Trading News Events

- U.S. Durable Goods Orders to Increase for Second Month.
- 7.1% Rise Would Mark Fastest Pace of Growth Since March 2011.

Trading the News: U.S. Durable Goods Orders

A 8.0% rise in demand for U.S. Durable Goods may spur a bullish reaction in the greenback (bearish EUR/USD) as it raises the scope for a stronger recovery in the second-half of 2014.

What’s Expected:

Why Is This Event Important:

It seems as though the Federal Open Market Committee (FOMC) is running out of arguments to retain its highly accommodative policy stance amid the ongoing improvements in the world’s largest economy, and the bullish sentiment surrounding the dollar may gather pace throughout the coming months should we see a growing number of central bank officials adopt a more hawkish tone for monetary policy.

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%
Consumer Confidence (JUL)	85.4	90.9

The pickup in household sentiment along with the resilience in private sector consumption may generate increased demand for U.S. Durable Goods, and a positive print may heighten the bullish sentiment surrounding the dollar as it raises the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Price Index Core (YoY) (JUL)	1.9%	1.9%
Consumer Credit (JUN)	$18.650B	$17.255B
Average Hourly Earnings (YoY) (JUL)	2.2%	2.0%

However, sticky inflation paired with subdued wage growth may drag on demand for large-ticket items, and a dismal development may serve as a fundamental catalyst to spur a larger correction in the reserve currency as it weighs on interest rate expectations.

How To Trade This Event Risk

Bullish USD Trade: Orders Increase 8.0% 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: Durable Goods Report 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

• Downside targets remain favored as long as RSI holds in oversold territory
• Interim Resistance: 1.3510 (38.2% expansion) to 1.3520 (38.2% retracement)
• Interim Support: 1.3140 (38.2% retracement) to 1.3150 Pivot

Impact that the U.S. Durable Goods 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)
JUN 2014	07/25/2014 12:30 GMT	0.5%	0.7%	- 4	- 8

June 2014 U.S. Durable Goods Orders
GBPUSD M5 : 15 pips price movement by USD - Durable Goods Orders news event

NZDUSD M5 : 12 pips price movement by USD - Durable Goods Orders news event

Orders for U.S. Durable Goods accelerated at a rate of 0.7% in June, exceeding estimates for 0.5% rise. The print was also much better than that in May, which showed a revised 1.0% contraction. The strength mainly came from increase in demand for commercial aircraft and machinery. However, the better-than-expected figure had a limited impact on the dollar. During the rest of the North America trade, the EUR/USD fluctuated around 1.3430 and closed at 1.3429.

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


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- Germany Unemployment to Contract for Second Consecutive Month.
- Jobless Rate to Hold at Annualized 6.7% for Six Straight Months.

Trading the News: German Unemployment Change

Germany’s Unemployment report may generate a more meaningful rebound in the EUR/USD should the data highlight an improved outlook the euro-area’s largest economy.

What’s Expected:

Why Is This Event Important:Despite fears of a slowing recovery in the monetary union, a further decline in unemployment may keep the European Central Bank (ECB) on the sidelines throughout the remainder of 2014, and a further improvement in the economic outlook may limit the downside risks for the EUR/USD as market participants scale back bets for more non-standard measures.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Markit Purchasing Manager Index Composite (AUG P)	54.6	54.9
Labor Costs s.a. (QoQ) (1Q)	--	0.4%
Private Consumption (1Q F)	0.6%	0.7%

Stronger consumption paired with the pickup in business outputs may generate a larger-than-expected decline in unemployment, and a positive development may encourage a more meaningful rebound in the EUR/USD as it gives the ECB greater scope to retain its current policy throughout the remainder of the year.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
IFO Business Climate (AUG)	107.0	106.3
Gross Domestic Product s.a. (QoQ) (2Q P)	-0.1%	-0.2%
Trade Balance (JUN)	18.9B	16.5B

However, the ongoing decline in business sentiment along with the weakening outlook for global trade may drag on the labor market, and an unexpected rise in unemployment may trigger a bearish reaction in the EUR/USD as it fuels bets for additional monetary support.

How To Trade This Event Risk

Bullish EUR Trade: German Unemployment Declines 5K or Greater

• Need red, green-minute candle following the print to consider a long EUR/USD position
• If market reaction favors a long Euro 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

Bullish EUR Trade: Labor Market Report Disappoints

• 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

• Despite the long-term bearish RSI momentum, may see a larger rebound as the oscillator rebounds from oversold territory.
• Interim Resistance: 1.3510 (38.2% expansion) to 1.3520 (38.2% retracement)
• Interim Support: 1.3140 (38.2% retracement) to 1.3150 Pivot

Impact that Germany’s Unemployment 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)
JUL 2014	07/31/2014 7:55 GMT	-5K	-12K		-3

Unemployment in German shrank by 12,000 in July, more than the average estimate for a 5,000 decline, while the jobless rate was unchanged at 6.6% as in June. However, the Euro fell against the US Dollar after the release, though the pair came back later during the North America trade. Despite the better-than-expected data, it seems as though one single good print may not be strong enough to shift the near-term outlook for the EUR/USD as it remains in a downward trend.

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


More...

- Euro-Zone Consumer Price Index (CPI) to Slow to 0.3%- Lowest Since October 2009
- Core Inflation to Hold Steady at 0.8% for Third Consecutive Month

Trading the News: Euro-Zone Consumer Price Index (CPI)

Another downside in the Euro-Zone’s Consumer Price Index (CPI) may heighten the bearish sentiment surrounding the EUR/USD as it puts increased pressure on the European Central Bank (ECB) to further embark on its easing cycle.

What’s Expected:

Why Is This Event Important:

ECB President Mario Draghi may show a greater willingness to implement more non-standard measures at the September 4th meeting should the CPI print show a larger threat for deflation, and the EUR/USD may continue to weaken throughout the second-half of 2014 as interest rate expectations deteriorate.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Markit Purchasing Manager Index Composite (AUG P)	53.4	52.8
Gross Domestic Product s.a. (QoQ) (2Q A)	0.1%	0.0%
Retail Sales (MoM) (JUN)	0.5%	0.4%

The slowdown in business outputs paired with the renewed weakness in private sector consumption may drag on price growth, and the growing risk for deflation may push the ECB to adopt more emergency measures in an effort to achieve its one and only mandate to deliver price stability.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Business Climate Indicator (AUG)	0.10	0.16
M3 Money Supply (YoY) (JUL)	1.5%	1.8%
Producer Price Index (MoM) (JUN)	0.0%	0.1%

The pickup in producer prices along with the expansion in the money supply may limit the downside risk for inflation, and a better-than-expected CPI print may encourage a more meaningful rebound in the EUR/USD as it gives the ECB greater scope to retain its current approach for monetary policy.

How To Trade This Event Risk

Bearish EUR Trade: Euro-Zone CPI Slips to 0.3% or Lower

• Need red, five-minute candle following the release to consider a short EUR/USD trade
• If market reaction favors selling Euro, short 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

Bullish EUR Trade: Headline Reading for Inflation Exceeds Market Forecast

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

Potential Price Targets For The Release
EUR/USD Daily

• Remains at Risk for Further Losses as Long as RSI Holds in Oversold Territory
• Interim Resistance: 1.3510 (38.2% expansion) to 1.3520 (38.2% retracement)
• Interim Support: 1.3140 (38.2% retracement) to 1.3150 Pivot

Impact that the Euro-Zone CPI report has had on EUR during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
JUL 2014	07/31/2014 9:00 GMT	0.4%	0.5%	-4	-4

The Euro-Zone Consumer Price Index (CPI) narrowed to an annualized rate of 0.4% from 0.5% the month prior, hitting a 5-year low. The print was also below the average estimate of 0.5%. Even though the core rate of inflation held steady at 0.8% for the second-month, price growth remains well below the ECB’s 2.0% target. Nevertheless, the ECB argued that lackluster print was attributed to volatile components, such as food and energy. However, there is no evidence that the inflation would pick up with the target soon, since ECB just announced a rate cut in June. The pair EUR/USD declined slowly after the release of the Eurozone CPI, but came back soon after and ended the day at 1.3386.

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


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Talking Points

• NFP Is a Highly Anticipated News Event
• Expectations are Set at 230k
• Traders Will Track the USD Based on Results

The release of the monthly Non-Farm Payroll figures is a highly anticipated moment for Forex traders. This is with good cause as the Non-Farm Payrolls, also known as NFP, has been historically known to produce volatility in the market place. As with other news releases on the economic calendar, traders will use this data to determine the strength or weakness of the underlying economy. NFP specifically looks at whether the US economy is expanding or contracting through new jobs being added to the labor force. With NFP set to be released this Friday at 8:30am ET,let’s take a momentto preview this week’s upcoming event.

First, NFP looks specifically at net changes in employment as jobs are created or subtracted in an economy in any given month. The term Non-Farm is used since farm / agricultural workers are not included in the employment count. The decision to not include agricultural jobs lies in these jobs being largely seasonal that could possibly produce small temporary shifts in labor reporting. Below we can see a composite of past NFP events from September 2012 through last month’s release. Through graphing we can see that employment figures have gradually been getting higher, after bottoming with the 2014 low of Just 84k new jobs reported in January.



To get an idea of what may be in store for this week’s NFP announcement, we can take a moment and review last month’s event. Below we can see a EURUSD 5 minute chart tracking price during the NFP news release. NFP numbers were expected to be released at 230k, meaning analysts expected 230,000 new jobs to be added to the economy. However, at the time of release the NFP number was issued lower than expected at 209k. Traders were left to react to this lower number with the market immediately reacting by selling off the US Dollar. After a few hours price action settled with the EURUSD increasing in value as much as 58 pips from the event low at 1.3189.

It should be noted that even though the news print was slightly lower than expected, traders generally took this data as USD positive. The August 1st high at 1.344, proved to be the monthly high for the EURUSD, with the USD rallying as much as 333 pips against the EUR through yesterday’s price action.

EURUSD August 2014 NFP Release



So what should traders look for this month, with NFP totals again being released on Friday the 5th? Expectations are set for 216k new jobs to be created. Taking a cue from last month’s report, if expectations are missed this could again lead to a selloff of the US Dollar across multiple currency pairs. However if NFP numbers are better than expected, or if the number is a narrow miss, traders may take this as a positive sign and look for the US Dollar to rally. Once a direction is established traders can then trade the news using the strategy of their choosing.

---Written by Walker England, Trading Instructor

More...

- U.S. Non-Farm Payrolls (NFP) to Increase 200+K for Seventh Consecutive Month.
- Would Match the Longest String of 200+K Prints Since 1997.

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

The EUR/USD may face a further decline over the next 24-hours of trade as the U.S. Non-Farm Payrolls (NFP) report is expected to show the world’s largest economy adding another 230K jobs in August while the jobless rate is expected to narrow to an annualized 6.1% from 6.2% the month prior.

What’s Expected:

Why Is This Event Important:

Signs of a more robust recovery may further boost interest rate expectations as the Federal Open Market Committee (FOMC) is expected to halt its asset-purchase program at the October 29 meeting, and the bullish sentiment surrounding the U.S dollar may gather pace throughout the remainder of the year as a growing number of central bank officials show a greater willing to normalize monetary policy sooner rather than later.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
ISM Non-Manufacturing- Employment (AUG)	--	57.1
ISM Manufacturing- Employment (AUG)	--	58.1
Gross Domestic Product (Annualized) (2Q S)	3.9%	4.2%

The pickup in economic activity paired with the highest ISM employment prints for 2014 may highlight a further expansion in job growth, and an above-forecast NFP figure may spur fresh monthly lows in the EUR/USD amid the deviation in the policy outlook.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Personal Spending (JUL)	0.2%	-0.1%
Durable Goods Orders ex Transportation (JUL)	0.5%	-0.8%
Advance Retail Sales (MoM) (JUL)	0.2%	0.0%

On the other hand, the recent slowdown in private-sector consumption - one of the leading drivers of growth - may generate another weaker-than-expect print, and a soft employment reading may spur a more meaningful pullback in the greenback as it dampens the outlook for the world’s largest economy.

How To Trade This Event Risk

Bullish USD Trade: NFPs Climb 230K or Greater While Jobless Rate Slips to 6.1% or Lower

• 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: Job Growth 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

• Downside targets remain favored as RSI pushes deeper into oversold territory.
• Interim Resistance: 1.3350 (61.8% expansion) to 1.3370 (50.0% retracement)
• Interim Support: 1.2870 (50.0% expansion) to 1.2900 (1.618% 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)
JUL 2014	8/01/2014 12:30 GMT	230K	209K	+ 24	+ 33

July 2014 U.S. Non-Farm Payrolls

EURUSD M5 : 44 pips price movement by USD - Non-Farm Payrolls news event:

AUDUSD M5 : 46 pips price movement by USD - Non-Farm Payrolls news event:

The U.S. economy added 209K jobs in July, following a revised 298K increase the month prior. The print was below the average estimate of 230K. The jobless rate unexpectedly rose to 6.2% from 6.1% in June as discouraged workers returned to the labor force. Nevertheless, the greenback lost ground following the below-forecast print, with the EUR/USD rallying to a high of 1.3443 going into the European close.

- RBNZ Expected to Retain Current Policy Amid Period of ‘Interest Rate Stability’.
- Will RBNZ Governor Graeme Wheeler Remove the Verbal Intervention on Kiwi?

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

According to a Bloomberg News survey, all of the 13 economist polled see the Reserve Bank of New Zealand (RBNZ) keeping the interest rate on hold at 3.50%, but the fresh batch of central bank rhetoric may produce increased volatility in the NZD/USD as market participants weigh the outlook for monetary policy.

What’s Expected:

Why Is This Event Important:

In light of the marked depreciation in the NZD/USD, the biggest risk for surprise will be a removal of the verbal intervention on the kiwi, and a further decline in the exchange rate may prompt Governor Graeme Wheeler to adopt a more hawkish tone for monetary policy as it fuels imported inflation.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Manufacturing Activity s.a. (QoQ) (2Q)	--	-1.9%
Employment Change (QoQ) (2Q)	0.7%	0.4%
Consumer Price Index (YoY) (2Q)	1.8%	1.6%

Below-target inflation along with the slowdown in employment may encourage the RBNZ to retain a period of ‘interest rate stability’ in New Zealand, and the fresh batch of central bank rhetoric may spur a further decline in the NZD/USD should it drag on interest rate expectations.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Value of All Buildings (YoY) (2Q)	0.0%	1.0%
Retail Sales ex Inflation (QoQ) (2Q)	1.0%	1.2%
Private Wages ex Overtime (QoQ) (2Q)	0.5%	0.6%

Nevertheless, the RBNZ may no longer jawbone the kiwi as the lower exchange rate raises the risk for imported inflation, and the NZD/USD may face a more meaningful rebound ahead of the next Fed meeting on September 17 should Governor Wheeler unexpectedly adopt a more hawkish tone for monetary policy.

How To Trade This Event Risk
Bearish NZD Trade: RBNZ Continues Talk Down Interest Rate Expectations

• Need red, five-minute candle following the statement to consider a short New Zealand dollar trade
• If market reaction favors selling kiwi, short NZD/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 NZD Trade: Governor Wheeler Removes Verbal Intervention

• Need green, five-minute candle to favor a long 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: 0.8430 (23.6% retracement) to 0.8450 (23.6% expansion)
• Interim Support: 0.8160 (100% expansion) to 0.8180 (38.2% 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)
JUL 2014	07/23/2014 21:00 GMT	3.50%	3.50%	-79	-114

As expected, the Reserve Bank of New Zealand (RBNZ) raised the Official Cash Rate (OCR) by another 25 pips to 3.50%, marking the fourth consecutive interest rate hike since March 2014. However, the RBNZ revised down the GDP forecast to 3.7% from 4% in June amid falling export prices of diary and timber, and went onto say that there will ‘be a period of assessment before interest rates adjust further towards a more-neutral level’. The NZD/USD was pulled down nearly 90 pips following the shift in the policy outlook, with the pair ending the day at 0.8584.

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


More...

- U.S. Advance Retail Sales to Increase for the Sixth Time in 2014.
- Rise of 0.6% Would Match Fastest Rate of Growth Since April.

Trading the News: U.S. Advance Retail Sales

The EUR/USD may face a further decline over the next 24-hours of trade should the U.S. Retail Sales report prop up interest rate expectations for the reserve currency.

What’s Expected:

Why Is This Event Important:

A marked picked up in private sector consumption may encourage the Federal Open Market Committee (FOMC) normalize monetary policy sooner rather than later, and we may see a growing number of central bank officials adopt a more hawkish tone for monetary policy as the board looks to conclude its asset-purchase program at the October 29 meeting.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Consumer Credit (JUL)	$17.350B	$26.006B
Average Hourly Earnings (YoY) (AUG)	2.1%	2.1%
Durable Goods Orders (JUL)	8.0%	22.6%

The expansion in private sector credit along with the uptick in wage growth may prompt a strong consumption reading for August, and a better-than-expected print may put increased downside pressure on the EUR/USD as it raises the outlook for growth and inflation.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Non-Farm Payrolls (AUG)	230K	142K
ADP Employment Change (AUG)	220K	204K
Personal Consumption Expenditure (PCE) Core (YoY) (JUL)	1.5%	1.5%

However, sticky inflation paired with the slowdown in job growth may drag on household spending, and a dismal Retail Sales figure may prompt a larger correction in the dollar as it limits the Fed’s scope to move away from the zero-interest rate policy (ZIRP) ahead of schedule.

How To Trade This Event Risk
Bullish USD Trade: U.S. Retail Sales Climb 0.6% or Greater

• 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: Household Consumption 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

• Will continue to favor downside targets as RSI holds in oversold territory & retains bearish momentum.
• Interim Resistance: 1.3220 (50.0% retracement) to 1.3230 (61.8% retracement)
• Interim Support: 1.2800 pivot to 1.2810 (61.8% expansion)

Impact that the U.S. Retail Sales 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)
JUL 2014	8/13/2014 12:30 GMT	0.2%	0.0%	+27	+3

July 2014 U.S. Advance Retail Sales
EURUSD M5 : 50 pips price movement by USD - Retail Sales news event

U.S. retail sales came in flat from June amid estimates of a 0.2% increase, largely drive by declines in Motor Vehicles, General Merchandise and Department Stores sales. The slowdown in consumption may indicate that the U.S. economy is expanding at a slow pace early on in the third quarter of 2014. The greenback weakened immediate following the dismal print, with the pair EUR/USD climbing above 1.3400, but the market reaction was short-lived as the pair ended the day at 1.3360, only 3 pips above the level prior to the release.

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



More...

- Federal Open Market Committee (FOMC) Widely Expected to Deliver Another $10B Taper
- Will There Be a Larger Dissent as the Fed Looks to End QE in October?

Trading the News: Federal Open Market Committee (FOMC) Interest Rate Decision

The Federal Open Market Committee (FOMC) interest rate decision may spur a bearish reaction in the dollar (bullish EUR/USD) if the central bank remains reluctant to move away from the zero-interest rate policy (ZIRP).
What’s Expected:

Why Is This Event Important:

Even though the Fed is widely expected to conclude its asset-purchase program at the October 29 meeting, we would need a more hawkish twist to the forward-guidance for monetary policy to favor further USD strength.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Non-Farm Payrolls (AUG)	230K	142K
New Home Sales (MoM) (JUN)	-5.8%	-8.1%
Housing Starts (MoM) (JUN)	1.9%	-9.3%

The dollar may come under pressure should we get more of the same from the Fed, and the greenback may face a larger correction over the remainder of the month should Chair Janet Yellen see greater scope to retain the highly accommodative policy stance for an extended period of time.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Average Hourly Earnings (YoY) (AUG)	2.1%	2.1%
Personal Consumption Expenditure Core (YoY) (JUL)	1.5%	1.5%
Consumer Price Index ex Food and Energy (YoY) (JUL)	1.9%	1.9%

Nevertheless, sticky inflation paired with the uptick in wage growth may spur a greater dissent within the committee and push the FOMC to lay out a more detailed exit strategy as the central bank looks to move away from its easing cycle.

How To Trade This Event Risk

Bearish USD Trade: FOMC Remains Reluctant to Normalize Monetary Policy

• Need green, five-minute candle following the policy statement to consider a long EUR/USD position
• If market reaction favors a bearish dollar 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

Bullish USD Trade: Policy Statement Shows Larger Dissent & Shift Away from ZIRP

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

Potential Price Targets For The Release
EUR/USD Daily

• Risks Larger Topside Correction as the Relative Strength Index (RSI) Threatens Bearish Momentum
• Interim Resistance: 1.2990 (23.6% retracement) to 1.3025 (23.6% expansion)
• Interim Support: 1.2858 (Monthly low) to 1.2870 (50.% expansion)

Impact that the FOMC 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)
JUL 2014	07/30/2014 18:00 GMT	0.25%	0.25%	+14	+20

July 2014 Federal Open Market Committee (FOMC) Interest Rate Decision
EURUSD M5 : 32 pips price movement by USD - Federal Funds Rate news event:

The Federal Open Market Committee (FOMC) voted to reduce its asset-purchase pace to $25B from $35B in July amid the sharp economic rebound in the second quarter. However, the Fed also highlighted the significant underutilization of labor resources and reiterated that it is appropriate to maintain the current fed fund rate for a considerable period of time even after the quantitative easing program ends. The Fed’s dovish tone dragged on the greenback, with EUR/USD climbing above 1.3400, but we saw limited follow-through behind the initial reaction as the pair ended the day at 1.3395.

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


More...

- New Zealand Trade Deficit of NZD1.125B Would Mark Largest Shortfall Since August 2013.
- Exports to Slow to NZD 3.20B- Lowest Since September 2010.

Trading the News: New Zealand Trade Balance

A marked expansion in New Zealand’s trade deficit may spark fresh monthly lows in the NZD/USD as it dampens the outlook for growth and inflation.

What’s Expected (MQ Metatrader 5 time as GMT+2):

Why Is This Event Important:

The weakening outlook for global trade may drag on interest rate expectations as the Reserve Bank of New Zealand (RBNZ) adopts a neutral tone for monetary policy, and Governor Graeme Wheeler may keep the cash rate on hold throughout the remainder of the year in an effort to combat the downside risk surrounding the real economy.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Manufacturing Activity s.a. (QoQ) (2Q)	--	-1.9%
ANZ Business Confidence (AUG)	--	36.6
Employment Change (QoQ) (2Q)	0.7%	0.4%

The trade report may highlight a weakening outlook for growth as business confidence deteriorates, and a marked expansion in the trade deficit may keep the RBNZ on the sidelines as the central bank continues to weigh the impact of the rate hikes from earlier this year.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product s.a. (QoQ) (2Q)	0.6%	0.7%
ANZ Commodity Price (AUG)	--	-3.3%
Terms of Trade Index (QoQ) (2Q)	-3.5%	0.3%

However, the improved terms of trade along withexpectations for a faster recovery may generate a better-than-expected print, and we may see central bank Governor Wheeler show a greater willingness to further normalize monetary policy should the data dampen the downside risks surrounding the New Zealand economy.

How To Trade This Event Risk

Bearish NZD Trade: Deficit Widens to NZD1.125B or Greater

• Need red, five-minute candle following the release to consider a short NZD/USD trade
• If market reaction favors a long dollar trade, short NZD/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

Bullish NZD Trade: Trade Balance Tops Market Expectations

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

Potential Price Targets For The Release
NZD/USD Daily

• May see the bearish trend continue to take shape should RSI dip back into oversold territory
• Interim Resistance: 0.8370 (38.2% expansion) to 0.8390 (38.2% retracement)
• Interim Support: 07970 (50.0% retracement) to 0.8000 pivot

Impact that New Zealand Trade Balance has had on NZD/USD during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
July 2014	08/25/2014 22:45 GMT	-475M	-692M	-10	+14

New Zealand’s trade balance showed a $692 million deficit in July after posting a $242 million surplus the month prior, with the region marking the first trade deficit in 11 months on the back of falling prices for dairy and forest product exports. The weakening outlook for global trade may continue to dampen the appeal of the New Zealand dollar as it limits the Reserve Bank of New Zealand’s (RBNZ) scope to normalize monetary policy at a more aggressive pace. Nevertheless, the impact of the disappointing print was limited and short-lived as the New Zealand dollar regained its strength following the Asian trade, with the NZDUSD closing the day at 0.8340.

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


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- Euro-Zone Consumer Price Index (CPI) to Mark the Slowest Pace of Growth Since October 2009.
- Core Inflation to Hold Steady at 0.9% for Second Straight Month.

Trading the News: Euro-Zone Consumer Price Index (CPI)

A further slowdown in the Euro-Zone’s Consumer Price Index (CPI) may prompt fresh monthly lows in the EUR/USD as it puts increased pressure on the European Central Bank (ECB) to implement more non-standard measures.

What’s Expected:

Why Is This Event Important:

The ECB may continue to push monetary policy into uncharted territory as the Governing Council struggles to achieve its one and only mandate to deliver price stability, and the bearish sentiment surrounding the Euro may gather pace throughout the remainder of the year amid the weakening outlook for growth and inflation.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Markit Purchasing Manager Index Composite (SEP P)	52.5	52.3
Producer Price Index (YoY) (JUL)	-1.1%	-1.1%
Gross Domestic Product s.a. (QoQ) (2Q A)	0.1%	0.0%

The persistent slack in the real economy may paint a weakened outlook for price growth, and a dismal CPI print may generate a bearish reaction in the EUR/USD should the report highlight a greater threat for deflation.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
M3 Money Supply (YoY) (AUG)	1.9%	2.0%
Employment (QoQ) (2Q)	--	0.2%
Household Consumption (QoQ) (2Q)	0.3%	0.3%

However, the unprecedented steps taken by the ECB may help to mitigate the downside risk for inflation, and a better-than-expected release may generate a more meaningful rebound in the Euro as it curbs bets of seeing a new wave of monetary support.

How To Trade This Event Risk

Bearish EUR Trade: Headline & Core CPI Highlight Greater Threat for Deflation

• Need red, five-minute candle following the release to consider a short EUR/USD trade
• If market reaction favors selling Euro, short 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

Bullish EUR Trade: Euro-Zone Inflation Tops Market Expectations

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

Potential Price Targets For The Release
EUR/USD Daily

• Downside targets remain favored as RSI retains bearish momentum & pushes deeper into oversold territory
• Interim Resistance: 1.3010 (50.0% retracement) to 1.3020 (23.6% expansion)
• Interim Support: 1.2590 (100% expansion) to 1.2600 pivot

Impact that the Euro-Zone CPI report has had on EUR during the last release

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
AUG 2014	08/29/2014 9:00 GMT	0.3%	0.3%		-44

August 2014 Euro-Zone Consumer Price Index (CPI)
EURUSD M5 : 17 pips price movement by EUR - CPI news event:

The Euro-Zone’s annualized Consumer Price Index (CPI) continued the downward trend and slipped to a 5-year low of 0.3% from 0.4% the month prior, while the core inflation rate unexpectedly rose 0.9% during the same period amid forecasts for a 0.8% print. The ongoing weakness in price growth may put increased pressure on the European Central Bank (ECB) to implement its own quantitative easing program amid the growing threat for deflation. Nevertheless, the initial reaction in the EUR/USD was short-lived as the pair consolidated around 1.3182 following the release, but the euro-dollar came under increased pressure during the North American trade as it ended the day at 1.3133.

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


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