index (CPI) may help to close the weekly opening gap in the GBP/USD should the inflation report drag on interest rate expectations.

What’s Expected:

Why Is This Event Important:

The Bank of England (BoE) may continue to soften its hawkish tone for monetary policy as the central bank cuts its outlook for U.K. wage growth, and a weaker-than-expected CPI print is likely to trigger a bearish reaction in the GBP/USD as market participants scale back bets of seeing a rate hike in 2014.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Average Weekly Earnings in Bonus (3MoY) (JUN)	-0.1%	-0.2%
Retail Sales ex Auto (MoM) (JUN)	0.3%	-0.1%
CBI Trends Selling Prices (JUL)	6.7%	6.6%

U.K. firms may conduct heavy discounting amid weak wage growth paired with the slowdown in private sector consumption, and a dismal CPI reading may instill a more bearish outlook for the GBP/USD as it reduces the BoE’s scope to normalize monetary policy sooner rather than later.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product (YoY) (2Q P)	3.1%	3.2%
Mortgage Approvals (JUN)	63.0K	67.2K
BBA Loans for House Purchases (JUN)	41375	43265

The pickup in private sector lending along with expectations for a faster recovery may generate another stronger-than-expected inflation print, and the pound-dollar may continue to push off of the 200-Day SMA (1.6662) should the data print boost rate expectations.

How To Trade This Event Risk
Bearish GBP Trade: U.K. CPI Slips to 1.8% 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 Tops Market Expectations

• 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

• Break of Bearish RSI Momentum Raises Risk for Bottoming Process
• Interim Resistance: 1.6960 (50.0% retracement) to 1.6970 (23.6% retracement)
• Interim Support: 1.6630 (50.0% expansion) to 1.6660 (200-Day SMA)

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)
JUN 2014	07/15/2014 8:30 GMT	1.6%	1.9%	+57	+67

June 2014 U.K. Consumer Price Index
GBPUSD M5 : 64 pips price movement by GBP - CPI news event

The U.K.’s Consumer Price Index (CPI) expanded sharply at an annualized rate of 1.9% in June, beating the average estimate of 1.6%. The core CPI also exceeded market forecast to reach 2.0% from 1.6% the month prior. The print was mostly pushed up by clothing & footwear and food & beverage. The larger-than-expected figure boosted the pound, with the GBP/USD climbing to a high of 1.7190 during the North American trade. However, the GBP/USD consolidated going the close, with the pair ending the day at 1.7146.

--- Written by David Song, Currency Analyst and Shuyang Ren


More...

- U.K. Retail Sales to Increase for Second Consecutive Month.
- Private Sector Spending to Rise for Fifth Time in 2014.

Trading the News: U.K. Retail Sales

A pickup in U.K. Retail Sales may spur a more meaningful rebound in the GBP/USD as it raises the prospects for a stronger recovery in the second-half of 2014.

What’s Expected:

Why Is This Event Important:

The growing dissent within the Bank of England (BoE) should continue to prop up interest rate expectations as a the central bank sees less spare capacity in the U.K. economy, and we may see a greater rift at the next meeting on September 4 should the fundamental developments coming out of the region raise the outlook for growth and inflation.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (JUL)	1.8%	1.6%
Jobless Claims Change (JUL)	-30.0K	-33.6K
BRC Shop Price Index (YoY) (JUL)	-1.6%	-1.9%

Easing price pressures along with the ongoing improvement in the labor market may generate a better-than-expected sales report, and a marked pickup in household spending may spur a meaningful rebound in the GBP/USD as it puts increased pressure on the BoE to normalize monetary policy sooner rather than later.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product (QoQ) (2Q P)	0.8%	0.8%
Average Weekly Earnings inc Bonus (3MoY) (JUN)	-0.1%	-0.2%
Net Consumer Credit (JUN)	0.8B	0.4B

However, subdued wage growth paired with the ongoing slack in the real economy may drag on private consumption, and a dismal print is likely to spur a further decline in the British Pound as market participants scale back bets for an early rate hike.

How To Trade This Event Risk
Bullish GBP Trade: U.K. Retail Sales Climbs 0.4% or Greater

• Need green, five-minute candle following the release to consider a long British Pound trade
• If market reaction favors long 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

Bullish GBP Trade: Household Spending 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

• Watching RSI as it struggles to hold above 26 along with the April low (1.6549)
• Interim Resistance: 1.6850-60 (78.6% expansion)
• Interim Support: 1.6560 (38.2% expansion) to 1.6570 (61.8% 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)
JUN 2014	07/24/2014 8:30 GMT	0.3%	0.1%	-19	-46

The U.K retail sales report showed a slight increase of 0.1% after contracting 0.5% in May. An decline in demand for textile, clothing and footwear contributed to the weaker-than-expected data. The lackluster print dragged on the pound, with GBP/USD sliding below the 1.7000 handle. The bearish reaction continued throughout the North American trade, with the pair ending the day at 1.6988.

--- Written by David Song, Currency Analyst and Shuyang Ren


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- Canada Headline Inflation to Hold Above 2.0% for Fifth Consecutive Month.
- Core Consumer Price Index of 1.9% Would Mark Fastest Pace of Growth Since June 2012.

Trading the News: Canada Consumer Price Index (CPI)

Despite expectations for a downtick in Canada’s Consumer Price Index (CPI), the stickiness in core inflation may spur a larger decline in the USD/CAD as it puts increased pressure on the Bank of Canada (BoC) to move away from its neutral policy stance.

What’s Expected:

Why Is This Event Important:

Even though BoC Governor Stephen Poloz talked down the risk for higher interest rates, the growing risk for a prolonged period of above-target inflation may push the central bank to adopt a more hawkish tone for monetary policy in an effort to promote price stability.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Wholesale Trade Sales (MoM) (JUN)	1.0%	1.6%
Manufacturing Sales (MoM) (JUN)	0.4%	0.6%
Retail Sales (MoM) (MAY)	0.6%	0.7%

The pickup in private sector consumption may heighten price pressures in Canada, and a strong inflation print may spur a more meaningful correction in the USD/CAD as it boosts interest rate expectations.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Average Weekly Earnigns (YoY) (MAY)	--	2.6%
BoC Senior Loan Officer Survey (2Q)	--	-12.8
Business Outlook Future Sales (2Q)	30.00	24.00

Nevertheless, slowing wage growth paired with the ongoing weakness in private lending may spur a softer-than-expected CPI print, and a marked slowdown in price growth may trigger a more meaningful run at the 1.1100 handle as it dampens bets for higher interest rates.

How To Trade This Event Risk

Bullish CAD Trade: Core Inflation Expands 1.9% 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: CPI Report Falls Short of Market Forecast

• 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: 1.1000 (38.2% retracement) to 1.1020 (23.6% retracement)
• Interim Support: 1.0820 (61.8% retracement) to 1.0830 (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)
JUN 2014	07/18/2014 12:30 GMT	2.3%	2.4%	-25	-31

June 2014 Canada Consumer Price Index (CPI)

USDCAD M5 : 46 pips price movement by CAD - CPI news event :

The annualized inflation rate hit a two-year high of 2.4%, beating an average estimate of 2.3%. The core Consumer Price Index (CPI) reading also exceeded market forecast and climbed 1.8% after expanding 1.7% in May. Bank of Canada Governor Stephen Poloz stressed that the faster rate of price growth was mainly due to transitory factors, including energy and import costs, and expects inflation to slow over the next two years as the central bank retains a “neutral” view for monetary policy. The Canadian dollar jumped following the better-than-expected print, with USD/CAD dipping below the 1.0710 handle. After a quick comeback, the pair moved sideways during the rest of the North American trade and closed at 1.0727.

--- Written by David Song, Currency Analyst and Shuyang Ren


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