Trading News Events

- Bank of England (BoE) to Raise Fundamental Outlook on Stronger Recovery
- Will BoE Implement Exit Strategy Ahead of Schedule?

Trading the News: Bank of England Inflation Report

The Bank of England’s (BoE) Inflation Report may heavily influence the near-term forecast for the British Pound as market participants see the central bank implementing its exit strategy ahead of schedule.

What’s Expected:

Time of release: 11/13/2013 10:30 GMT, 5:30 EST
Primary Pair Impact: GBPUSD
Expected: --
Previous: --
Forecast:--

Why Is This Event Important:

There’s speculation that Governor Mark Carney will rein in the optimism surrounding the U.K. economy, but the central bank may adopt a more hawkish tone for monetary policy as the stronger recovery raises the risk for a prolonged period of above-target inflation.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product (QoQ) (3Q A)	0.8%	0.8%
Retail Sales ex Auto (MoM) (SEP)	0.3%	0.7%
Jobless Claims Change (SEP)	-25.0K	-41.7K

The BoE looks poised raise its economic assessment for the U.K. economy on the back of the stronger recovery, and the central bank may show a greater willingness to move away from its easing cycle as the region gets on a more sustainable path.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Price Index (YoY) (OCT)	2.5%	2.2%
Trade Balance (SEP)	-2.700B	-3.268B
BRC Shop Price Index (YoY) (OCT)	0.1%	-0.5%

However, the recent slowdown in price growth may give the BoE greater scope to support the economy throughout 2014, and we may see a more meaningful correction in the British Pound should the central bank present a greater argument toretain its highly accommodative policy stance.

Potential Price Targets For The Release
GBPUSD Daily

• Threatens Range Following U.K. CPI Report; Bearish RSI Momentum Remains Intact
• Interim Resistance: 1.6250 Pivot to 1.6300 Pivot (2012 highs)
• Interim Support: 1.5900 Pivot to 1.5910 (78.6% Fibonacci expansion)

How To Trade This Event Risk

Bullish GBP Trade: BoE Raises Forecast; Adopts More Hawkish Tone

• Need green, five-minute candle following the statement to favor a long GBP trade
• If reaction favors buying British Pound, long GBPUSD with two separate position
• Set stop at the near-by swing low/reasonable distance from entry; need 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: BoE to Retain Highly Accommodative Stance Throughout 2014

• Need red, five-minute candle to consider a short GBPUSD trade
• Implement same setup as the bullish British Pound trade, just in the opposite direction

Impact that the BoE Inflation 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 2013	8/7/2013 9:30 GMT	--	--	+119	+194

August 2013 Bank of England Inflation Report



The BoE implemented forward-guidance for monetary policy as they pegged a 7.0% threshold for unemployment, but we saw Governor Mark Carney refrain from implementing a growth target as the central bank continues to operate under its inflation-targeting framework. In turn, the initial dip in the British Pound was short-lived, with the GBPUSD climbing above the 1.5400 handle, and the sterling continued to gain ground throughout the day as the pair closed at 1.5486.

--- Written by David Song, Currency Analyst

More...

- German Gross Domestic Product (GDP) to Grow for Two Straight Quarters
- 2Q GDP (0.7%) Marked the Fastest Pace of Growth Since 1Q 2012

Trading the News: German Gross Domestic Product

Germany’s 3Q Gross Domestic Product (GDP) report may highlight a weakening outlook for the euro-area as the region’s largest economy faces a slowing recovery. In turn, a dismal development may heighten the bearish sentiment surrounding the single currency as it spurs bets for additional monetary support.

What’s Expected:

Time of release:11/14/2013 7:00 GMT, 2:00 EST
Primary Pair Impact: EURUSD
Expected: 0.3%
Previous: 0.7%
Forecast: 0.1% to 0.3%

Why Is This Event Important:

Following the surprise rate cut last week, it seems as though the European Central Bank (ECB) will further embark on its easing cycle as President Mario Draghi maintains his pledge to keep interest rates at the current level or lower, and the Governing Council may adopt more non-standard measures over the coming months as growth and inflation remains subdued.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Industrial Production s.a. (MoM) (SEP)	0.0%	-0.9%
Retail Sales (MoM) (SEP)	0.4%	-0.4%
Unemployment Change (OCT)	0K	2K

The 3Q growth rate may undershoot market expectations amid the rise in unemployment paired with the slowdown in private sector consumption, and a weak GDP print may prompt the EURUSD to give back the rebound from earlier this week as it raises the ECB’s scope to implement more monetary easing.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Trade Balance (SEP)	15.4B	20.4B
Factory Orders (MoM) (SEP)	0.5%	3.3%
ZEW Survey- Expectations (OCT)	49.6	52.8

Nevertheless, improved confidence along with the pickup in global trade may result in a more upbeat growth figure, and a positive print may encourage a more meaningful rebound in the EURUSD as it dampens speculation for more ECB support.

Potential Price Targets For The Release
EURUSD Daily

Chart -

• Former Support in Focus- May Serves as New Resistance
• Relative Strength Index Clears Bearish Trend
• Interim Resistance: 1.3450 (50.0% expansion) to 1.3490 (50.0% retracement)
• Interim Support: 1.3290 (50.0% retracement) to 1.3300 Pivot

How To Trade This Event Risk

Bearish Euro Trade: German 3Q GDP Misses Market Forecast

• Need red, five-minute candle following the report to favor a bearish Euro trade
• If reaction favors selling Euro, short EURUSD with two separate position
• Set stop at the near-by swing high/reasonable distance from entry; need at least 1:1 risk-to-reward
• Move stop to entry on remaining position once initial target is hit, set reasonable limit

Bullish Euro Trade: Growth Rate Exceeds 0.3%

• Need green, five-minute candle to consider a long EURUSD trade
• Implement same strategy as the bearish Euro trade, just in the opposite direction

Impact that the German GDP report has had on EUR during the last quarter

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
2Q A 2013	8/14/2013 6:00 GMT	0.6%	0.7%	-14	-19

2Q 2013German Gross Domestic Product



After holding flat during the first three-months of 2013, Europe’s largest economy grew 0.7% in the second quarter to emerge from the recession, while the euro-area expanded 0.3% during the same period amid forecasts for a 0.2% print. Nevertheless, the initial uptick in the EURUSD was short-lived, with the pair slipping back below the 1.3275 region, and the single currency struggled to hold its ground throughout the day as it closed at 1.3252.

--- Written by David Song, Currency Analyst

More...

- Bank of England (BoE) Minutes to Show Unanimous Vote
- Was There Talk to Shift Forward-Guidance? Will They Promote Stronger Cable?

Trading the News: Bank of England Minutes

The British Pound may make a more meaningful run at the 1.6300 handle in the days ahead should the Bank of England (BoE) Minutes spur a more material shift in the policy.

What’s Expected:

Time of release: 11/20/2013 9:30 GMT, 4:30 EST
Primary Pair Impact: GBPUSD
Expected: --
Previous: --
Forecast:--

Why Is This Event Important:

There’s growing speculation that BoE Governor Mark Carney will implement the exit strategy ahead of schedule in light of the stronger recovery, and the policy statement may highlight a growing discussion to lower the unemployment threshold as the central bank raises its outlook for growth.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Jobless Claims Change (OCT)	-30.0K	-41.7K
Mortgage Approvals (SEP)	66.0K	66.7K
Gross Domestic Product (QoQ) (3Q A)	0.8%	0.8%

The marked decline in unemployment along with the pickup in private sector lending may encourage the BoE to adopt a more hawkish tone for monetary policy, and the central bank may show a greater willingness to remove the highly accommodative policy stance earlier-than-expected as the region gets on a more sustainable path.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
Retail Sales ex Auto (MoM) (OCT)	-0.1%	-0.6%
Consumer Price Index (YoY) (OCT)	2.5%	2.2%
Trade Balance (SEP)	-2.700B	-3.268B

However, the recent slowdown in price growth paired with slump in household spending may prompt the BoE to retain a cautious outlook for the region, and British Pound may continue to face range-bound prices over the near-term as market participants weigh the outlook for monetary policy.
Potential Price Targets For The Release

GBPUSD Daily

Chart -

• Retains Sideways Trend; Continues to Mark Closes Above 1.5900
• Interim Resistance: 1.6250 Pivot to 1.6300 Pivot (2012 highs)
• Interim Support: 1.5900 Pivot to 1.5910 (78.6% Fibonacci expansion)

How To Trade This Event Risk

Bullish GBP Trade: BoE Sounds More Hawkish; Shifts Policy Outlook

• Need green, five-minute candle following the statement to favor a long British Pound trade
• If reaction favors buying British Pound, long GBPUSD with two separate position
• Set stop at the near-by swing low/reasonable distance from entry; want 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: BoE to Preserve Highly Accommodative Stance Throughout 2014

• Need red, five-minute candle to consider a short GBPUSD trade
• Carry out same strategy as the bullish British Pound trade, just in the opposite direction

Impact that the BoE Minutes 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)
OCT 2013	10/23/2013 8:30 GMT	--	--	-25	+38

October 2013 Bank of England Minutes



Minutes from the October 10th BoE rate announcement yielded little volatility following release, but the GBP/USD pair moved slightly lower before recovering towards the end of the daily close. Although better than expected data (and especially CPI numbers) have led some to speculate about a hawkish shift in forward guidance, mums the word continues to be the policy at Mr. Carney’s Bank of England. Positive incoming data was only mentioned in regards to evidence of a “robust” recovery and the BoE unanimously voted to maintain the asset purchase target of £375B with a record-low benchmark interest rate of 0.50% unchanged.

--- Written by David Song, Currency Analyst

More...

- Canada Consumer Price Index to Slip Below 1.0% for First Time Since May
- Core Inflation to Grow 1.2%; Third-Lowest Print for 2013

Trading the News: Canada Consumer Price Index

A further slowdown in Canada’s Consumer Price Index may highlight a bearish outlook for the Canadian dollar as it heightens the threat for deflation.

What’s Expected:

Time of release: 11/22/2013 13:30 GMT, 8:30 EST
Primary Pair Impact: USDCAD
Expected: 0.8%
Previous: 1.1%
Forecast: 0.6% to 1.0%

Why Is This Event Important:

It seems as though BoC Governor Stephen Poloz no longer sees a need for higher interest rates in light of the slowing recovery, and the central bank may adopt a more dovish tone for monetary policy as growth and inflation remains subdued.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Wholesale Trade Sales (MoM) (SEP)	0.3%	0.2%
Raw Materials Price Index (MoM) (SEP)	-0.5%	-1.5%
Retail Sales (MoM) (AUG)	0.3%	0.2%

Firms in Canada may embark on heavy discounting amid the slowdown in private sector consumption, and a marked slowdown in price growth may prompt the BoC to reinstate its easing cycle in order to encourage a stronger recovery.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Net Change in Employment (OCT)	11.0K	13.2K
Gross Domestic Product (MoM) (AUG)	0.1%	0.3%
Business Outlook Future Sales (3Q)	--	31.00

Nevertheless, the pickup in job growth paired with the rise in business confidence may help to limit the downside for price growth, and a positive development may produce a meaningful correction in the USDCAD as market participants scale back bets for additional monetary support.

Potential Price Targets For The Release

USDCAD Daily

• Retains Upward Trending from January; RSI Bullish Since September
• Interim Resistance: 1.0510 Pivot to 1.0540 (1.0540)
• Interim Support: 1.0410 Pivot to 1.0430 (38.2% Fibonacci expansion)

How To Trade This Event Risk

Bearish CAD Trade: Canada Inflation Slows to 0.8% or Lower

• Need green, five-minute candle after the report to consider long USDCAD entry
• If the market reaction favors a short 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: Inflation Tops Market Forecast

• Need red, five-minute candle following the release to look at a short USDCAD trade
• Carry out the same setup as the bullish CAD trade, just in the opposite direction

Impact that the Canada Consumer Price 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)
SEP 2013	10/18/2013 12:30 GMT	1.0%	1.1%	-9	-102

September 2013 Canada Consumer Price Index

CPI data out of Canada showed September price growth at 1.1%, beating estimates of a 1.0% print. The USD/CAD pair weakened heading into the weekly close as pressure mounted on the greenback due to speculation of a delayed Fed taper- a result of the two week long US Government shutdown. The year over year print this time around is estimated to be a dismal 0.8% due to impacts from the shutdown in addition to a decline in fuel prices across the board. Sustained lower crude prices will continue to put pressure on inflation levels and may prompt dovish intervention by the Bank of Canada as the Federal Reserve looks to step back asset purchases over the next few months. Disappointing CPI prints moving forward do not bode well for CAD strength, especially in the context of a BoC that just removed pledges to raise rates in the future.

--- Written by David Song, Currency Analyst

More...

- U.S. Durable Goods Orders to Decline for First Time Since July 2013
- Demands for Durable Goods Increased Six Times in 2013

Trading the News: U.S. Durable Goods Orders

Demands for U.S. Durable Goods are expected to contract 2.0% in October and a marked slowdown in private sector consumption may drag on the dollar as it limits the Fed’s scope to taper the asset-purchase program at the December 17-18 meeting.

What’s Expected:

Time of release: 11/27/2013 13:30 GMT, 8:30 EST
Primary Pair Impact: EURUSD
Expected: -2.0%
Previous: 3.7%
Forecast: -3.0% to 2.0%

Why Is This Event Important:

With the ongoing discussion at the Fed to scale back on quantitative easing, data pointing to a slower recovery may prompt the central bank to undermine the taper-timeline laid out by Chairman Ben Bernanke, and the committee may present a greater argument to carry its highly accommodative policy stance into 2014 should the fundamental developments coming out of the U.S. economy dampen the outlook for growth and inflation.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Consumer Confidence (NOV)	72.6	70.4
U. of Michigan Confidence (NOV P)	74.5	72.0
Domestic Vehicle Sales (OCT)	11.90M	11.73M

The ongoing weakness in household sentiment may ultimately produce a larger-than-expected decline in U.S. Durable Goods, and a dismal print may spur a selloff in the reserve currency as it raises the Fed’s scope to retain its current policy for an extended period of time.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Advance Retail Sales (MoM) (OCT)	0.1%	0.4%
Wholesale Trade Sales (MoM) (SEP)	0.3%	0.6%
Personal Income (SEP)	0.3%	0.5%

However, the pickup in wage growth along with the resilience in private sector consumption may pave the way for a positive outcome, and third consecutive rise in Durable Goods may strengthen the argument to taper the asset-purchase program as the U.S. economy gets on a more sustainable path.

Potential Price Targets For The Release

• Retains November Range; Carving Head-and-Shoulders Top?
• Relative Strength Index Retains Bullish Momentum
• Interim Resistance: 1.3530 (61.8% expansion) to 1.3580 (23.6% retracement)
• Interim Support: 1.3290 (50.0% retracement) to 1.3300 Pivot

How To Trade This Event Risk

Bearish USD Trade: Orders for Durable Goods Contract 2.0% or Greater

• Need green, five-minute candle following the report to consider a long EURUSD trade
• If the market reaction favors a bearish dollar trade, establish long EURUSD with two position
• Set stop at the near-by swing low/reasonable distance from entry with 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: Demands Increase for the Third Straight Month

• Need red, five-minute candle following the release to look at a short EURUSD entry
• Implement same setup as the bearish USD trade, just in opposite direction

Impact that the U.S. Durable Goods Orders report has had on USD during the last month

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
SEP 2013	10/25/2013 12:30 GMT	2.5%	3.7%	+14	+21

September 2013 U.S. Durable Goods Orders


Although U.S. Durable Goods orders beat estimates of 2.3% coming in at 3.7%, Ex Transport and Cap Orders Nondef Ex Air missed estimates by over 2%. In the ‘bad news is good news’ psyche, EUR/USD saw some chop before heading higher as the trading week came to a close. As for some fundamentals behind this Wednesday’s print, it is important to note that Caterpillar sales for October fell 12% vs. a 9% fall in September while massive Boeing orders from the Dubai Airshow will not be accounted for until the November print. Although the reading is estimated to come in at -2.0%, we have seen October data come in better than economists have expected as the US government shutdown impact has been relatively muted in data.

--- Written by David Song, Currency Analyst

More...

- German Unemployment to Hold Flat After Rising for Last Three-Months
- Unemployment Reported Missed Market Forecast for Last Three Prints

Trading the News: German Unemployment Change

Germany’s Unemployment Report may threaten the short-term rebound in the EURUSD should the figure highlight a more subdued recovery in Europe’s largest economy.

What’s Expected:

Time of release: 11/28/2013 8:55 GMT, 3:55 EST
Primary Pair Impact: EURUSD
Expected: 0K
Previous: 2K
Forecast: 0K to 2K

Why Is This Event Important:

With the European Central Bank’s (ECB) December 5 meeting quickly approaching, a further deterioration in the growth outlook may put increased pressure on the Governing Council to take more unprecedented steps, and the policy outlook may become a growing proponent to drive the Euro lower as President Mario Draghi looks to negative deposit rates.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Private Sector Consumption (QoQ) (3Q F)	0.2%	0.1%
Industrial Production s.a. (MoM) (SEP)	0.0%	-0..9%
Retail Sales (SEP)	0.4%	-0.45

The slowdown in private sector consumption may continue to drag on the labor market as it prompts firms to scale back on hiring, and another unexpected uptick in German Unemployment may help to carve a head-and-shoulders top in the EURUSD as it heightens the threat for deflation.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
IFO Business Climate (NOV)	107.7	109.3
Trade Balance (SEP)	15.4B	20.4B
Factory Orders (MoM) (SEP)	0.5%	3.3%

Nevertheless, the rise in business sentiment a long with the pickup in global trade may highlight a turning point for Germany’s labor market, and a positive development, may encourage a more bullish outlook for the single currency as it gives the ECB greater scope to retain its wait-and-see approach.

Potential Price Targets For The Release

EUR/USD Daily

• Looking for Higher High or Head-and-Shoulders Top? RSI Retains Bullish Trend
• Interim Resistance: 1.3650-60 (78.6% expansion)
• Interim Support: 1.3290 (50.0% retracement) to 1.3300 Pivot

How To Trade This Event Risk

Bearish Euro Trade: German Unemployment Rises for Fourth Month

• Need red, five-minute candle following the report to consider a short Euro trade
• If the market reaction favors a bearish EURUSD trade, sell with two position
• Set stop at the near-by swing high/reasonable distance from entry with at least 1:1 risk-to-reward
• Move stop to cost on remaining position once initial target is met; set reasonable limit

Bullish Euro Trade: Labor Market Improves

• Need green, five-minute candle following the release to look at a long EURUSD entry
• Implement same setup as the bearish Euro trade, just in reverse

Impact that the change in German Unemployment has had on EUR during the last month

Period	Data Released	Estimate		Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
OCT 2013	10/30/2013 8:55 GMT		0K	2K	+2	-56

October 2013 German Unemployment Change

Although the October print missed flat estimates coming in at 2K, the jobless rate remained steady at 6.9% and the prior reading was revised lower by 1K. The release was good for 10 pips to the upside for EUR/USD, but momentum waned ahead of Euro Zone Consumer Confidence and US CPI prints later that day. Economists surveyed by Bloomberg had previously been predicting a 6.8% unemployment rate by 4Q 2013, but November’s survey release shows economists have revised their outlook to a year end 6.9% unemployment rate for Germany.

--- Written by David Song, Currency Analyst and Gregory Marks

More...

- European Central Bank (ECB) to Keep Rate at 0.50%; Forward-Guidance in Focus
- President Mario Draghi to Sounds More Dovish; Which Non-Standard Measure is Next?

Trading the News: European Central Bank Interest Rate Decision

The European Central Bank (ECB) is widely expected to adopt a more dovish tone for monetary policy as the Governing Council remains poised to implement more non-standard measures in 2014.

What’s Expected:
Time of release: 12/05/2013 12:45 GMT, 7:45 EST
Primary Pair Impact: EURUSD
Expected: 0.25%
Previous: 0.25%
DailyFX Forecast: 0.25%
Why Is This Event Important:

Given the recent headlines surrounding the ECB, there may be little in terms of new surprises as the Governing Council looks at a range of policy tools (Negative Deposit Rates, Long-Term Refinancing Operations, and Quantitative Easing), but the Euro may struggle to hold its ground following the policy meeting should President Mario Draghi layout a more detailed schedule for its easing cycle.

Expectations: Bearish Argument/Scenario

Release	Expected	Actual
Euro-Zone Retail Sales (MoM) (OCT)	0.0%	-0.2%
Euro-Zone Consumer Confidence (NOV A)	-14.0	-15.4
Euro-Zone Unemployment Rate (OCT)	12.2%	12.1%

The ECB may lay out a more detailed timeline for its easing cycle as the underlying weakness in the real economy heightens the threat for deflation, and a material shift in the policy outlook may spark a key reversal in the EURUSD as the pair appears to be carving a head-and-shoulders top.

Risk: Bullish Argument/Scenario

Release	Expected	Actual
Euro-Zone Consumer Price Index Estimate (YoY) (NOV)	0.8%	0.9%
Euro-Zone Economic Confidence (NOV)	98.0	98.5
Euro-Zone Gross Domestic Product (3Q P)	0.1%	0.1%

However, the ECB may not sound so dovish this time around amid the small uptick in price growth, and the Euro may continue to track higher over the near-term as it retains the bullish trend carried over from November.

How To Trade This Event Risk

Trading the ECB interest rate decision may not be as clear cut as some of our other trade setups as the press conference with President Draghi ends with a Q&A session

Bearish EUR Trade: ECB Lays Out Detailed Easing Schedule

• Need to see red, five-minute candle following the decision/statement to consider a short Euro trade
• If market reaction favors a short trade, sell EURUSD 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 Adopts More Neutral Tone

• Need green, five-minute candle to favor a long EURUSD trade
• Implement same strategy as the bearish euro trade, just in the opposite direction

Potential Price Targets For The Rate Decision

EURUSD Daily

• Continues to Threaten Trendline Support; Head-and-Shoulders Formation?
• Bearish Break in Relative Strength Index to Provide Confirmation/Conviction
• Interim Resistance: 1.3650-60 (78.6% expansion)
• Interim Support: 1.3290 (50.% retracement) to 1.3300 Pivot

Impact that the European Central Bank Interest Rate Decision has had on EUR during the last meeting

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
NOV 2013	11/07/2013 12:45 GMT	0.50%	0.25%	-180	-89

November 2013 European Central Bank Interest Rate Decision



In a surprise move, the European Central Bank cut its key benchmark interest rate last month by 25bps from 0.50% to 0.25%. The announcement was slightly delayed and this led to immediate selling of Euro crosses. When the release finally hit the wires, the Euro continued to come under pressure and was down almost 200 pips against the greenback a little under an hour after the announcement. ECB President Mario Draghi did his best to talk down the Euro further by making it clear that the central bank would consider negative deposit facility rates in an attempt to spur lending by Eurozone banks. After this rate cut, it looks increasingly more likely that such action would not be taken unless CPI prints start to echo signs of coming deflation.

--- Written by David Song, Currency Analyst

More...

- U.S. Non-Farm Payrolls to Climb 185K, Unemployment Rate to Narrow to 7.2%
- NFP(OCT) Topped Market Forecast for the First Time in the Last Four Prints

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

The U.S. economy is expected to add another 185K jobs in November and a positive development may highlight a bullish outlook for the dollar as it raises the Fed’s scope to taper the asset-purchase program at the December 17-18 meeting.

What’s Expected:

Time of release: 12/06/2013 13:30 GMT, 8:30 EST
Primary Pair Impact: EURUSD
Expected: 185K
Previous: 204K
Forecast: 160K to 200K

Why Is This Event Important:

A further improvement in the U.S. labor market may spark a more material shift in the policy outlook as the Fed retains its forward-guidance for monetary policy, and we may see a growing number of central bank officials show a greater willingness to move away from the easing cycle.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
Gross Domestic Product (Annualized) (QoQ) (3Q S)	3.1%	3.6%
ADP Employment Change (NOV)	170K	215K
Advance Retail Sales (MoM) (OCT)	0.1%	0.4%

The resilience in private sector consumption along with the pickup in growth may foster a larger-than-expected rise in NFP, and a positive development may fuel bets for a December taper as Fed officials refrain from undermining the timeline laid out by Chairman Ben Bernanke.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
ISM Non-Manufacturing (NOV)	55.0	53.9
Industrial Production (MoM) (OCT)	0.2%	-0.1%
NFIB Small Business Optimism (OCT)	93.5	91.6

However, NFPs may disappoint should the slowdown in business outputs drag on hiring, and a dismal employment report may spark a sharp selloff in the USD as it raises the risk of seeing the FOMC carry its highly accommodative policy stance into 2014.

How To Trade This Event Risk

Bullish USD Trade: NFP Increases 185K+; Unemployment Slips to 7.2%

• Need to see red, five-minute candle following the print to consider a short trade on EURUSD
• If market reaction favors a long dollar trade, sell EURUSD 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: November Job Growth Disappoints

• Need green, five-minute candle to favor a long EURUSD trade
• Implement same setup as the bullish dollar trade, just in the opposite direction

Potential Price Targets For The Release

EURUSD Daily

Chart -

• Clears Interim Resistance; Upward Trending Channel in Focus
• Bullish Relative Strength Index Points to Further Advances
• Interim Resistance: 1.3700 Pivot to 1.3716 (78.6 retracement)
• Interim Support: 1.3490 (50.0 retracement) to 1.3500 (38.2 retracement)

Impact that the U.S. Non-Farm Payrolls report has had on EUR/USD during the last month

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
OCT 2013	11/08/2013 13:30 GMT	119K	204K	-49	-45

October 2013 U.S. Non-Farm Payrolls



Last month’s NFP print covered the U.S. government shutdown in October and pushed economists to give a dismal 119K estimate. The 204K print ended up coming in at the highest since February and the second highest of 2013. The better than expected reading slammed EUR/USD lower and- after some chop- ended down only 49 pips after an hour. Data out of the U.S. (including employment components in ISM surveys and the ADP Employment Change) has been favorable over the past week, but those expecting a beat must take note of the revised estimate up to 185K. If we do see a beat, expect speculation of a December Fed taper to resume after one incredible week in U.S. data.

--- Written by David Song, Currency Analyst

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I always find it difficult to trade the Non Farm Payroll the first Friday of the month. When I go down the price goes up and vice versa.

- Reserve Bank of New Zealand Sees Rate Hike in 2014; More Verbal Intervention?
- RBNZ Governor Stephen Poloz to Speak at 15:05 & 19:10 EST

Trading the News: Reserve Bank of New Zealand Interest Rate Decision

The Reserve Bank of New Zealand’s (RBNZ) last meeting for 2013 may spark a bullish breakout in the NZDUSD should the central bank lay out a more detailed timeline for its exit strategy.

What’s Expected:
Time of release: 12/11/2013 20:00 GMT, 15:00 EST
Primary Pair Impact: NZDUSD
Expected: 2.50%
Previous: 2.50%
DailyFX Forecast: 2.50%

Why Is This Event Important:

Despite talks of a currency intervention, Governor Graeme Wheeler may sound more hawkish this time around as the central bank prepares to normalize monetary policy in 2014, and the growing threats of an asset-bubble may prompt the RBNZ to implement a rate hike within the first-half of the following year in order to balance the risks surrounding the region.

Expectations: Bullish Argument/Scenario

Release	Expected	Actual
QV Home Prices (YoY) (NOV)	--	9.2%
Employment Change (QoQ) (3Q)	0.5%	1.2%
Consumer Price Index (YoY) (3Q)	1.2%	1.4%

Indeed, rising home prices along with the ongoing pickup in private sector activity may heighten the risk of seeing a housing bubble, and Governor Wheeler may show a greater willingness to raise borrowing costs in the coming months as the economic recovery gradually gathers pace.

Risk: Bearish Argument/Scenario

Release	Expected	Actual
ANZ Commodity Price (NOV)	--	-0.4%
Retail Sales ex Inflation (QoQ) (3Q)	0.9%	0.3%
Private Wages ex Overtime (QoQ) (3Q)	0.5%	0.4%

However, Mr. Wheeler may take a more preserved approach in implementing the exit strategy amid the ongoing margin of slack in the real economy, and the central bank may merely reiterate the policy statement from the October meeting as the RBNZ continues to weigh the outlook for global growth.

How To Trade This Event Risk

Bullish NZD Trade: RBNZ Delivers Detailed Schedule for Normalization

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

Bearish NZD Trade: Wheeler Strengthens Verbal Intervention

• Need red, five-minute candle to favor a short NZDUSD trade
• Implement same strategy as the bullish New Zealand dollar trade, just in opposite direction

Potential Price Targets For The Rate Decision

NZDUSD Daily
Daily

• Threatens Downward Trending Channel From October; Carving Lower High?
• Topside RSI Break Points to Further NZDUSD Strength
• Interim resistance: 0.8060 (38.2% retracement) to 0.8100 Pivot
• Interim support: 0.8360 (23.6% expansion) to 0.8400 Pivot

Impact that the RBNZ Interest Rate Decision has had on NZD during the last meeting

Period	Data Released	Estimate	Actual	Pips Change (1 Hour post event )	Pips Change (End of Day post event)
OCT 2013	10/31/2013 20:00 GMT	2.50%	2.50%	flat	+5

October 2013 Reserve Bank of New Zealand Interest Rate Decision



Once again as economists expected, the RBNZ left its key benchmark interest rate at 2.50% and this led to little change in the Kiwi throughout the rest of the trading day. The central bank noted that the rate was likely to remain at 2.50% through 2013 and that a rate hike in 2014 would most likely occur. As Gov. Wheeler at the RBNZ hopes to keep the Kiwi low for as long as possible before the need to raise rates, a policy statement is likely to be muted as to not upset recent price action to the downside in the Kiwi. As for FX intervention to devalue to the New Zealand Dollar, market participants continue to take Gov. Wheeler’s rhetoric as just that.
--- Written by David Song, Currency Analyst

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