3 Attachment(s)
EUR/USD to Face Larger Rebound on Dismal ISM Manufacturing
- U.S. ISM Manufacturing Survey Expected to Fall Back from Highest Reading Since March 2011.
- Even Though Employment Component Narrowed in August, Still Marked the Second-Highest Print for 2014.
Trading the News: U.S. ISM Manufacturing
A downtick in the ISM Manufacturing survey may generate a bearish dollar reaction (bullish EUR/USD) should the data print dampen the outlook for growth and inflation.
What’s Expected:
Attachment 9915
Why Is This Event Important:
At the same time, we will need to keep a close eye on the employment component as the highly anticipated Non-Farm Payrolls (NFP) report is expected to show the U.S. economy adding another 217K jobs in September, and a material downward revision in the key metrics may undermine the bullish sentiment surrounding the greenback as it drags on interest rate expectations.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Chicago Fed National Activity Index (AUG) |
0.33 |
-0.21 |
| Industrial Production (MoM) (AUG) |
0.3% |
-0.1% |
| Manufacturing Production (SIC) (AUG) |
0.1% |
-0.4% |
The dollar may face a near-term correction should the ongoing slack in the real economy spur a marked slowdown in manufacturing, and a dismal ISM print may prompt the Fed to further delay its normalization cycle as Chair Janet Yellen remains reluctant to move away from the zero-interest rate policy (ZIRP).
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Personal Spending (AUG) |
0.4% |
0.5% |
| Advance Retail Sales (MoM) (AUG) |
0.6% |
0.6% |
| Consumer Credit (JUL) |
$17.350B |
$26.006B |
Nevertheless, the resilience in private sector consumption may foster another unexpected uptick in the manufacturing survey, and a better-than-expected release may heighten the bullish sentiment surrounding the dollar as it raises the Fed’s scope to implement a rate hike sooner rather than later.
How To Trade This Event Risk
Bearish USD Trade: ISM Survey Narrows to 58.5 or Lower
- Need to see green, five-minute candle following the release to consider a long trade on EURUSD
- If market reaction favors a bearish dollar trade, buy EURUSD 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 USD Trade: Manufacturing Unexpectedly Tops Market Forecast for Second Month
- Need green, five-minute candle to favor a short EURUSD trade
- Implement same setup as the bearish dollar trade, just in the opposite direction
Potential Price Targets For The Release
EUR/USD Daily
Attachment 9914
- Remains vulnerable to a further decline as near-term bearish RSI momentum remains in play
- Interim Resistance: 1.3010 (50.0% retracement) to 1.3020 (23.6% expansion)
- Interim Support: 1.2450 (78.6% retracement) to 1.2500 pivot
Impact that the U.S. ISM Manufacturing 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) |
AUG
2014 |
9/02/2014 14:00 GMT |
57.0 |
59.0 |
-4 |
-2 |
August 2014 U.S. ISM Manufacturing
EURUSD M5 : 10 pips price movement by USD - ISM Manufacturing PMI news event:
Attachment 9916
Manufacturing activity in the U.S. unexpectedly picked up in August as the ISM survey rose to 59.0 from July’s 57.1 print; reaching the highest level since March 2011. The expansion was fueled by a surge in orders for plastics and metals, and highlights the scope for a stronger U.S. recovery in the second half of the year. The market reaction to the positive ISM print was limited and short-lived as the EUR/USD chopped around 1.3128, with the pair closing the day at 1.3122.
--- Written by David Song, Currency Analyst and Shuyang Ren
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3 Attachment(s)
Bearish EUR/USD Outlook Vulnerable If ECB Attempts to Buy Time
- European Central Bank (ECB) to Announce Further Details Surrounding Non-Standard Measures.
- Will ECB President Mario Draghi Talk Down the Euro?
Trading the News: European Central Bank (ECB) Interest Rate Decision
Further details surrounding the European Central Bank’s (ECB) asset-back securities (ABS) and covered-bond purchase program may heighten the bearish sentiment surrounding the Euro, but we may see a relief rally in the EUR/USD should the Governing Council use the interest rate decision as an attempt to buy more time.
What’s Expected:
Attachment 9929
Why Is This Event Important:
The ECB may refrain from addressing the unanswered questions surrounding the non-standard measures as President Mario Draghi waits for the results of the second targeted long-term refinancing operation (T-LTRO), and the EUR/USD may face a near-term correction should the fresh developments dampen bets for more easing.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Consumer Price Index Core (YoY) (SEP A) |
0.9% |
0.7% |
| Markit Purchasing Manager Index Composite (SEP P) |
52.5 |
52.3 |
| Gross Domestic Product (2Q A) |
0.1% |
0.0% |
The ECB may sound increasingly dovish amid the growth threat for deflation, and the EUR/USD may face a further decline should the council keep the door open for more non-standard measures, which may quantitative easing (QE).
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Employment (QoQ) (2Q) |
-- |
0.2% |
| Industrial Production s.a. (MoM) (JUL) |
0.7% |
1.0% |
| Household Consumption (QoQ) (2Q) |
0.4% |
-0.3% |
Nevertheless, the ECB may scale back its dovish outlook amid the improvements in the monetary union, and the Euro may face a near-term bounce should the central bank adopt a wait-and-see approach.
How To Trade This Event Risk
Bearish EUR Trade: ECB Keeps Door Open for More Non-Standard Measures
- Need red, five-minute candle following the updated foreward-guidance to consider a short EUR/USD trade
- If market reaction favors a short Euro trade, sell EUR/USD with two separate position
- Set stop at the near-by swing high/reasonable distance from cost; at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is met, set reasonable limit
Bullish EUR Trade: Governing Council Tries to Buy More Time
- Need green, five-minute candle to favor a long EUR/USD trade
- Implement same strategy as the bearish euro trade, just in the opposite direction
Potential Price Targets For The Release
EUR/USD Daily
Attachment 9927
Attachment 9928
- DailyFX Speculative Sentiment Index (SSI) shows retail crowd remains net-short the dollar, with the EUR/USD ratio current sitting at +1.34.
- Interim Resistance: 1.3010 (50.0% retracement) to 1.3020 (23.6% expansion)
- Interim Support: 1.2450 (78.6% retracement) to 1.2500 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) |
| SEP 2014 |
09/04/2014 11:45 GMT |
0.15% |
0.05% |
-107 |
-197 |
The European Central Bank unexpectedly cut the benchmark interest rate to fresh record low of 0.05% as the downside risks surrounding the growth outlook raises the threat for deflation. The Governing Council also laid out an asset-backed securities (ABS) purchasing plan to further boost private-sector lending, with details to be disclosed at the October 2 policy meeting. As a result, it seems as though the Euro will face additional headwinds over the near to medium-term as the ECB continues to push monetary policy into unchartered territory. The EUR/USD plummeted following the new wave of monetary support, with the pair dropping over 100 pips during the North American trade, but we saw a minor bounce going in the close as the euro-dollar ended the day at 1.2932.
--- Written by David Song, Currency Analyst and Shuyang Ren
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2 Attachment(s)
EUR/USD Rebound to Fizzle on Strong NFP- False RSI Break?
- U.S. Non-Farm Payrolls (NFP) to Pick Up From Lowest Print Since .
- Jobless Rate to Hold at 6.1% for Second Consecutive Month.
Trading the News: U.S. Non-Farm Payrolls
A pickup in U.S. Non-Farm Payrolls (NFP) may spur a further decline in the EUR/USD as the Federal Reserve is widely expected to halt its quantitative easing (QE) program at the October 29 policy meeting.
What’s Expected:
Attachment 9957
Why Is This Event Important:
The deviation in the policy outlook certainly casts a long-term bearish outlook for the EUR/USD, but a further slowdown in job growth may generate a larger pullback in the dollar as it would allow the Federal Open Market Committee (FOMC) to further delay the normalization cycle.
Expectations: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Challenger Job Cuts (YoY) (SEP) |
-- |
-24.4% |
| ADP Employment Change (SEP) |
205K |
213K |
| Gross Domestic Product (Annualized) (2Q F) |
4.6% |
4.6% |
The ongoing decline in planned job-cuts along with the pickup in private sector activity may spur a meaningful uptick in job growth, and a positive print may spur another round of dollar strength as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Construction Spending (MoM) (AUG) |
0.5% |
-0.8% |
| Pending Home Sales (MoM) (AUG) |
-0.5% |
-1.0% |
| Building Permits (MoM) (AUG) |
-1.6% |
-5.6% |
However, the slowdown in building activity paired with the persistent weakness in the housing market may drag on hiring, and another disappointing employment report may trigger a near-term decline in the greenback as it dampens bets of seeing the Fed normalize policy sooner rather than later.
How To Trade This Event Risk
Bullish USD Trade: Job & Wage Growth Picks Up
- Need red, five-minute candle following the release to consider a short trade on EUR/USD
- If market reaction favors a long dollar position, 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: NFPs Disappoint for Third Consecutive Month
- 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
Attachment 9956
- As Relative Strength Index (RSI) comes off of oversold territory, break of near-term bearish momentum should highlight a larger topside correction.
- Interim Resistance: 1.3010 (50.0% retracement) to 1.3020 (23.6% expansion)
- Interim Support: 1.2450 (78.6% retracement) to 1.2500 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) |
| AUG 2014 |
09/05/2014 12:30 GMT |
230K |
142K |
+15 |
+3 |
U.S. Non-Farm Payrolls (NFP) advanced only 142K in August to mark the slowest pace of growth for 2014 after climbing a revised 212K the preceding month. The jobless rate declined as expected to an annualized 6.1% from the prior month’s 6.2% as discouraged workers left the labor force, with participation rate slipping to 62.8% from 62.9%. The slowing recovery in employment may dampen the Fed’s scope to normalize policy sooner rather than later as Chair Janet Yellen remains in to rush to remove the zero-interest rate policy (ZIRP). The lower-than expected print dragged on the greenback, with the EUR/USD rising 28 pips right after the release to mark a fresh session high of 1.2988. However, the reaction was short-lived, with the pair consolidating during the rest of the North America trade to close at 1.2950.
--- Written by David Song, Currency Analyst and Shuyang Ren
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2 Attachment(s)
USD/CAD to Eye Opening Monthly Range on Strong Canada Employment
- Canada Employment to Increase for Fifth Month in 2014.
- Jobless Rate to Hold at Annualized 7.0% for Third Consecutive Month.
Trading the News: Canada Net Change in Employment
The USD/CAD may face a larger pullback going into the end of the week should Canada’s Employment report show a meaningful rebound in job growth and fuel interest rate expectations.
What’s Expected:
Attachment 10118
Why Is This Event Important:
An upbeat employment print may put increased pressure on the Bank of Canada (BoC) to further normalize monetary policy, but we would need to see a material shift in the forward-guidance to adopt a bullish outlook for the Canadian dollar as Governor Stephen Poloz continues to endorse a period of interest rate stability.
Expectations: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Ivey Purchasing Manager Index s.a. (SEP) |
52.5 |
58.6 |
| Raw Material Price Index (MoM) (AUG) |
-1.5% |
-2.2% |
| Gross Domestic Product (Annualized) (2Q) |
2.7% |
3.1% |
Easing input costs along with the pickup in private sector activity may generate a strong pickup in job growth, and a positive print may threaten the opening monthly range in the USD/CAD as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| International Merchandise Trade (AUG) |
1.60B |
-0.61B |
| Retail Sales (MoM) (JUL) |
0.5% |
-0.1% |
| Wholesale Trade Sales (MoM) (JUL) |
0.8% |
-0.3% |
However, weakening demand at home and abroad may drag on employment, and a dismal development may heighten the bullish sentiment surrounding the USD/CAD as it gives the BoC greater scope to retain its current policy for an extended period of time.
How To Trade This Event Risk
Bullish CAD Trade: Canada Adds 20.0K or More Jobs
- Need red, five-minute candle following the report for a potential short USD/CAD trade
- If market reaction favors a long loonie trade, sell USD/CAD 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 breakeven on remaining position once initial target is met, set reasonable limit
Bearish CAD Trade: Employment Report Disappoints
- Need green, five-minute candle to consider a long USD/CAD position
- Carry out the same setup as the bullish Canadian dollar trade, just in the opposite direction
Potential Price Targets For The Release
Attachment 10119
- Will favor topside targets as inverse head-and-shoulders remains in play & RSI retains bullish momentum
- Interim Resistance: 1.1300 pivot to 1.1320 (61.8% expansion)
- Interim Support: 1.1050 (61.8% expansion) to 1.1065 (23.6% expansion)
Impact that Canada Employment Change has had on CAD during the last release
| Period |
Data Released |
Estimate |
Actual |
Pips Change
(1 Hour post event ) |
Pips Change
(End of Day post event) |
| AUG 2014 |
09/05/2014 12:30 GMT |
10.0K |
-11.0K |
+12 |
+8 |
The Canada employment report disappointed, with the region shedding 11.0K jobs in August after adding 41.7K the month prior. Despite a downtick in the participation rate to 66.0% from 66.1%, the unemployment rate held steady at an annualized 7.0% for the second consecutive month. As a result, it seems as though the Bank of Canada will retain its neutral tone for monetary policy and keep the benchmark interest rate at 1.00% throughout the remainder of the year in an effort to encourage a more robust recovery. The reaction to the dismal reading was short-lived as the USD/CAD chopped around the 1.0880 level during the North America trade, with the pair closing at 1.0879.
--- Written by David Song, Currency Analyst and Shuyang Ren
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2 Attachment(s)
USD/CAD to Eye Fresh Highs on Marked Slowdown in Canada CPI
- Canada Consumer Price Index (CPI) to Slow After Holding at 2.1% for Last Two-Months.
- Core Inflation to Retain the Fastest Pace of Growth Since April 2012.
Trading the News: Canada Consumer Price Index (CPI)
A slowdown in Canada’s Consumer Price Index (CPI) may generate a further advance in USD/CAD as it gives the Bank of Canada (BoC) greater scope to retain its current policy throughout the remainder of 2014.
What’s Expected:
Attachment 10259
Why Is This Event Important:
However, the stickiness in core inflation may heighten the appeal of the loonie as it puts increased pressure on central bank Governor Stephen Poloz to adopt a more hawkish tone for monetary policy, and the USD/CAD may face a larger pullback ahead of the October 22 policy meeting should the report boost interest rate expectations.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Raw Materials Price Index (MoM) (AUG) |
-1.5% |
-2.2% |
| Gross Domestic Product (MoM) (JUL) |
0.3% |
0.0% |
| Retail Sales (MoM) (JUL) |
0.5% |
-0.1% |
Easing input costs along with the slowdown in private consumption may generate a marked slowdown in price growth, and a dismal CPI print may generate fresh monthly highs in USD/CAD as market participants scale back bets for higher borrowing costs.
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Business Outlook Future Sales (3Q) |
28.00 |
35.00 |
| New Housing Price Index (YoY) (AUG) |
1.5% |
1.5% |
| Average Weekly Earnings (YoY) (JUL) |
-- |
3.3% |
However, higher wage growth paired with expectations for a faster recovery may boost price pressures in Canada, and a strong inflation reading should spur a bullish reaction in the Canadian dollar as it raises the BoC’s scope to further normalize monetary policy.
How To Trade This Event Risk
Bearish CAD Trade: Headline & Core Inflation Slows in September
- Need green, five-minute candle following a dismal CPI report to consider long USD/CAD entry
- If the market reaction favors a bearish Canadian dollar trade, establish long with two position
- Set stop at the near-by swing low/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
Bullish CAD Trade: Consumer Price Report Tops Market Expectations
- Need red, five-minute candle following the release to look at a short USD/CAD trade
- Carry out the same setup as the bearish loonie trade, just in the opposite direction
Potential Price Targets For The Release
USD/CAD Daily Chart
Attachment 10256
- Bearish RSI break may undermine inverse head-and-shoulders pattern; will stay constructive as long as USD/CAD holds above the August low (1.0809).
- Interim Resistance: 1.1380 (78.6% expansion) to 1.1400 Pivot
- Interim Support: 1.0830 (61.8% retracement) to 1.0850 (38.2% 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) |
AUG
2014 |
09/19/2014 12:30 GMT |
2.1% |
2.1% |
-58 |
-20 |
Canada’s Consumer Price Index (CPI) held steady at an annualized rate of 2.1% in August, while the core CPI unexpectedly increased to 2.1% from 1.7% in July, marking the highest reading since May 2012. Though the rise in core inflation may put increased pressure on the Bank of Canada (BoC) to raise the benchmark interest rate, it seems as though the central bank will retain its neutral tone for some time as the fundamental outlook remains clouded by the weakness in global growth. The better-than-expected core inflation print propped up the Canadian dollar, with the USD/CAD dipping below 1.0900 following the release, but the loonie struggled to hold the gains during the North America trade as it closed at 1.0957.
--- Written by David Song, Currency Analyst and Shuyang Ren
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4 Attachment(s)
EUR/USD Risks Larger Rebound on Slowing U.S. Inflation (CPI)
- U.S. Consumer Price Index (CPI) to Slow for Third Consecutive Month.
- Core Rate of Inflation to Hold at Annualized 1.7% for Second Month.
Trading the News: U.S. Consumer Price Index (CPI)
A further slowdown in the U.S. Consumer Price Index (CPI) may spark a bearish dollar reaction (bullish EUR/USD) as the majority of the Federal Open Market Committee (FOMC) remain in no rush to normalize monetary policy.
What’s Expected:
Attachment 10324
Why Is This Event Important:
Even though the Fed is widely expected to conclude its quantitative easing (QE) program at the October 29 meeting, subdued price growth may encourage the FOMC to retain the zero-interest rate policy (ZIRP) for an extended period of time in order to promote a stronger recovery.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Advance Retail Sales (MoM) (SEP) |
-0.1% |
-0.3% |
| Producer Price Index (YoY) (SEP) |
1.8% |
1.6% |
| Durable Goods Orders (AUG) |
-18.0% |
-18.2% |
Easing input costs along with the slowdown in private-sector consumption may spur a weak CPI print, and the EUR/USD may face a larger correction over the near-term should the fundamental development drag on interest rate expectations.
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Non-Farm Payrolls (SEP) |
215K |
248K |
| Personal Income (AUG) |
0.3% |
0.3% |
| Gross Domestic Product (QoQ) (Annualized) (2Q F) |
4.6% |
4.6% |
Nevertheless, the ongoing recovery in the labor market paired with the pickup in economic activity may show an unexpected uptick in price growth, and a stronger-than-expected inflation report may generate another wave of USD strength as market participants boost bets for higher borrowing costs.
How To Trade This Event Risk
Bearish USD Trade: Headline & Core Inflation Continue to Undershoot
- Need to see green, five-minute candle following the release to consider a long trade on EURUSD
- If market reaction favors a bearish dollar trade, buy EURUSD 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 USD Trade: Price Growth Tops Market Expectations & Boosts Rate Expectations
- Need green, five-minute candle to favor a short EURUSD trade
- Implement same setup as the bearish dollar trade, just in the opposite direction
Potential Price Targets For The Release
EUR/USD Daily Chart
Attachment 10321
EUR/USD Monthly Chart
Attachment 10322
- Failure to retain the bullish RSI momentum raises the risk for a further decline in EUR/USD.
- Interim Resistance: 1.2900 (61.8% retracement) to 1.2940 (38.2% expansion)
- Interim Support: 1.2460 (78.6% retracement) to 1.2500 Pivot
Impact that the U.S. ISM Manufacturing 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) |
AUG
2014 |
9/17/2014 12:30 GMT |
1.9% |
1.7% |
+1 |
-93 |
August 2014 U.S. Consumer Price Index
EURUSD M5 : 24 pips price movement by USD - CPI news event
Attachment 10323
The U.S. Consumer Price Index (CPI) slowed more-than-expected in August, with the headline reading slipping to 1.7% from 2.0% in July, while the core rate of inflation unexpectedly narrowed to 1.7% to mark the slowest pace of growth since March. Even though the Fed argues inflation expectations remain firmly anchored, subdued price growth may continue to delay the normalization cycle as Chair Janet Yellen remains in no rush to abandon the zero-interest rate policy (ZIRP). Despite the limited market reaction to the weak CPI print, the greenback regained its footing during the North America trade, with the EUR/USD dipping below the 1.2850 region and closing the day at 1.2864.
--- Written by David Song, Currency Analyst and Shuyang Ren
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2 Attachment(s)
GBP/USD at Risk for Fresh Monthly Lows on Slowing U.K. GDP
- 3Q U.K. GDP of 0.7% Would Mark the Slowest Rate of Growth Since 4Q 2013.
- Slower Economic Recovery Likely to Further Delay the BoE’s Normalization Cycle.
Trading the News: U.K. Gross Domestic Product (GDP)
The U.K.’s 3Q Gross Domestic Product (GDP) report may spur a lower-low in GBP/USD should the advance reading drag on interest rate expectations.
What’s Expected:
Attachment 10376
Why Is This Event Important:
A marked slowdown in the U.K. economy may continue to spur a 7-2 split within the Monetary Policy Committee (MPC) as Governor Mark Carney remains in no rush to normalize monetary policy, and the GBP/USD may face a further decline over the remainder of the year as the Fed prepares to exit it easing cycle.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Retail Sales ex Auto (MoM) (SEP) |
0.0% |
-0.3% |
| Industrial Production (MoM) (AUG) |
0.0% |
0.0% |
| CBI Business Optimism (OCT) |
15 |
8 |
Lower business outputs paired with the slowdown in private-sector consumption may dampen bets of seeing a stronger recovery in the U.K., and a dismal 3Q GDP print may trigger fresh monthly lows in the GBP/USD especially as the BoE retains a rather neutral tone for monetary policy.
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| ILO Unemployment Rate (3M) (AUG) |
6.1% |
6.0% |
| Markit Purchasing Manager Index- Construction (SEP) |
63.5 |
64.2 |
| NIESR GDP Estimate (SEP) |
-- |
0.7% |
Nevertheless, the expansion in building activity along with the ongoing improvement in the labor market may pave the way for a better-than-expected growth report, and a positive development may spur a larger dissent within the BoE as the fundamental outlook for the U.K. improves.
How To Trade This Event Risk
Bearish GBP Trade: U.K. GDP Slows to 0.7% or Lower
- Need red, five-minute candle following the GDP print to consider a short British Pound trade
- If market reaction favors bearish sterling trade, 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: 3Q Growth Rate 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 Chart
Attachment 10375
- Despite the string of lower-highs, need a break of the bullish RSI momentum to favor fresh lows.
- Interim Resistance: 1.6280 (38.2% retracement) to 1.6300 (50.0% retracement)
- Interim Support: 1.5890 (61.8% retracement) to 1.5900 (50.0% expansion)
Impact that the U.K. GDP 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) |
| 2Q 2014 |
07/25/2014 8:30 GMT |
0.8% |
0.8% |
-5 |
+1 |
As expected, the U.K. economy expanded another 0.8% in the second quarter of 2014 following the 0.8% rate of growth in the first three months of the year. The lackluster recovery in the U.K. may continue to drag on interest rate expectations as the Bank of England (BoE) remains in no rush to normalize monetary policy, and the British Pound may face additional headwinds over the rest of the year should the central bank scale back its willingness to raise the benchmark interest rate off of the record-low. The initial reaction was largely mixed as the GBP/USD quickly fell back from the 1.6990 region, and the pair continued to consolidate throughout the North American trade as it ended the day at 1.6974.
--- Written by David Song, Currency Analyst and Shuyang Ren
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2 Attachment(s)
GDP increased by 0.7% in Q3 2014 compared with Q2 2014
Quote:
Originally Posted by
TheNews
- 3Q U.K. GDP of 0.7% Would Mark the Slowest Rate of Growth Since 4Q 2013.
- Slower Economic Recovery Likely to Further Delay the BoE’s Normalization Cycle.
Trading the News: U.K. Gross Domestic Product (GDP)
The U.K.’s 3Q Gross Domestic Product (GDP) report may spur a lower-low in GBP/USD should the advance reading drag on interest rate expectations.
What’s Expected:
Attachment 10376
Why Is This Event Important:
A marked slowdown in the U.K. economy may continue to spur a 7-2 split within the Monetary Policy Committee (MPC) as Governor Mark Carney remains in no rush to normalize monetary policy, and the GBP/USD may face a further decline over the remainder of the year as the Fed prepares to exit it easing cycle.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Retail Sales ex Auto (MoM) (SEP) |
0.0% |
-0.3% |
| Industrial Production (MoM) (AUG) |
0.0% |
0.0% |
| CBI Business Optimism (OCT) |
15 |
8 |
Lower business outputs paired with the slowdown in private-sector consumption may dampen bets of seeing a stronger recovery in the U.K., and a dismal 3Q GDP print may trigger fresh monthly lows in the GBP/USD especially as the BoE retains a rather neutral tone for monetary policy.
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| ILO Unemployment Rate (3M) (AUG) |
6.1% |
6.0% |
| Markit Purchasing Manager Index- Construction (SEP) |
63.5 |
64.2 |
| NIESR GDP Estimate (SEP) |
-- |
0.7% |
Nevertheless, the expansion in building activity along with the ongoing improvement in the labor market may pave the way for a better-than-expected growth report, and a positive development may spur a larger dissent within the BoE as the fundamental outlook for the U.K. improves.
How To Trade This Event Risk
Bearish GBP Trade: U.K. GDP Slows to 0.7% or Lower
- Need red, five-minute candle following the GDP print to consider a short British Pound trade
- If market reaction favors bearish sterling trade, 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: 3Q Growth Rate 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 Chart
Attachment 10375
- Despite the string of lower-highs, need a break of the bullish RSI momentum to favor fresh lows.
- Interim Resistance: 1.6280 (38.2% retracement) to 1.6300 (50.0% retracement)
- Interim Support: 1.5890 (61.8% retracement) to 1.5900 (50.0% expansion)
Impact that the U.K. GDP 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) |
| 2Q 2014 |
07/25/2014 8:30 GMT |
0.8% |
0.8% |
-5 |
+1 |
As expected, the U.K. economy expanded another 0.8% in the second quarter of 2014 following the 0.8% rate of growth in the first three months of the year. The lackluster recovery in the U.K. may continue to drag on interest rate expectations as the Bank of England (BoE) remains in no rush to normalize monetary policy, and the British Pound may face additional headwinds over the rest of the year should the central bank scale back its willingness to raise the benchmark interest rate off of the record-low. The initial reaction was largely mixed as the GBP/USD quickly fell back from the 1.6990 region, and the pair continued to consolidate throughout the North American trade as it ended the day at 1.6974.
--- Written by David Song, Currency Analyst and Shuyang Ren
More...
GDP increased by 0.7% in Q3 2014 compared with Q2 2014
Attachment 10389
GDP increased by 0.7% in the third quarter of 2014.The largest contribution to the increase came from the services sector, which increased by 0.7%.The increase in GDP followed growth of 0.9% in Q2 2014. In the latest quarter there were increases in all four main aggregates; output increased by 0.7% in services, 0.5% in production, 0.8% in construction and 0.3% in agriculture.
GDP was 3.0% higher in Q3 2014 compared with the same quarter a year ago.
GDP in the UK grew steadily during the 2000s until a financial market shock affected UK and global economic growth in 2008 and 2009. Economic growth resumed towards the end of 2009, but generally at a slower rate than the period prior to 2008. This growth was also erratic, with several quarters between 2010 and 2012 recording stagnant or declining GDP. This two-year period coincided with special events (severe winter weather in Q4 2010, the Diamond Jubilee in Q2 2012) that are likely to have affected growth. Since 2013, GDP has grown steadily, exceeding its pre-downturn peak in Q3 2013.
Industries have shown differing trends following the downturn. The construction and production industries were more acutely affected by the deterioration in economic conditions. Following the downturn, the services industries generally grew steadily, albeit slowly, with output exceeding its pre-downturn peak in Q3 2011.
GBPUSD M5: 45 pips price movement by GBP - GDP news event :
Attachment 10390
