Trading News Events

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

The Federal Open Market Committee (FOMC) is widely expected to retain its current policy in April even as central banks officials project two rate-hikes for 2016, but a growing dissent within the central bank may trigger a near-term selloff in EUR/USD as it boosts interest-rate expectations.

What’s Expected:

Why Is This Event Important:

Even though Fed Chair Janet Yellen remains largely concerned about the ‘external risks’ surrounding the region, a growing number of Fed officials may look to further normalize monetary policy in the first-half of 2016 especially as the U.S. economy approaches ‘full-employment.’

However, easing confidence along with the slowdown in household spending may dampen Fed expectations for a ‘consumer-led’ recovery, and more of the same from the central bank may drag on the dollar as market participants push out bets for the next Fed rate-hike.

How To Trade This Event Risk

Bullish USD Trade: Policy Statement Highlights Growing Dissent Within FOMC

• Need red, five-minute candle following the rate decision to consider a short EUR/USD position.
• If market reaction favors a bullish dollar 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.

Bearish USD Trade: Fed Votes 9-1 Once Again to Retain Current Policy

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

Potential Price Targets For The Release
EURUSD Daily

• The diverging paths for monetary policy casts a long-term bearish outlook for EUR/USD, but the pair appears to be carving a major bottoming-process especially as the Relative Strength Index (RSI) largely preserves the bullish formation carried over from March 2015.
• Interim Resistance: 1.1510 (50% retracement) to 1.1520 (61.8% expansion)
• Interim Support: Interim Support: 1.0370 (38.2% expansion) to 1.0410 (61.8% expansion)

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

The 1Q U.S. Gross Domestic Product (GDP) report may dampen the appeal of the greenback and spark a near-term advance in EUR/USD as signs of a slowing recovery weigh on interest-rate expectations.

What’s Expected:

Why Is This Event Important:

A soft growth figure may encourage the Federal Reserve to retain its current policy throughout most of 2016 amid the ongoing 9 to 1 split within the central bank, but a marked rebound in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may put increased pressure on Chair Janet Yellen and Co. to further normalize monetary policy over the coming months especially as the U.S. economy approaches ‘full-employment.’

Nevertheless, the pickup in housing accompanied by ongoing improvement in labor-market dynamics may help to boost economic activity, and a positive development may generate a bullish reaction in the U.S. dollar as it puts increased pressure on the Federal Reserve to further normalize monetary policy sooner rather than later.

How To Trade This Event Risk

Bearish USD Trade: 1Q GDP Report Warns of Slowing Recovery

• Need to see green, five-minute candle following the GDP report 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: U.S. Expands Annualized 0.6% or Greater, Core PCE Rebounds

• Need red, 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
EURUSD Daily

• EUR/USD may continue to consolidate going into the end of the month as it remains stuck within a near-term triangle/wedge formation, but the continuation pattern may ultimately give way to a further advance in the exchange rate especially as the Relative Strength Index (RSI) largely preserves the bullish trend carried over from March 2015.
• Interim Resistance: 1.1510 (50% retracement) to 1.1520 (61.8% expansion)
• Interim Support: Interim Support: 1.0370 (38.2% expansion) to 1.0410 (61.8% expansion)

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Trading the News: ISM Non-Manufacturing

Another pickup in the ISM Non-Manufacturing survey may heighten the appeal of the greenback and spark a larger pullback in EUR/USD as it raises the outlook for growth and inflation.

What’s Expected:

Why Is This Event Important:

Despite the ongoing 9 to1 split within the Federal Open Market Committee, Chair Janet Yellen and Co. may come under increased pressure to further normalize monetary policy at the next quarterly meeting June especially as the U.S. economy approaches ‘full-employment.’

How To Trade This Event Risk
Bullish USD Trade: ISM Non-Manufacturing Survey Climbs to 54.8 or Higher

• Need red, five-minute candle following the print to consider a short trade on EUR/USD.
• If market reaction favors a bullish 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: Gauge for Service-Based Activity 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
EURUSD Daily

• EUR/USD may make a more meaningful run at the August high (1.1713) as it breaks out of the triangle/wedge formation in April, but the pair stands at risk for a near-term pullback as the Relative Strength Index (RSI) struggles to push above 70 and appears to be turning around ahead of overbought territory.
• Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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

Another 200K expansion in Non-Farm Payrolls (NFP) accompanied by a downtick in the jobless rate may boost the appeal of the greenback and spur a larger pullback in EUR/USD as it boosts interest-rate expectations.

What’s Expected:

Why Is This Event Important:

With the U.S. economy approaching ‘full-employment,’ a further improvement in the labor market paired with signs of stronger wage growth may put increased pressure on the Federal Open Market Committee (FOMC) to raise the benchmark interest rate at the next quarterly meeting in June as the central bank risks falling behind the curve.

Nevertheless, waning business confidence along with the slowdown in household consumption may prompt U.S. firms to scale back on hiring, and a dismal employment report may drag on the U.S. dollar as market participants push out bets for higher borrowing-costs.

How To Trade This Event Risk
Bullish USD Trade: NFP Expands 200K+, Jobless Rate Narrows

• Need red, five-minute candle following the NFP print to consider a short trade on EUR/USD.
• If market reaction favors a bullish 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: U.S Employment Report Falls Short of Market Expectations

• 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
EURUSD Daily

• Even though the diverging paths for monetary policy casts a long-term bearish outlook for EUR/USD, the pair may extend the advance from the previous month especially as it breaks out of the triangle/wedge formation carried over from back in March.
• Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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Trading the News: U.K. Industrial & Manufacturing Production

A rebound in U.K. Industrial & Manufacturing Production may boost the economic outlook for the U.K. economy and spur a near-term rebound in GBP/USD as it raises the scope for a stronger-than-expected recovery.

What’s Expected:

Why Is This Event Important:

Beyond the looming U.K. Referendum in June, positive data prints coming out of the region may put increased pressure on the Bank of England (BoE) to normalize monetary policy sooner rather than later as central bank officials see a risk of overshooting the 2% inflation target over the policy horizon.

However, waning demand from home and abroad may drag on business outputs, and an unexpected contraction in industrial & manufacturing production may drag on the British Pound as it gives the BoE greater scope to retain the record-low interest rate for an extended period of time.

How To Trade This Event Risk
Bullish GBP Trade: Industrial & Manufacturing Production Rebounds in March

• Need red, green-minute candle following the report to consider a long British Pound trade.
• If market reaction favors bullish sterling trade, short GBP/USD with two separate position.
• Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bearish GBP Trade: U.K. Business Outputs Fall Short of Market Forecast

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

Potential Price Targets For The Release
GBPUSD Daily

• GBP/USD may continue to threaten the downward trend from back in November as the pair carves a near-term series of higher lows in 2016, while the Relative Strength Index (RSI) largely preserves the bullish formation from January.
• Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
• Interim Support: 1.3870 (78.6% expansion) and 1.3960 (50% expansion)

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Trading the News: Bank of England Interest Rate Decision

Even though the Bank of England (BoE) is widely anticipated to retain its current policy in May, a downward revision in the central bank’s growth and inflation forecast may dampen the appeal of the British Pound and spur a bearish reaction in GBP/USD as it drags on interest-rate expectations.

What’s Expected:

Why Is This Event Important:

Indeed, Governor Mark Carney may continue to argue that the next move will be to normalize monetary policy, but the central bank may sound increasingly cautious this time around as the U.K. Referendum clouds the economic outlook for the region.

Nevertheless, sticky inflation paired signs of stronger wage growth may spur a dissent within the MPC, and a split vote to retain the current policy may generate a bullish reaction in the British Pound as it puts increased pressure on the BoE to normalize monetary policy sooner rather than later.

How To Trade This Event Risk
Bearish GBP Trade: BoE Trims Growth & Inflation Forecast

• Need red, five-minute candle following the GDP report to consider a short sterling trade.
• If market reaction favors bearish British Pound 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 Adopts More Hawkish Outlook for Monetary Policy

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

Potential Price Targets For The Release
GBPUSD Daily

• Even though GBP/USD remains stuck in a narrow range ahead of the BoE meeting, the pair may make a more meaningful attempt to threaten the downward trend carried over from August, with the pound-dollar at a risk for a further advance as long as the Relative Strength Index (RSI) retains the bullish formation from earlier this year.
• Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
• Interim Support: 1.3870 (78.6% expansion) and 1.3960 (50% expansion)

more...

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

What’s Expected:

Even though Fed officials see scope for two rate-hikes in 2016, signs of a slower-than-expected recovery may push the Federal Open Market Committee (FOMC) to further delay the normalization cycle amid the external risks surrounding the real economy.

However, stronger wage growth paired with the rebound in private-sector spending may boost consumer prices, and a pickup in the headline & core rate of inflation may spur a bullish reaction in the U.S. dollar as it puts increased pressure on the Fed to implement higher borrowing-costs.

How To Trade This Event Risk

Bearish USD Trade: Core Rate of Inflation Narrows to 2.1% or Lower

• Need green, five-minute candle following the print to consider a long position on EUR/USD.
• 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 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: U.S. CPI Report Exceeds Market Forecast

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

Potential Price Targets For The Release
EURUSD Daily

• Following the failed attempt to test the August high (1.1713), EUR/USD may continue to give back the advance from the previous month as it remains stuck in a descending channel formation, with a near-term hurdle coming in around 1.1210 (61.8% retracement) to 1.1230 (38.2% retracement).
• Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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Trading the News: U.K. Jobless Claims Change

What’s Expected:

Why Is This Event Important:

The BoE looks poised to retain its current policy ahead of the U.K. Referendum on June 23, but the central bank may show a greater willingness to remove the record-low interest rate over the coming months as Governor Mark Carney and Co. remain adamant that the next move will be to implement higher borrow-costs.

How To Trade This Event Risk
Bearish GBP Trade: U.K. Employment Report Disappoints

• Need red, five-minute candle following the print to consider a short GBP/USD trade.
• If market reaction favors selling sterling, short GBP/USD with two separate position.
• Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is hit, set reasonable limit.

Bullish GBP Trade: Job/Wage Growth Exceed 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
GBPUSD Daily

• GBP/USD appears to have made an unsuccessful attempt to break out of the downward trend carried over from August as the Relative Strength Index (RSI) fails to preserve the bullish momentum from earlier this year, and the pair may continue to consolidate ahead of the U.K. Referendum as it remains stuck in a broader wedge/triangle formation.
• Interim Resistance: 1.4910 (61.8% retracement) to 1.4930 (38.2% expansion)
• Interim Support: 1.3870 (78.6% expansion) and 1.3960 (50% expansion)

more...

Trading the News: Canada Consumer Price Index (CPI)

Despite forecasts for a rebound in Canada’s Consumer Price Index (CPI), a marked slowdown in the core rate of inflation may drag on the loonie and spark a further advance in USD/CAD as it dampens interest-rate expectations.

What’s Expected:

Why Is This Event Important:

Even though the Bank of Canada (BoC) has turned upbeat on the economy in 2016, Governor Stephen Poloz and Co. may opt to retain the accommodative policy stance for an extended period as the central bank continues to highlight the persistent slack in the real economy.

However, Canadian firms may offer discounted prices amid easing demand at home and abroad, and a soft inflation report may produce near-term headwinds for the loonie as it fuels speculation for additional monetary support.

How To Trade This Event Risk

Bullish CAD Trade: Headline & Core Rate of Inflation Exceed Market Forecast

• Need to see red, five-minute candle following the release to consider a short trade on USD/CAD.
• If market reaction favors a bullish 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 entry on remaining position once initial target is hit; set reasonable limit.

Bearish CAD Trade: Canada CPI Report Disappoints

• Need green, five-minute candle to favor a long USD/CAD trade.
• Implement same setup as the bullish Canadian dollar trade, just in reverse.

Potential Price Targets For The Release
USD/CAD Daily

• May see the long-term bull trend in USD/CAD reassert itself as the pair breaks out of the bearish formation from earlier this year, with the Relative Strength Index (RSI) following suit.
• Key Resistance: 1.3560 (100% expansion) to 1.3630 (38.2% retracement)
• Key Support: 1.2510 (78.6% retracement) to 1.2520 (38.2% expansion)

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Trading the News: U.S. Durable Goods Orders

Another 0.5% expansion in orders for U.S. Durable Goods may heighten the appeal of the greenback and spur a near-term decline in EUR/USD as it puts increased pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy.

What’s Expected:

Why Is This Event Important:Even though Fed Chair Janet Yellen remains in no rush to implement higher borrowing-costs, we may see a greater dissent at the next quarterly meeting in June as a growing number of central bank officials see the U.S. economy approaching ‘full-employment.’

How To Trade This Event Risk
Bullish USD Trade: Demand for Large-Ticket Items Increase 0.5% or Greater

• Need red, five-minute candle following the rate decision to consider a short EUR/USD position.
• If market reaction favors a bullish dollar 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.

Bearish USD Trade: Durable Goods Orders Report Disappoints

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

Potential Price Targets For The Release
[U]EURUSD Daily

• EUR/USD may continue to give back the advance from earlier this year following the failed attempt to test the August high (1.1713), while the Relative Strength Index (RSI) largely fails to preserve the bullish formation carried over from the previous year.
• Interim Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

more...