Trading News Events

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Trading the News: Canada Consumer Price Index (CPI)

A slowdown in Canada’s headline & core Consumer Price Index (CPI) may drag on the loonie and fuel the near-term advance in USD/CAD as it puts pressure on the Bank of Canada (BoC) to further support the real economy.

What’s Expected:

Why Is This Event Important:

Even though BoC Governor Stephen Poloz sticks to the sidelines in 2016 and largely endorse a wait-and-see approach for monetary policy, the central bank may revert back to its easing cycle in an effort to encourage a stronger recovery.

How To Trade This Event Risk

Bearish CAD Trade: Headline & Core Rate of Inflation Slows in May

• Need to see green, five-minute candle following the release to consider a long trade on USD/CAD.
• If market reaction favors a bearish loonie trade, buy USD/CAD 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 CAD Trade: Canada CPI Report Beats Market Forecast

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

Potential Price Targets For The Release
USD/CAD H4

Canada’s Consumer Price Index (CPI) climbed an annualized 1.7% in April following the 1.3% expansion the month prior, while the core rate of inflation unexpectedly advanced 2.2% during the same period amid forecasts for a 2.0% print. A deeper look at the report showed transportation costs increased 2.0% as energy prices climbed 3.8%, while prices for clothing and footwear held flat in April, with food costs falling 0.5% following a 0.3% contraction in March. Despite the stronger-than-expected CPI report, the Canadian dollar struggled to hold its ground, with USD/CAD climbing back above the 1.3100 handle to end the day at 1.3107.

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Trading the News: Canada Retail Sales

A 0.8% rebound in Canada Retail Sales may heighten the appeal of the loonie and spark a near-term decline in USD/CAD as it boosts the outlook for growth and inflation.

What’s Expected:

Why Is This Event Important:

The Bank of Canada (BoC) may largely endorse a wait-and-see approach throughout the remainder of the year as Governor Stephen Poloz turns upbeat towards the economy, and the central bank may gradually move away from its easing cycle after implementing the ‘insurance’ rate-cuts in 2015.

How To Trade This Event Risk

Bullish CAD Trade: Retail Sales Rebounds 0.8% or Greater

• 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 Household Consumption 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 H4

Canada Retail Sales slumped 1.0% in March after expanding a revised 0.6% during the previous month. A deeper look at the report showed demand for furniture & home furnishings declined 3.7% to lead the decline, with food & beverage sales contracting 0.4%, while discretionary spending on clothing and accessories increased 0.8% during the same period. The Canadian dollar struggled to hold its ground following the weak consumption report, with USD/CAD climbing above the 1.3100 handle to end the day at 1.3107.


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Trading the News: Bank of England Interest Rate Decision

According to a Bloomberg News survey 30 of the 54 economists polled forecast the Bank of England (BoE) to reduce the benchmark interest rate to a fresh record-low, and GBP/USD stands at risk of facing additional headwinds over the near to medium-term should the central bank revert back to its easing cycle.

What’s Expected:

Why Is This Event Important:

With the U.K. positioned to leave the European Union (EU), the BoE may have little choice but to further support the economy in 2016 as Governor Mark Carney tries to avoid a recession. A material shift in the policy outlook is likely to drag on the sterling as interest-rate expectations falter.

How To Trade This Event Risk

Bearish GBP Trade: BoE Reverts Back to Easing Cycle

• Need red, five-minute candle following the rate decision 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: Governor Carney Endorses Wait-and-See Approach

• 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 H1

• The near-term rebound in GBP/USD may unravel amid the failed attempt to test the monthly opening range, with the British Pound at risk of facing near-term headwind should the BoE talk up expectations for additional monetary support.
• Key Resistance: 1.4880 (50% retracement) to 1.4930 (38.2% expansion)
• Key Support: 1.2460 (61.8% expansion) to 1.2500 pivot

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

GBP/USD may stage a larger recovery over the next 24-hours of trading as market participants forecast the headline & core U.K. Consumer Price Index (CPI) to uptick in July. Indeed, signs of stronger inflation may undermine expectations for a material shift in the monetary policy outlook amid the rift within the Bank of England (BoE).

What’s Expected:

Why Is This Event Important:

With the U.K. preparing to depart from the European Union (EU), there’s growing speculation the BoE will reestablish its easing cycle at the next interest-rate decision on August 4, but we may see another split decision to retain the current policy as the marked depreciation in the British Pound raises the risk of overshooting the 2% target for inflation.

How To Trade This Event Risk

Bullish GBP Trade: Headline & Core Inflation Climb Higher in June

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

Bearish GBP Trade: U.K. CPI Report Disappoints

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

Potential Price Targets For The Release
GBP/USD

• With a near-term inverse head-and-shoulders formation taking shape, GBP/USD may stage a larger recovery as the Relative Strength Index (RSI) comes off of oversold territory, with a closing price above 1.3360 (50% expansion) to 1.3370 (78.6% expansion) raising the risk for a move back towards the Fibonacci overlap around 1.3640 (38.2% retracement) to 1.3720 (61.8% expansion).
• Key Resistance: 1.4880 (50% retracement) to 1.4930 (38.2% expansion)
• Key Support: 1.2460 (61.8% expansion) to 1.2500 pivot

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Trading the News: U.K. Jobless Claims Change

Even though U.K. Jobless Claims are projected to increase 4.0K in June, another pickup in household earnings may generate a bullish reaction in GBP/USD as it highlights an improved outlook for growth and inflation.

What’s Expected:

Why Is This Event Important:

Signs of stronger wage growth may prompt the Bank of England (BoE) to retain its current policy at the next interest-rate decision on August 4 as the central bank runs the risk of overshooting the 2% inflation-target, and Governor Mark Carney may attempt to buy more time even as the U.K. prepares to leave the European Union (EU).

How To Trade This Event Risk

Bullish GBP Trade: Job/Wage Growth Picks Up in June

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

Bearish GBP Trade: U.K. Labor Market Report Fails to Meet 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
GBP/USD

• The string of failed attempts to closes back above 1.3360 (50% expansion) to 1.3370 (78.6% expansion) may invalidate the inverse head-and-shoulders formation carried over from the previous month, with the pair at risk of giving back the rebound from 1.2788 as the pair appears to be carving a near-term high.
• Key Resistance: 1.4880 (50% retracement) to 1.4930 (38.2% expansion)
• Key Support: 1.2460 (61.8% expansion) to 1.2500 pivot

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Trading the News: European Central Bank (ECB) Interest Rate Decision

Even though the European Central Bank (ECB) is widely anticipated to preserve the zero-interest rate policy (ZIRP) in July, a series of adjustments to the non-standard measures may drag on the Euro and spark a near-term decline in EUR/USD should the central bank continue to push monetary policy into unchartered territory.

What’s Expected:

Why Is This Event Important

With the U.K.’s imminent exit from the European Union (EU) clouding the economic outlook for the monetary union, ECB President Mario Draghi may take additional steps to insulate the euro-area, and the Governing Council may extend the duration as well as the scope of its quantitative easing (QE) program in an effort to encourage a stronger recovery.

How To Trade This Event Risk

Bearish EUR Trade: ECB Adjusts Non-Standard Measures

• Need red, five-minute candle following the policy statement to consider a short EUR/USD trade.
• If market reaction favors a bearish Euro trade, sell EUR/USD with two separate position.
• Set stop at the near-by swing high/reasonable distance from cost; need 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 Preserves Current Policy

• 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
EURUSD

• EUR/USD may continue to give back the advance from earlier this year as a head-and-shoulders formation appears to be playing out in the second-half of 2016, with a closing price below the Fibonacci overlap around 1.0960 (23.6% retracement) to 1.0970 (38.2% retracement) opening up the next downside target around 1.0910 (38.2% expansion).
• Key Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Key Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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Trading the News: Canada Consumer Price Index (CPI)

Another downtick in Canada’s headline & core Consumer Price Index (CPI) may push USD/CAD to fresh weekly highs as it puts pressure on the Bank of Canada (BoC) to further embark on its easing cycle.

What’s Expected:

Why Is This Event Important:

Even though BoC Governor Stephen Poloz largely endorses a wait-and-see approach for monetary policy, the central bank may keep the door open to further reduce the benchmark interest rate as the Canadian economy continues to adjust to the oil-price shock.

How To Trade This Event Risk

Bearish CAD Trade: Headline & Core Rate of Inflation Slows in May

• Need to see green, five-minute candle following the release to consider a long trade on USD/CAD.
• If market reaction favors a bearish loonie trade, buy USD/CAD 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 CAD Trade: Canada CPI Report Beats Market Forecast

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

Potential Price Targets For The Release
USD/CAD

• USD/CAD may continue to face range-bound prices as it largely preserves the wedge/triangle formation from earlier this year, with the pair capped around 1.3130 (38.2% retracement), while near-term support comes in around 1.2620 (50% retracement) to 1.2650 (50% retracement).
• 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: Federal Open Market Committee Interest Rate Decision

Another unanimous vote by the Federal Open Market Committee (FOMC) to retain the current policy may dampen the appeal of the greenback and spark a near-term advance in EUR/USD as market participants push out bets for the next rate-hike.

What’s Expected:

Why Is This Event Important:

With Fed Funds Futures reflecting limited expectations for higher borrowing-costs in 2016, Chair Janet Yellen and Co. may largely endorse a wait-and-see approach for monetary policy as the central bank argues market-based measures of inflation compensation remains weak while ‘most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.’

How To Trade This Event Risk

Bearish USD Trade: FOMC Votes Unanimously to Keep Status Quo

• Need green, five-minute candle following the rate decision 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: Increased Number of Fed Officials Dissent

• 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
EURUSD H1

• The diverging paths for monetary policy continues to cast a long-term bearish outlook for EUR/USD, but the pair may mount a larger recovery over the days ahead amid the string of failed attempts to close below 1.0960 (23.6% retracement) to 1.0970 (38.2% retracement).
• Key Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Key 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 180K expansion in U.S. Non-Farm Payrolls (NFP) accompanied by a downtick in the jobless rate may boost the appeal of the greenback and trigger further losses in EUR/USD as it puts pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy in 2016.

What’s Expected:

Why Is This Event Important:

Even though Fed Funds Futures highlight a 12% probability for a September rate-hike, a further improvement in labor market dynamics may encourage central bank officials to adopt a more hawkish outlook for monetary policy as the U.S. economy approaches ‘full-employment.’ However, an unexpected slowdown in wage growth may keep the FOMC on the sidelines throughout 2016 as the central bank warns ‘market-based measures of inflation compensation remain low; most survey-based measures of longer-term inflation expectations are little changed, on balance, in recent months.’

How To Trade This Event Risk

Bullish USD Trade: NFP Increases 180K or More, Labor Force Participation Improves

• 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 Disappoints

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

Potential Price Targets For The Release
EURUSD

• EUR/USD may extend the rebound from the end of July following the string of failed attempts to close below the Fibonacci overlap around 1.0960 (23.6% retracement) to 1.0970 (38.2% retracement), while price & the Relative Strength Index (RSI) breakout of the bearish formations from earlier this year.
• Key Resistance: 1.1760 (61.8% retracement) to 1.1810 (38.2% retracement)
• Key Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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