2 Attachment(s)
ECB Preview: EUR/USD at Risk on More Aggressive ECB Easing Cycle
- European Central Bank (ECB) to Retain Current Policy Ahead of Next T-LTRO in December.
- Will ECB Expand the Scope & Attractiveness of Non-Standard Measures?
Trading the News: European Central Bank (ECB) Interest Rate Decision
The EUR/USD may face another selloff in the days ahead should the European Central Bank (ECB) adopt a more dovish tone and offer additional monetary support to prop up the ailing economy.
What’s Expected:
Attachment 10614
Why Is This Event Important:
The ECB may take a more aggressive approach in expanding its balance-sheet amid the growing threat for deflation, but we may see a relief rally in the EUR/USD should the Governing Council merely make an attempt to buy more time.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Retail Sales (MoM) (SEP) |
-0.8% |
-1.3% |
| Consumer Price Index Core (YoY) (OCT A) |
0.8% |
0.7% |
| Gross Domestic Product (2Q P) |
0.0% |
0.0% |
The ECB may expand the scope of its asset-purchase program to include a broader range of assets amid the weakening outlook for growth and inflation, and the bearish sentiment surrounding the EUR/USD looks poised to gather pace over the medium-term as the Governing Council further embarks on its easing cycle.
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Economic Confidence (OCT) |
99.7 |
100.7 |
| Construction Output (MoM) (AUG) |
-- |
1.5% |
| Trade Balance s.a. (AUG) |
13.3B |
15.8B |
Nevertheless, ECB President Mario Draghi may promote a wait-and-see approach as the central bank continues to assess the impact of the non-standard measures, and the Euro may face a more meaningful rebound in the days ahead if we see more of the same from the Governing Council’s October 2 meeting.
How To Trade This Event Risk
Bearish EUR Trade: Governing Council Shows Greater Willingness to Implement More Easing
- Need red, five-minute candle following the updated forward-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: ECB Attempts 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 Chart
Attachment 10613
- Despite the range-bound price action in EUR/USD, the long-term outlook remains bearish as the RSI retains the downward momentum carried over from the previous year.
- Interim Resistance: 1.2580 (78.6% retracement) to 1.2620 (50.0% expansion)
- Interim Support: 1.2450 (78.6% retracement) to 1.2470 (78.6% expansion)
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) |
| OCT 2014 |
10/02/2014 11:45 GMT |
0.05% |
0.05% |
+5 |
+20 |
The European Central Bank (ECB) kept the benchmark interest rate unchanged at the historical low of 0.05%, while unveiling the details of the asset purchase programme. The ECB would start with covered-bond purchases in late October, which will be followed by the asset-back securities (ABS) programme in December, with the non-standard measure largely aimed at mitigating the downside risk for growth and inflation. However, the ECB may sound increasingly dovish over the remainder of the year as the monetary union faces a growing risk of slipping back into recession. Nevertheless, the Euro gained following the initial announcement, with EUR/USD climbing above the 1.2675 region, but Euro struggled to hold its ground throughout the North American trade as the pair ended the day at 1.2654.
--- Written by David Song, Currency Analyst and Shuyang Ren
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4 Attachment(s)
EUR/USD Risks Fresh Monthly Lows on Strong Non-Farm Payrolls (NFP)
- U.S. Non-Farm Payrolls (NFP) to Expand 200+K for Eighth Time in 2014.
- Jobless Rate to Hold at 5.9% for Second Consecutive Month.
Trading the News: U.S. Non-Farm Payrolls
The U.S. Non-Farm Payrolls (NFP) report may generate a further decline in the EUR/USD as market participants anticipate a pickup in job growth.
What’s Expected:
Attachment 10631
Why Is This Event Important:
At the same time, Average Hourly Earnings are also expected to uptick to an annualized 2.1% from 2.0% in September, and stronger employment paired with growing wage pressures should heighten the bullish sentiment surrounding the greenback especially as the Federal Open Market Committee (FOMC) moves away from its easing cycle.
Expectations: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| ISM Non-Manufacturing Employment (OCT) |
-- |
59.6 |
| ADP Employment Change (OCT) |
220K |
230K |
| ISM Manufacturing Employment (OCT) |
-- |
55.5 |
Expectations for a faster recovery in the second-half of 2014 may spur a marked pickup in job/wage growth, and a positive employment report may spur fresh monthly lows in EUR/USD as puts increased pressure on the Fed to normalize monetary policy sooner rather than later.
Risk: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Factory Orders (SEP) |
-0.6% |
-0.6% |
| Construction Spending (MoM) (SEP) |
0.7% |
-0.4% |
| Durable Goods Orders (SEP) |
0.5% |
-1.3% |
However, easing demand paired with the slowdown in building activity may drag on the labor market, and a dismal NFP report may spur a relief rally in EUR/USD as it drags on interest rate expectations.
How To Trade This Event Risk
Bullish USD Trade: NFPs Exceed Market Expectations
- 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: Job/Wage Growth 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 Chart
Attachment 10630
- Will continue to look for lower highs/lows as the RSI retains the bearish momentum carried over from the end of 2013.
- Interim Resistance: 1.2580 (78.6% retracement) to 1.2625 (61.8% expansion)
- Interim Support: 1.2290 (100% expansion) to 1.2320 (38.2% 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) |
| SEP 2014 |
10/03/2014 12:30 GMT |
215K |
248K |
-76 |
-83 |
September 2014 U.S. Non-Farm Payrolls
EURUSD M5 : 68 pips price movement by USD - Non-Farm Employment Change news event :
Attachment 10632
GBPUSD M5 : 54 pips price movement by USD - Non-Farm Employment Change news event :
Attachment 10633
U.S. Non-Farm Payrolls (NFPs) increased 248K in September after expanding a revised 142K the month prior, while the jobless rate unexpectedly slipped to a six-year low of 5.9% from 6.1% in August. The uptick in hiring certainly highlights an improved outlook for the world’s largest economy, and the bullish sentiment surrounding the U.S. dollar may gather pace over the remainder of the year as the Fed is widely expected to halt its asset-purchase program at the October 29 meeting. Indeed, the better-than-expected prints spurred a bullish dollar reaction, with the EUR/USD slipping below the 1.2550 handle to hit a fresh yearly low of 1.2501.
--- Written by David Song, Currency Analyst and Shuyang Ren
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3 Attachment(s)
GBP/USD Rebound Vulnerable to Dovish BoE Inflation Report
- Bank of England (BoE) Widely Expected to Reduce Growth, Inflation Forecast.
- Will the BoE Inflation Report Drag on Interest-Rate Expectations?
Trading the News: Bank of England (BoE) Inflation Report
Trading the Bank of England (BoE) Inflation report may not be clear cut even with expectations for a downward revision in the central bank’s growth/inflation forecast as Governor Mark Carney continues to prepare U.K. households and businesses for higher borrowing-costs.
What’s Expected:
Attachment 10733
Attachment 10738
Why Is This Event Important:
The fresh batch of central bank rhetoric may continue to drag on interest rate expectations as the majority of the Monetary Policy Committee (MPC) remains in no rush to normalize monetary policy, but the BoE may stick to its current course to raise the benchmark interest rate in 2015 amid the ongoing recovery in the real economy.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Retail Sales ex Auto (MoM) (SEP) |
0.0% |
-0.3% |
| Consumer Price Index Core (YoY) (SEP) |
1.8% |
1.5% |
| Producer Price Index Core- Output n.s.a. (YoY) (SEP) |
0.9% |
0.8% |
Easing inflation along with the slowing consumption may encourage the BoE to adopt a more dovish tone for monetary policy, and GBP/USD may continue to carve lower highs & lows throughout the remainder of the year should the central bank scale back its willingness to remove the highly accommodative policy stance.
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Manufacturing Production (MoM) (SEP) |
0.3% |
0.4% |
| ILO Unemployment Rate (3M) (AUG) |
6.1% |
6.0% |
| Average Weekly Earnings ex. Bonus (AUG) |
0.8% |
0.9% |
However, the BoE may largely retain an upbeat view for the U.K. economy amid the rise in business outputs paired with the ongoing improvement in the labor market, and the British Pound may continue to pare the losses carried over from the previous month should the fresh batch of central bank commentary prop up interest rate expectations.
How To Trade This Event Risk
Bearish GBP Trade: Interest Rate Expectations Falter as BoE Cuts Economic Forecast
- 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: MPC Stays on Course to Raise Interest Rate in 2015
- 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 10734
- Downside targets remain favored as GBP/USD continues to carve lower-highs while RSI fails to establish bullish trend.
- Interim Resistance: 1.5980 (100% expansion) to 1.6000 (50.0% retracement)
- Interim Support: 1.5720 (61.8% retracement) to 1.5740 (38.2% 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) |
| AUG 2014 |
08/13/2014 9:30 GMT |
-- |
-- |
-80 |
-125 |
In the latest Inflation Report, the Bank of England (BoE) raised its 2014 growth forecast to 3.5% from 3.4%, but went onto say that now is not the time for a U.K. rate increase as the central bank slashes its wage growth outlook. Indeed, BoE Governor Mark Carney stated that the forward-guidance for monetary policy remains unchanged amid the reduction in spare capacity, but concerns over weak wage growth, muted exports and heightening geopolitical tensions may continue to dampen the appeal of the British Pound as it drags on interest rate expectations. The sterling tumbled lower on the back of the relative dovish BoE statement, with GBP/USD slipping below the 1.6700 handle during the North America trade to close at a low of 1.6678.
--- Written by David Song, Currency Analyst and Shuyang Ren
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2 Attachment(s)
EUR/USD to Face Larger Rebound on Upbeat 3Q GDP- 1.2600 on Tap?
- Euro-Zone Growth Rate to Rebound 0.1% in Third-Quarter.
- Will ECB Venture into QE as Weak Growth Raises Threat for Deflation?
Trading the News: Euro-Zone Gross Domestic Product (GDP)
The Euro-Zone’s 3Q Gross Domestic Product (GDP) report may generate a larger correction in EUR/USD as the monetary union is expected to return to growth after stagnating during the three-months through June.
What’s Expected:
Attachment 10758
Why Is This Event Important:
However, a rebound in the growth rate may do little to heighten the appeal of the single-currency as the European Central Bank (ECB) is widely expected to implement more non-standard measures in December, and the ongoing deviation in the policy outlook continues to foster a bearish outlook for EUR/USD as the Federal Reserve moves away from its easing cycle.
Expectations: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Economic Confidence (OCT) |
99.7 |
100.7 |
| Construction Output (MoM) (AUG) |
-- |
1.5% |
| Trade Balance s.a. (AUG) |
13.3B |
15.8B |
Improved confidence along with the pickup in building activity may generate a more meaningful rebound in the growth rate, and an upbeat GDP report may trigger a bullish reaction in the Euro as it dampens bets for QE in the euro-area.
Risk: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Retail Sales (MoM) (SEP) |
-0.8% |
-1.3% |
| Consumer Price Index Core (YoY) (OCT A) |
0.8% |
0.7% |
| Unemployment Rate (SEP) |
11.5% |
11.5% |
Nevertheless, high unemployment paired with the slowdown in private consumption may continue to drag on economic activity, and a dismal growth print may put increased pressure on the ECB to offer additional monetary support amid the growth threat for deflation.
How To Trade This Event Risk
Bullish EUR Trade: 3Q GDP Climbs 0.1% or Greater
- Need green, five-minute candle following a positive report to consider a long EUR/USD trade
- If market reaction favors a bullish 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
Bearish EUR Trade: Euro-Zone Fails to Grow & Spurs Bets for More ECB Support
- Need red, five-minute candle to favor a short EUR/USD trade
- Implement same strategy as the bullish euro trade, just in reverse
Potential Price Targets For The Release
EUR/USD Daily
Attachment 10759
- Long-term EUR/USD outlook remains bearish as RSI retains downward trend, but will watch former support for new resistance as the exchange rate continues to come off of channel support.
- Interim Resistance: 1.2600 pivot to 1.2620 (61.8% expansion)
- Interim Support: 1.2280 (100% expansion) to 1.2300 pivot
Impact that Euro-Zone GDP has had on EUR/USD during the last quarter
| Period |
Data Released |
Estimate |
Actual |
Pips Change
(1 Hour post event ) |
Pips Change
(End of Day post event) |
| 2Q A 2014 |
08/14/2014 09:00 GMT |
0.1% |
0.0% |
+18 |
+1 |
The euro-area economy failed to grow in the second quarter of 2014 following a 0.2% expansion during the first three-months of the year, raising the threat for deflation across the monetary union. The weaker-than-expected growth was mainly attributed to the economic contraction Germany, with Europe’s growth engine slowing for the first time since 1Q 2013. The lackluster recovery is likely to put increased pressure on the European Central Bank (ECB) to boost market liquidity especially as private-sector lending remains subdued. Despite missing market expectations, the EUR/USD climbed above the 1.3400 region during the European trade, but largely struggled to retain the gains as the pair closed at 1.3362.
--- Written by David Song, Currency Analyst and Shuyang Ren
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3 Attachment(s)
GBP/USD to Face Near-Term Rebound on Strong U.K. Core CPI
- U.K. Consumer Price Index (CPI) to Hold at Annualized 1.2% for Second-Month.
- Core Rate of Inflation to Rebound from Lowest Reading Since 2009.
Trading the News: U.K. Consumer Price Index
Beyond the headline reading for U.K. inflation, an uptick in the core Consumer Price Index (CPI) may generate a near-term rebound in GBP/USD as the Bank of England (BoE) largely remains on course to normalize monetary policy in 2015.
What’s Expected:
Attachment 10802
Why Is This Event Important:
Despite the downward revision to the BoE’s growth & inflation forecast, sticky price growth in the U.K. may spur a greater dissent within the Monetary Policy Committee (MPC), and it seems as though Governor Mark Carney will continue to prepare household & businesses for higher borrowing-costs as the economic recovery becomes more broad-based.
Expectations: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| Manufacturing Production (MoM) (SEP) |
0.3% |
0.4% |
| Jobless Claims Change (OCT) |
-20.0K |
-20.4K |
| Average Weekly Earnings ex Bonus (3MoY) SEP) |
1.1% |
1.3% |
Higher wage growth paired with the pickup in business outputs may generate a stronger-than-expected CPI print, and stick price pressures should help to improve the appeal of the sterling as it boosts interest rate expectations.
Risk: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| GfK Consumer Confidence (OCT) |
-1 |
-2 |
| Retail Sales ex Auto (MoM) (SEP) |
0.0% |
-0.3% |
| Producer Price Index- Input n.s.a. (YoY) (SEP) |
-0.3% |
-0.4% |
However, U.K. firms may continue to offer discounted prices amid falling input prices along with the slowdown in private-sector consumption, and a dismal inflation report may spur fresh monthly lows in GBP/USD as the Federal Reserve shows a greater willingness to normalize monetary policy in the year ahead.
How To Trade This Event Risk
Bullish GBP Trade: U.K. Core Inflation Rebounds in October
- 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
Bearish GBP Trade: CPI Report Falls Short of 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
Attachment 10801
- GBP/USD remains vulnerable to further losses as the RSI appears to be sliding back into oversold territory.
- Interim Resistance: 1.6000 (50.0% retracement) to 1.6020 pivot
- Interim Support: 1.5540 (61.8% expansion) to 1.5550 (78.6% retracement)
Impact that the U.K. CPI report has had on GBP during the last release
| Period |
Data Released |
Estimate |
Actual |
Pips Change
(1 Hour post event ) |
Pips Change
(End of Day post event) |
| SEP 2014 |
10/14/2014 8:30 GMT |
1.4% |
1.2% |
-49 |
-108 |
September 2014 U.K. Consumer Price Index
GBPUSD: 108 pips price movement by GBP - PPI news event
Attachment 10803
The U.K.’s Consumer Price Index (CPI) unexpectedly slipped to a five-year low of 1.2% in September, with the core rate of inflation also narrowing to an annualized 1.5% from 1.9% in August. Indeed, teasing price pressures may encourage the Bank of England (BoE) to retain its current policy throughout the remainder of the year, but it seems as though the central bank will stay on course to raise the benchmark interest rate in 2015 as Governor Mark Carney sees a sustainable recovery in the U.K. The sterling lost ground against its major counterparts following the release, with GBP/USD dipping back below the 1.6000 handle to end the day at 1.5907.
--- Written by David Song, Currency Analyst and Shuyang Ren
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3 Attachment(s)
EUR/USD to Press Fresh Monthly Highs on Lackluster U.S. CPI
- U.S. Consumer Price Index (CPI) to Slow for Fourth Time in 2014.
- Core Rate of Inflation to Hold at Annualized 1.7% for Third Month.
Trading the News: U.S. Consumer Price Index (CPI)
A downtick in the U.S. Consumer Price Index (CPI) may spark a more meaningful rebound in EUR/USD as it dampens the interest rate outlook for the world’s largest economy.
What’s Expected:
Attachment 10821
Why Is This Event Important:
It seems as though the Federal Open Market Committee (FOMC) is in no rush to normalize monetary policy as a growing number of central bank officials highlight the downside risk for inflation expectations, and a marked slowdown in price growth may undermine the bullish sentiment surrounding the greenback as central bank hawks Richard Fisher and Charles Plosser lose their vote in 2015.
Expectations: Bearish Argument/Scenario
| Release |
Expected |
Actual |
| Average Hourly Earnings (YoY) (OCT) |
2.1% |
2.0% |
| Personal Income (SEP) |
0.3% |
0.2% |
| ISM Non-Manufacturing (OCT) |
58.0 |
57.1 |
Subdued wages paired with the slowdown in service-based activity may drag on price growth, and a weaker-than-expected CPI print may trigger a larger rebound in EUR/USD as market participants scale back bets for higher borrowing costs in the U.S.
Risk: Bullish Argument/Scenario
| Release |
Expected |
Actual |
| U. of Michigan Confidence (NOV P) |
87.5 |
89.4 |
| NFIB Small Business Optimism (OCT) |
96.0 |
96.1 |
| Consumer Confidence (OCT) |
87.0 |
94.5 |
Nevertheless, the ongoing improvement in household and business confidence may stoke faster price growth, and a strong inflation report should boost the appeal of the greenback as it raises the Fed’s scope to normalize monetary policy sooner rather than later.
How To Trade This Event Risk
Bearish USD Trade: U.S. CPI Slows to Annualized 1.6% 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: Headline & Core Price Growth Exceed Market 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 10820
- With the break of the monthly opening range, will watch former support on EUR/USD for new resistance.
- Interim Resistance: 1.2610 (61.8% expansion) to 1.2620 (50% retracement)
- Interim Support: 1.2280 (100% expansion) to 1.2300 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) |
SEP
2014 |
10/22/2014 12:30 GMT |
1.6% |
1.7% |
-24 |
-59 |
September 2014 U.S. Consumer Price Index
EURUSD M5: 38 pips price movement by USD - CPI news event :
Attachment 10822
The U.S. Consumer Price Index (CPI) held steady at an annualized rate of 1.7% in September amid forecasts for a 1.6% print. At the same time, the core rate of inflation also remained unchanged at 1.7% during the same period. Lower energy and transportation costs continued to drag on price growth, while the report showed stable prices for nearly all other sectors. With the subdued outlook for inflation, the Fed may retain the highly accommodative policy for an extended period of time in order to balance the risks surrounding the region. The better-than-expected CPI print spurred a bullish reaction in the greenback, with EUR/USD slipping below 1.2675 during the North America trade to end the day at 1.2637.
--- Written by David Song, Currency Analyst and Shuyang Ren
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