Trading News Events

Trading the News: U.S. Non-Farm Payrolls (NFP)

The U.S. Non-Farm Payrolls (NFP) report may generate a mixed market reaction as the economy is anticipated to add 190K jobs in April, while the Unemployment Rate is projected to uptick to an annualized 4.6% from 4.5% the month prior. Moreover, household earnings are expected to hold steady at 2.7% per annum, and a lackluster labor report may fuel the near-term resilience in EUR/USD especially as market attention turns to the final around of the French election.

Why Is This Event Important:

With Fed Fund Futures now pricing a greater than 70% probability for a June rate-hike, the fresh speech from Chair Janet Yellen may trigger a more meaningful reaction as market participants continue to gauge the timing and pace of the normalization cycle. A more detailed approach in unloading the Fed’s balance sheet may curb the recent advance in the euro-dollar exchange rate as the Federal Open Market Committee (FOMC) adopts a more aggressive approach in normalizing monetary policy, but the event may fail to prop up the greenback should the central bank head merely try to buy more time.

How To Trade This Event Risk
Bearish USD Trade: Employment Report Shows U.S. Approaching Full-Employment

• Need a green, five-minute candle following the NFP report to consider a long EUR/USD position.
• If market reaction favors a bearish dollar trade, buy EUR/USD with two separate lots.
• Set stop at the near-by swing low/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.

Bullish USD Trade: NFP Expands 190K; Jobless Rate & Wage Growth Hold Steady

• Need a red, five-minute EUR/USD candle to favor a long dollar position.
• Carry out the same setup as the bearish dollar setup, just in reverse.

Potential Price Targets For The Release
EUR/USD Daily

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Trading the News: Bank of England (BoE) Interest Rate Decision

Even though the Bank of England (BoE) appears to be in no rush to lift the benchmark interest rate off of the record-low, the fresh updates to the quarterly inflation report may fuel the relief rally in the British Pound should the central bank highlight an improved outlook for the U.K. economy.

Why Is This Event Important:

Moreover, the policy statement may reveal a growing rift within the Monetary Policy Committee (MPC) following the 8 to 1 split in March, and a greater dissent may heighten the appeal of Sterling as it boosts interest-rate expectations. In contrast, the majority may merely try to buy more time as ‘Brexit’ continues to cloud the outlook for growth & inflation, and more of the same from the BoE may undermine the recent recovery in the GBP/USD as market participants push back bets for a rate-hike.

How To Trade This Event Risk
Bullish GBP Trade: BoE Boosts Economic Forecasts, Reveals Larger Dissent

• Need a green, five-minute candle following the rate decision to consider a long GBP/USD trade.
• If market reaction favors a bullish Sterling trade, buy GBP/USD with two separate lots.
• Set stop at the near-by swing low/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 GBP Trade: More of the Same From Governor Mark Carney & Co.

• Need a red, five-minute GBP/USD candle to favor a short Sterling position.
• Carry out the same setup as the bullish Sterling trade, just in reverse.

Potential Price Targets For The Release
GBP/USD Daily

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Trading the News: Canada Consumer Price Index (CPI)

Another slowdown in Canada’s Consumer Price Index (CPI) may tame the sharp depreciation in USD/CAD as it encourages the Bank of Canada (BoC) to adopt a more gradually path in normalizing monetary policy.

Why Is This Event Important:

Signs of softer-than-expected inflation may push the BoC to the sidelines as ‘very strong growth of the first quarter is expected to moderate over the balance of the year,’ and Governor Stephen Poloz and Co. may endorse a wait-and-see approach at the next meeting on September 6 as ‘geopolitical uncertainty still clouds the global outlook.’
Nevertheless, stickiness in the core rate of inflation accompanied by a further expansion in household consumption may encourage the BoC to adopt a more hawkish tone as ‘the output gap is now projected to close around the end of 2017, earlier than the Bank anticipated in its April Monetary Policy Report (MPR).’ In turn, BoC officials may continue to implement higher borrowing-costs over the coming months as the central bank expect to achieve the 2% target for price growth by the middle of 2018.

Canada’s Consumer Price Index (CPI) slipped to an annualized 1.3% in May from 1.6% the month prior, while the core rate of inflation held steady at 1.3% per annum amid forecasts for a 1.4% print. A deeper look at the report showed the decline was largely led by lower energy prices, with transportation costs narrowing 0.7% in May, while prices for clothing and footwear bounced back 0.5% after contracting 1.1% in April. The Canadian dollar lost ground following the softer-than-expected inflation report, with USD/CAD turning around ahead of the 1.3200 handle to end the day at 1.3268.

How To Trade This Event Risk
Bearish CAD Trade: Canada Inflation Report Continues to Disappoint

• Need a green, five-minute candle following the report to consider a long USD/CAD position.
• If market reaction favors a bearish loonie trade, buy USD/CAD with two separate lots.
• Set stop at the near-by swing low/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.

Bullish CAD Trade: Headline & Core CPI Exceed Market Expectations

• Need a red, five-minute USD/CAD candle to consider a long loonie position.
• Implement the same setup as the bearish loonie trade, just in reverse.

Potential Price Targets For The Release
USD/CAD Daily

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The Bank of England (BoE) Minutes may prop up the British Pound as the central bank appears to be slowly moving away from its easing cycle.

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

An uptick in the U.S. Consumer Price Index (CPI) may stoke a near-term pullback in EUR/USD as signs of rising inflation puts pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy in 2017.

Why Is This Event Important:

Even though Fed Fund Futures largely price a 50% probability for a move in December, Chair Janet Yellen and Co. may stay on course to deliver three rate-hikes in 2017 as central bank officials expect to achieve the 2% target for inflation over the policy horizon. In turn, the FOMC may endorse a more aggressive approach at the next interest rate decision on September 20 especially as the FOMC ‘expects to begin implementing its balance sheet normalization program relatively soon.’

However, another dismal development may spark a bearish reaction in the greenback as it encourages the Fed to preserve the current policy throughout the remainder. As a result, the U.S. dollar may continue to exhibit a bearish behavior over the coming months if they key data prints coming out of the real economy drag on interest-rate expectations.

How To Trade This Event Risk
Bullish USD Trade: Headline and Core Inflation Picks Up in July

• Need a red, five-minute candle following the print to consider a short EUR/USD trade.
• If the market reaction favors a bullish dollar position, sell EUR/USD with two separate lots.
• 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 USD Trade: CPI Report Falls Short of Market Forecasts

• Need a green, five-minute EUR/USD candle to consider a short dollar trade.
• Implement the same approach as the bullish dollar position, just in the opposite direction.

Potential Price Targets For The Release
EUR/USD Daily Chart

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Trading the News: U.S. Non-Farm Payrolls (NFP)

A 180K expansion in U.S. Non-Farm Payrolls (NFP) paired a pickup in household earnings may trigger a near-term pullback in EUR/USD as it puts pressure on the Federal Open Market Committee (FOMC) to further normalize monetary policy sooner rather than later.

Why Is This Event Important:

With the U.S. economy approaching full-employment, signs of higher wage growth may encourage Chair Janet Yellen and Co. to deliver three rate-hikes in 2017 as the central bank remains confident in reaching the 2% inflation-target over the policy horizon. In turn, the dollar may exhibit a more bullish behavior ahead of the next rate decision on September 20 as the ‘the Committee expects to begin implementing its balance sheet normalization program relatively soon.’

How To Trade This Event Risk

Bullish USD Trade: U.S. Adds 180K Jobs or More, Wage Growth Picks in August

• Need a red, five-minute candle subsequent to the fresh figures to consider a short EUR/USD position.
• If the market reaction favors a bullish dollar trade, sell EUR/USD with two separate lots.
• 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 USD Trade: NFP Report Falls Short of Market Expectations

• Need a green, five-minute EUR/USD candle to consider a short dollar position.
• Implement the same approach as the bullish dollar trade, just in the opposite direction.

Potential Price Targets For The Release
EUR/USD Daily Chart

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Trading the News: Canada Consumer Price Index (CPI)

Another uptick in Canada’s Consumer Price Index (CPI) may rattle the near-term rebound in USD/CAD as it puts pressure on the Bank of Canada (BoC) to deliver another rate-hike over the coming months.

The BoC may continue to implement higher borrowing-costs as ‘the level of GDP is now higher than the Bank had expected,’ and Governor Stephen Poloz and Co. may prepare Canadian households and businesses for another rate-hike at the next meeting on October 25 as the central bank notes that ‘there has been a slight increase in both total CPI and the Bank’s core measures of inflation, consistent with the dissipating negative impact of temporary price shocks and the absorption of economic slack.’

Canada’s Consumer Price Index (CPI) increased for the first time since January, with the headline reading climbing to an annualized 1.2% from 1.0% the month prior. Nevertheless, the core rate of inflation held steady at 1.4% per annum during the same period, but signs of budding price pressures may encourage the Bank of Canada (BoC) to further normalize monetary policy in 2017 as the central bank warns ‘the factors behind soft inflation appear to be mostly temporary.’ The Canadian dollar rallied followed the print, with USD/CAD slipping below the 1.2600 handle to end the day at 1.2583.

How To Trade This Event Risk

Bullish CAD Trade: Headline & Core Inflation Picks Up in August

• Need a red, five-minute candle following the report to favor a short USD/CAD trade.
• If market reaction favors a bullish loonie position, sell USD/CAD with two separate lots.
• 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: Canada CPI Falls Short of Market Expectations

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

Potential Price Targets For The Release
USD/CAD Daily Chart

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

An uptick in both the headline and core U.S. Consumer Price Index (CPI) may undermine the near-term rebound in EUR/USD as it encourages the Federal Open Market Committee (FOMC) to implement higher borrowing-costs over the coming months.

The U.S. Consumer Price Index (CPI) climbed to an annualized 1.9% in August from 1.7% the month prior, while the core rate of inflation held steady at 1.7% per annum amid forecasts for a 1.6% print. A deeper look at the report showed Energy prices climbing 2.8% to lead the advance, with Transportation costs also rising 1.4%, while prices for apparel increased a marginal 0.1% in August. The initial reaction to the CPI report was short-lived, with EUR/USD climbing back above the 1.1900 handle to end the day at 1.1918.

How To Trade This Event Risk

Bullish USD Trade: Headline & Core CPI Pick Up in September

• Need a red, five-minute candle following the CPI report to favor a short EUR/USD trade.
• If the market reaction favors a bullish dollar position, sell EUR/USD with two separate lots.
• 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 USD Trade: U.S. Inflation Report Fails to Meet Market Forecast

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

Potential Price Targets For The Release
EUR/USD Daily Chart

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Trading the News: U.K. Employment Change

In light of the market reaction to the U.K. Consumer Price Index (CPI), another batch of lackluster data prints may continue to rattle the near-term rebound in GBP/USD as it saps bets for higher interest rates. Even though BoE Governor Mark Carney warns the central bank will deliver a rate-hike over the ‘coming months,’ the majority of the Monetary Policy Committee (MPC) may largely endorse a wait-and-see approach at the next meeting on November 2 as ‘it was too soon to judge whether stronger consumption growth would be sufficient to offset continuing weakness in business investment.’ In turn, the BoE may carry the record-low interest rate into 2018 as ‘the squeeze on households’ real income continued to weigh on consumption.’

The U.K. added another 180K jobs in July, while the Unemployment Rate unexpectedly narrowed to an annualized 4.3% from 4.4% during the same period. Despite the ongoing improvement in the labor market, Average Weekly Earnings held steady at an annualized 2.1% amid forecasts for a 2.3% print, and signs of subdued wage growth may encourage the Bank of England (BoE) to further delay the normalization cycle especially as Brexit clouds the economic outlook with high uncertainty. The batch of mixed data prints weighed on the British Pound, with GBP/USD pulling back from the 1.3300 handle to end the day at 1.3208.

How To Trade This Event Risk
Bearish GBP Trade: U.K. Household Earnings Remains Subdued

• Need a red, five-minute candle following the release to favor a short GBP/USD trade.
• If market reaction favors a bearish Pound position, sell GBP/USD with two separate lots.
• 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.

Bullish GBP Trade: Job, Wage Growth Exceeds Market Forecast

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

Potential Price Targets For The Release
GBP/USD Daily Chart



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