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Trading News Events

This is a discussion on Trading News Events within the General Discussion forums, part of the Trading Forum category; Trading the News: Bank of England Minutes What’s Expected: Time of release: 05/22/2013 8:30 GMT, 4:30 EDT Primary Pair Impact: ...

          
   
  1. #1
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    GBP/USD- Trading the Bank of England (BoE) Minutes

    Trading the News: Bank of England Minutes

    What’s Expected:
    Time of release: 05/22/2013 8:30 GMT, 4:30 EDT
    Primary Pair Impact: GBPUSD
    Expected: --
    Previous: --
    DailyFX Forecast: --

    Why Is This Event Important:

    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, and the fresh batch of central bank rhetoric may instill a bullish outlook for the sterling should the Monetary Policy Committee talk down bets for more quantitative easing. Although we anticipate to see another 6-3 split within the committee, the BoE may keep the Asset Purchase Facility capped at GBP 375B as it extends the Funding for Lending Scheme by another 12-months, and the policy statement may sound more hawkish this time around as the central bank sees a ‘modest’ recovery in the U.K.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    Jobless Claims Change (APR) -3.0K -7.3K
    Net Consumer Credit (MAR) 0.5B 0.5B
    Gross Domestic Product (QoQ) (1Q A) 0.1% 0.3%
    The Downside
    Release Expected Actual
    Consumer Price Index (YoY) (APR) 2.6% 2.4%
    Average Weekly Earnings inc Bonus (3MoY) (MAR) 0.7% 0.4%
    Retail Sales ex auto Fuel (MoM) (MAR) -0.6% -0.8%

    As the U.K. skirts a triple-dip recession, the ongoing improvement in the labor market along with the expansion in private sector credit may encourage the BoE to strike a more neutral to hawkish tone for monetary policy, and the central bank may sap bets for more QE as the economic recovery slowly picks up. However, easing price pressures along with the slowdown in private sector consumption may push the central bank to adopt a cautious outlook for the region, and the MPC may keep the door open to expand the balance sheet further in an effort to stem the downside risks for the U.K. economy.

    Potential Price Targets For The Rate Decision



    As the British Pound struggles to hold above the 50.0% Fibonacci retracement from the 2009 low to high around 1.5260, we may see the GBPUSD give back the rebound from March (1.4830), but the BoE Minutes may serve as the fundamental catalyst to spark a near-term rally in the pair as market participants weigh the prospects for future policy. Indeed, we would need a material shift in the policy outlook to see the pound-dollar carve out a higher low in May, and we may see another run at the 38.2% retracement (1.6190-1.6200) should we see a growing number of BoE officials scale back their willingness to further embark on quantitative easing.

    Trading the BoE Minutes may not be as clear cut as some of our previous trades, but a more hawkish rhetoric from the BoE may pave the way for a long British Pound trade as market participants scale back bets for additional monetary support. Therefore, if the MPC talks down bets for more QE, we will need to see a green, five-minute candle following the release to establish a long entry on two-lots of GBPUSD. Once these conditions are fulfilled, we will place the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will generate our first objective. The second target will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade hits its mark in order to preserve our profits.

    On the other hand, the BoE may keep the door open to expand its balance sheet further amid the persistent slack in the real economy, and the central bank may preserve a highly accommodative policy stance over the near to medium-term in an effort to get the economy on a more sustainable path. As a result, if the committee shows a greater willingness to expand the balance sheet further, we will implement the same strategy for a short pound-dollar trade as the long position mentioned above, just in the opposite direction.

    Impact that the Bank of England Inflation Report has had on GBP during the last quarter
    Period Data Released Estimate Actual Pips Change
    (1 Hour post event )
    Pips Change
    (End of Day post event)
    APR 2013 04/17/2013 8:30 GMT -- -- -61 -85

    April 2013 Bank of England Minutes



    The Bank of England (BoE) Minutes showed another 6-3 split within the Monetary Policy Committee, with Governor King, David Miles and Paul Fisher continuing to push for another GBP 25B in quantitative easing, but the central bank struck a rather dovish tone for monetary policy and said ‘the short-run trade-off between output growth and inflation meant that the Committee could return inflation to the target more quickly than currently expected only by taking policy actions that would provide less support to output.’ The cautious policy statement failed to prop up the British Pound, with the GBPUSD slipping back below the 1.5300 figure, and the sterling continued to lose ground throughout the day as the pair closed at 1.5238.
    --- Written by David Song, Currency Analyst


    DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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    Trading News Events

    Trading the News: U.S. Durable Goods Orders

    What’s Expected:
    Time of release: 05/24/2013 12:30 GMT, 8:30 EDT
    Primary Pair Impact: EURUSD
    Expected: 1.5%
    Previous: -5.7%
    DailyFX Forecast: 1.0% to 2.5%

    Why Is This Event Important:

    Orders for U.S. Durable Goods are expected to increase 1.5% in April and greater demands for large-ticket items should increase the appeal of the dollar as private sector consumption remains one of the leading drivers of growth. As a growing number of Fed officials turn increasingly upbeat toward the economy, it seems as though the FOMC will scale back on quantitative easing in the second-half of the year, and the committee may start to lay out a more detailed exit strategy in the coming months as the region gets on a more sustainable path.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    U. of Michigan Confidence (MAY P) 77.9 83.7
    Advance Retail Sales (APR) -0.3% 0.1%
    Change in Non-Farm Payrolls (APR) 140K 165K
    The Downside
    Release Expected Actual
    Consumer Credit (MAR) $15.600B $7.966B
    Personal Income (MAR) 0.4% 0.2%
    Gross Domestic Product (Annualized) (QoQ) (1Q A) 3.0% 2.5%

    The rebound in consumer sentiment paired with the resilience in household spending certainly bodes well for U.S. durable goods, and a positive development may further dampen expectations for more QE as the outlook for growth improves. However, subdued wage growth along with the slowdown in private sector credit may drag on demands for large-ticket items, and the FOMC may keep the door open to expand its asset purchase program beyond the $85/month target in an effort to encourage a stronger recovery.

    Potential Price Targets For The Release


    The head-and-shoulders formation in the EURUSD should continue to take shape as it carves out a lower top in May, and the pair looks poised for a move back towards the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 as the fundamental outlook for the U.S. economy improves. However, a dismal durable goods report may spark another test of the 38.2% retracement (1.3120), and we may see the bearish pattern fail to pan out should the developments coming out of the U.S. renew bets for additional monetary support.

    Forecasts for a rebound in durable goods certainly casts a bullish outlook for the greenback, and a positive development may pave the way for a long U.S. dollar trade as it raises the scope for faster growth. Therefore, if orders increase 1.5% or greater in April, we will need a red, five-minute candle following the release to establish a sell entry on two-lots of EURUSD. Once these conditions are met, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will generate our first target. The second objective will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade hits its mark in an effort to lock-in our gains.

    In contrast, demands for U.S. durable goods may taper off amid the persistent slack in the real economy, and a dismal print may drag on the greenback as the data fuels bets for more QE. As a result, if the report falls short of market expectations, we will carry out the same setup for a long euro-dollar trade as the short position mentioned above, just in the 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)
    MAR 2013 04/24/2013 12:30 GMT -3.0% -5.7% -2 +19

    March 2013 U.S. Durable Goods Orders



    Demands for U.S. durable goods tumbled 5.7% in March after expanding a revised 6.4% the month prior, while orders for Non-Defense Capital Goods excluding Aircrafts, a proxy for business investments, increased 0.2% during the same period amid forecasts for a 0.3% rise. Despite the weaker-than-expected print, the EURUSD edged lower following the release, but we saw the U.S. dollar struggle to hold its ground during the North American trade as the pair ended the day at 1.3014.
    --- Written by David Song, Currency Analyst

    DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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    GBP/USD- Trading the U.K. Consumer Price Report

    Trading the News: U.K. Consumer Price Index

    What’s Expected:
    Time of release: 05/21/2013 8:30 GMT, 4:30 EDT
    Primary Pair Impact: GBPUSD
    Expected: 2.6%
    Previous: 2.8%
    DailyFX Forecast: 2.6% to 2.8%

    Why Is This Event Important:

    The headline reading for U.K. inflation is expected to increase an annualized 2.6% in April following the 2.8% expansion the month prior, and easing price pressures may dampen the appeal of the British Pound as it raises the Bank of England’s (BoE) scope to further embark on quantitative easing. However, as the region is expected to face above-target inflation over the policy horizon, we may see the BoE switch gears later this year, and the central bank may start to discuss a tentative exit strategy in the second-half of 2013 as the economic recovery slowly picks up.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    Jobless Claims Change (APR) -3.0K -7.3K
    Net Consumer Credit (MAR) 0.5B 0.5B
    Gross Domestic Product (QoQ) (1Q A) 0.1% 0.3%
    The Downside
    Release Expected Actual
    Average Weekly Earnings inc Bonus (3MoY) (MAR) 0.7% 0.4%
    Retail Sales ex auto Fuel (MoM) (MAR) -0.6% -0.8%
    Producer Price Index- Input n.s.a. (YoY) (MAR) 0.7% 0.4%

    Firms in the U.K. may boost consumer prices amid the ongoing expansion in consumer credit along with the improvements in the labor market, and a strong inflation print should prop up the sterling as it dampens bets for more QE. However, subdued wage growth paired with the slowdown in private sector consumption may push businesses to conduct heavy discounting, and a weaker-than-expected inflation print may drag on the sterling as it fuels bets for additional monetary support.

    Potential Price Targets For The Release



    Although the GBPUSD failed to maintain the upward trend from earlier this year, the pair appears to be carving out a higher low in May, and we may see the pound-dollar work its way back towards the 38.2% Fibonacci retracement from the 2009 low to high around 1.5680 amid the shift in the policy outlook. However, we may see the GBPUSD struggle to hold above the 50.0% retracement (1.5260) on a soft inflation print, and the sterling may struggle to hold its ground ahead of the BoE Minutes due out on May 22 should the consumer price report renew bets for more BoE easing.

    Forecasts for a slower rate of inflation casts a bearish outlook for the sterling , but sticky price growth may pave the way for a long British Pound trade as it dampens the scope for additional monetary support. Therefore, if the CPI tops market expectations, we will need a green, five-minute candle following the development to establish a long entry on two-lots of GBPUSD. Once these conditions are met, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will generate our first objective. The second target will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade hits its mark in an effort to protect our gains.

    On the other hand, the persistent weakness in wage growth along with the drop in retail spending may drag on inflation, and a weak CPI print may spark a sharp selloff ahead of the BoE Minutes as it fuels speculation for more easing. As a result, if price growth slows to an annualized pace of 2.6% or lower, we will implement the same strategy for a short pound-dollar trade as the long position laid out above, just in the opposite direction.

    Impact that the U.K. Consumer Price report has had on GBP during the last month
    Period Data Released Estimate Actual Pips Change
    (1 Hour post event )
    Pips Change
    (End of Day post event)
    MAR 2013 04/16/2013 8:30 GMT 2.8% 2.8% +22 +76

    March 2013 U.K. Consumer Price Index



    Consumer prices in the U.K. increased another annualized 2.8% in March as businesses continued to scale back on discounting, while the core rate of inflation advanced 2.4% during the same period amid forecasts for a 2.3%. Although the initial reaction to U.K. CPI was fairly muted, the British Pound firmed up throughout the day, with the GBPUSD climbing back above the 1.5300 figure, and the sterling continued to gain ground during the North American trade as the pair closed at 1.5360.
    --- Written by David Song, Currency Analyst

    DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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    USD Correction Limited by FOMC Policy- AUD Remains Oversold

    Index Last High Low Daily Change (%) Daily Range (% of ATR)
    DJ-FXCM Dollar Index 10828.74 10848.87 10792.96 0.32 80.51%



    The Dow Jones-FXCM U.S. Dollar Index is trading 0.32 percent higher on the day after the U.S. Consumer Confidence survey and the Richmond Fed Manufacturing report beat market expectations, and the bullish sentiment surrounding the greenback may gather pace in the days ahead as the fundamental outlook for the world’s largest economy improves. As the dollar appears to be carving out a higher low during the final days of May, we may see another run at the 10,900 ahead of the next FOMC interest rate decision on June 19, and the shift in the policy outlook should prop up the dollar over the near to medium-term as market participants scale back bets for more monetary support. Although the dollar cleared the 23.6 percent Fibonacci expansion around 10,832, we’re seeing the 30-minute relative strength index fall back from a high of 73, and we may see the dollar consolidate over the next 24-hours of trading as the market reaction tapers off.



    Indeed, the daily chart calls for an more meaningful correction in the USDOLLAR as the relative strength index comes off of resistance (78), but we may see a shallow pullback in the index as a growing number of Fed officials see scope to taper the asset purchase program in the coming months. As Moody’s Investor Services raises its outlook for the U.S. banking system to stable from negative, we may see a greater discussion to halt the easing cycle towards the end of the year, and the central bank may start to lay out a more detailed exit strategy in the second-half of 2013 as the recovery gradually gathers pace. In turn, we will continue to look for a higher low in the USDOLLAR, and will look to buy dips in the index as the interest rate outlook starts to pick up.



    Three of the four components weakened against the greenback, led by a 1.10 percent decline in the Japanese Yen, while the Australian dollar bucked the trend as the AUDUSD climbed 0.12 percent. The aussie-dollar looks poised for a near-term correction as the relative strength index bounces back from a low of 19, but we may see the pair continue to consolidate above the 0.9600 figure as the oscillator struggles to push above the 30 figure. Nevertheless, as Credit Suisse overnight index swaps continue to show expectations for another 25bp rate cut from the Reserve Bank of Australia (RBA), we will maintain a bearish outlook on a longer-term scale, and the downward trend dating back to 2011 should persistently take shape in the coming months as Governor Glenn Stevens retains a dovish tone for monetary policy. In turn, we will wait for the correction to sell the AUDUSD, but we may see a fresh low before the bounce should the fundamental developments coming out of the $1T economy disappoint.
    --- Written by David Song, Currency Analyst


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    USD/CAD- Trading the Bank of Canada (BoC) Rate Decision

    Trading the News: Bank of Canada Interest Rate Decision

    What’s Expected:
    Time of release: 05/29/2013 14:00 GMT, 10:00 EDT
    Primary Pair Impact: USDCAD
    Expected: 1.00%
    Previous: 1.00%
    DailyFX Forecast: 1.00%

    Why Is This Event Important:

    Although the Bank of Canada (BoC) is widely expected to keep the benchmark interest rate at 1.00% in May, the fresh batch of central bank rhetoric accompanying the rate decision may dampen the appeal of the Canadian dollar should Governor Mark Carney adopt a more dovish tone for monetary policy. As Canada faces a slowing recovery, the BoC may scale back its willingness to deliver a rate hike, and the central bank remains poised to carry its wait-and-see approach into the second-half of the year in an effort to stem the downside risks for growth and inflation.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    Existing Home Sales (MoM) (APR) -- 0.6%
    Building Permits (MoM) (MAR) 1.3% 8.6%
    Gross Domestic Product (MoM) (FEB) 0.2% 0.3%
    The Downside
    Release Expected Actual
    Retail Sales (MoM) (MAR) 0.1% 0.0%
    Consumer Price Index (YoY) (APR) 0.6% 0.4%
    Net Change in Employment (APR) 15.0K 12.5K

    As rising home prices paired with the expansion in private sector lending raises the threat of an asset bubble, Governor Carney has persistently talked up bets for a rate hike, and the central bank head may show a greater willingness to normalize monetary policy as the fundamental outlook for the United States – Canada’s largest trading partner – improves. However, the slowdown in retail sales along with the ongoing slack in the real economy may prompt the BoC to adopt a more dovish tone for monetary policy, and the central bank may scale back its willingness to raise the benchmark interest rate in order to encourage a stronger recovery.

    Potential Price Targets For The Rate Decision



    Although the USDCAD appears to be breaking out of the consolidation phase dating back to 2011, the pair could be carving out a near-term top ahead of the BoC rate decision as it struggles to clear the 1.0400 handle. Nevertheless, the deviation in the policy outlook may produce further advances in the exchange rate as the Federal Reserve appears to be slowly moving away from its easing cycle, and the Canadian dollar may weaken further in the second-half of the year as Governor Carney warns of a slowing recovery.

    How To Trade This Event Risk

    As the BoC retains its current policy stance, we will be closely watching the statement accompanying the rate decision, and the fresh batch of central bank rhetoric may set the stage for a long Canadian dollar trade amid bets for higher borrowing costs. Therefore, if Governor Carney sees a greater case to raise the benchmark interest rate from 1.00%, we will need to see a red, five-minute candle following the announcement to generate a sell entry on two-lots of USDCAD. Once these conditions are met, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will establish our first objective. The second target will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade hits its mark in order to lock-in our gains.

    On the other hand, the slowdown in household spending paired with the renewed slack in private sector activity may lead the BoC to carry a wait-and-see approach in the second-half of the year, and we may see Governor Carney sound more dovish this time around as the fundamental outlook for the region deteriorates. As a result, if the central bank head see limited scope for a rate hike, we will carry out the same setup for a long dollar-loonie trade as the short position mentioned above, just in the opposite direction.
    Impact that the Bank of Canada Interest Rate Decision has had on CAD during the last meeting

    Period Data Released Estimate Actual Pips Change
    (1 Hour post event )
    Pips Change
    (End of Day post event)
    APR 2013 04/17/2013 14:00 GMT 1.00% 1.00% +7 -1

    April 2013 Bank of Canada Interest Rate Decision



    Although the Bank of Canada kept the door open to raise the benchmark interest rate from1.00%, Governor Mark Carney struck a rather cautious tone for the region and warned that ‘a material degree of slack has re-emerged in the Canadian economy.’ The rather dovish tone for monetary policy dragged on the Canadian dollar, with the USDCAD pushing back towards parity, but the market reaction failed to gather momentum as the pair ended the day at 1.0263.

    --- Written by David Song, Currency Analyst


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    AUD/USD- Trading the Reserve Bank of Australia (RBA) Meeting

    Trading the News: Reserve Bank of Australia Interest Rate Decision

    What’s Expected:
    Time of release: 06/04/2013 4:30 GMT, 0:30 EDT
    Primary Pair Impact: AUDUSD
    Expected: 2.75%
    Previous: 2.75%
    DailyFX Forecast: 2.75%

    Why Is This Event Important:

    Although the Reserve Bank of Australia (RBA) is widely expected to keep the benchmark interest rate at 2.75% in June, the policy statement accompanying the rate decision may drag on the exchange rate should Governor Glenn Stevens carry the easing cycle into the second-half of the year. However, the RBA may scale back its dovish tone for monetary policy as the previous rate cuts continue to work way through the real economy, and the central bank may retain its current policy in the third-quarter amid the bright signs coming out of the region.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    Private Sector Credit (MoM) (APR) 0.3% 0.3%
    Building Approvals (MoM) (APR) 4.0% 9.1%
    Employment Change (QoQ) (APR) 11.0K 50.1K
    The Downside
    Release Expected Actual
    Retail Sales s.a. (MoM) (APR) 0.3% 0.2%
    NAB Business Confidence (APR) -- -2
    Consumer Prices (YoY) (1Q) 2.8% 2.5%

    The ongoing expansion in private sector credit along with the sharp rebound in employment may encourage the RBA to adopt an improved outlook for the $1T economy, and the fresh batch of central bank rhetoric may increase the appeal of the higher-yielding currency should Governor Stevens talk down bets for lower borrowing costs. However, the slowdown in household spending paired with the drop in business confidence may further dampen the outlook for inflation, and the RBA may keep the door open to deliver another rate cut in an effort to encourage a stronger recovery.

    Potential Price Targets For The Rate Decision



    As the relative strength index on the AUDUSD snaps back from oversold territory, we would need to see the RBA scale back its dovish tone for monetary policy to see the rebound from 0.9527 gather pace. However, as the aussie-dollar struggles to push back above the 23.6% Fibonacci retracement from the 2011 high to low around 0.9780-90, a dovish policy statement may keep the pair range-bound over the near-term, and we may see the downward trend continue to take shape should the RBA see scope to introduce further rate cuts.

    How To Trade This Event Risk

    Trading the given event risk may not be as clear cut as some of our previous trades as the RBA is expected to retain its current policy, but a less-dovish statement from the central bank could pave the way for a long Australian dollar trade as market participants scale back bets for a rate cut. Therefore, if Governor Stevens adopts an improved outlook for the $1T economy, we will need to see a green, five-minute candle following the announcement to generate a long entry on two-lots of AUDUSD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will establish our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in order to secure our gains.

    On the other hand, the persistent slack in the real economy paired with the weakening outlook for inflation may keep the door open for further rate cuts, and Governor Stevens may show a greater willingness to push the benchmark interest rate to a fresh record-low in an effort to stem the downside risks surrounding the region. As a result, if the RBA continues to strike a dovish tone for monetary policy, we will carry out the same setup for a short aussie-dollar as the long position mentioned above, just in reverse.
    Impact that the RBA Interest Rate Decision has had on AUD during the last meeting

    Period Data Released Estimate Actual Pips Change
    (1 Hour post event )
    Pips Change
    (End of Day post event)
    MAY 2012 05/07/2013 4:30 GMT 3.00% 2.75% -39 -51

    May 2013 Reserve Bank of Australia Interest Rate Decision



    The Reserve Bank of Australia surprised with a 25bp rate cut, with Governor Glenn Stevens pushing the benchmark interest rate to a fresh record-low of 2.75%, and the central bank may continue to embark on its easing cycle in an effort to encourage a stronger recovery. Indeed, the rate cut dragged on the Australian dollar, with the AUDUSD slipping below the 1.0200 figure, and the higher-yielding currency struggled to hold its ground throughout the day as the pair closed at 1.0183.

    --- Written by David Song, Currency Analyst
    To be added to David's e-mail distribution list, please follow this link.
    DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.


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    Trading the Australian Gross Domestic Product (GDP) Report

    Trading the News: Australia Gross Domestic Product
    What’s Expected:
    Time of release: 06/05/2013 1:30 GMT, 21:30 EDT
    Primary Pair Impact: AUDUSD
    Expected: 0.7%
    Previous: 0.6%
    DailyFX Forecast: 0.5% to 0.7%

    Why Is This Event Important:

    The Australian economy is expected to grow another 0.7% following the 0.6% expansion during the last three-months of 2012, and the faster rate of growth may prop up the aussie as it dampens speculation for lower borrowing costs. However, as the Reserve Bank of Australia (RBA) keeps the door open to push the benchmark interest rate to a fresh record-low, a dismal growth report may encourage Governor Glenn Stevens to further embark on the easing cycle in the second-half of the year, and the higher-yielding currency may face additional headwinds in the coming months as the region faces an uneven recovery.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    Private Sector Credit (MoM) (APR) 0.3% 0.3%
    Employment Change (QoQ) (APR) 11.0K 50.1K
    Trade Balance (MAR) 0M 307M
    The Downside
    Release Expected Actual
    Retail Sales s.a. (MoM) (APR) 0.3% 0.2%
    Westpac Consumer Confidence s.a. (MoM) (MAY) -- -7.0%
    NAB Business Confidence (APR) -- -2

    The rebound in global trade along with the pickup in employment may produce a strong GDP print, and a positive development may increase the appeal of the Australian dollar as it limits the RBA’s scope to deliver another rate cut in the second-half of 2013. However, Governor Stevens may preserve a dovish tone for monetary policy amid the ongoing weakness in the real economy, and the central bank may push the benchmark interest rate to a fresh record-low later this year in an effort to encourage a stronger recovery.

    Potential Price Targets For The Release



    Despite the rebound in the relative strength index, the AUDUSD is struggling to push back above the 23.6% Fibonacci retracement from the 2011 high to low around 0.9780-90, and we may see the pair continue to carve a lower top in June should the GDP report fuel speculation for additional monetary support. However, a positive development may fuel a key reversal in the Australian dollar, and we may see the AUDUSD work its way back towards parity should the report dampen expectations for lower borrowing costs.

    How To Trade This Event Risk

    Forecasts for a faster rate of growth instills a bullish outlook for the higher-yielding currency, and a positive development may set the stage for a long Australian dollar trade as it dampens bets for another rate cut. Therefore, if the growth rate expands 0.7% or greater during the first three-months of the year, we will need to see a green, five-minute candle following the print to establish a buy entry on two-lots of AUDUSD. Once these conditions are met, we place the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will generate our first target. The second objective will be based on discretion, and we will move the stop on the remaining position to cost once the first trade hits its mark in order to protect our profits.

    On the other hand, the slowdown in private consumption along with the drop on confidence may continue to drag on the real economy, and Governor Stevens may show a greater willingness to push the benchmark interest rate to a fresh record-low in an effort to encourage a stronger recovery. As a result, if the GDP report falls short of market expectations, we will carry out the same setup for a short aussie-dollar as the long position mentioned above, just in reverse.

    Impact that Australia GDP has had on AUD during the last quarter
    Period Data Released Estimate Actual Pips Change
    (1 Hour post event )
    Pips Change
    (End of Day post event)
    4Q 2012 03/06/2013 0:30 GMT 0.6% 0.6% +13 -27

    4Q 2012 Australia GDP



    Australia grew another 0.6% during the last three-months of 2012 after expansion a revised 0.7% in the third quarter, and the slowing recovery may prompt the Reserve Bank of Australia to push the benchmark interest rate to a fresh record-low in an effort to encourage a stronger recovery. Nevertheless, the in-line print propped up the Australian dollar, with the AUDUSD advancing to the 1.0300 figure, but the higher-yielding currency struggled to hold its ground throughout the day as the pair closed at 1.0234.
    --- Written by David Song, Currency Analyst



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    EUR/USD- Trading the European Central Bank (ECB) Rate Decision

    Trading the News: European Central Bank Interest Rate Decision
    What’s Expected:
    Time of release: 06/06/2013 11:45 GMT, 7:45 EDT
    Primary Pair Impact: EURUSD
    Expected: 0.50%
    Previous: 0.50%
    DailyFX Forecast: 0.50%

    Why Is This Event Important:

    Although the European Central Bank (ECB) is widely expected to keep the benchmark interest rate at 0.50% in June, the Governing Council may show a greater willingness to further embark on its easing cycle as the region struggles to emerge from the recession. As the persistent weakness in the euro-area threatens price stability, ECB President Mario Draghi may look to purchase Asset-Backed Securities (ABS) in the second-half of the year, but we may also see a greater discussion for a negative interest-rate policy (NIRP) as the governments operating under the single currency become increasingly reliant on monetary support.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    Euro-Zone Consumer Price Index Core (YoY) (MAY A) 1.1% 1.2%
    Euro-Zone Economic Confidence (MAY) 89.4 89.4
    Euro-Zone Trade Balance s.a. (MAR) 11.5B 18.7B
    The Downside
    Release Expected Actual
    Euro-Zone Retail Sales (MoM) (APR) -0.2% -0.5%
    Euro-Zone Gross Domestic Product s.a. (QoQ) (1Q P) -0.2% -0.2%
    Euro-Zone Unemployment Rate (APR) 12.2% 12.2%

    Sticky price growth along with the pickup in global trade may prompt the ECB to soften its dovish tone for monetary policy, and the central bank may endorse a neutral policy stance for the second-half of the year as the region is expected to return to growth towards the end of 2013. However, record-high unemployment paired with the ongoing weakness in private sector consumption may spark a greater discussion for additional monetary support, and the ECB may implement more non-standard measures in the coming months to address the risks surrounding the region.

    Potential Price Targets For The Rate Decision



    As the EURUSD continues to carve a lower top just below the 38.2% Fibonacci retracement from the 2009 high to the 2010 low around 1.3120, the ECB interest rate decision may serve as the fundamental catalyst to put the head-and-shoulders formation into play, and we may see the central bank implement a range of policy tools in the second-half of the year in order to steer the region out of recession. However, a less dovish ECB may spark another run at the 1.3200 handle, and we may see a bullish formation take shape should President Draghi talk down speculation for additional monetary support.

    How To Trade This Event Risk

    Trading the given event risk may not be as clear cut as some of our previous trades as the ECB preserves its current policy, but the fresh batch of central bank rhetoric may pave the way for a long Euro trade should the Governing Council raise its fundamental outlook for the euro-area. Therefore, if President Draghi strikes a more neutral tone for monetary policy and talks down bets for more easing, we will need a green, five-minute candle following the statement to generate a buy entry on two-lots of EURUSD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will establish our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in an effort to secure our profits.

    In contrast, the Governing Council may turn increasingly cautious towards the economy as the region remains mired in recession, and we may see a growing number of ECB officials show a greater willingness to ease policy further in order to stem the downside risks for growth and inflation. As a result, if Mr. Draghi pledges to introduce more non-standard measures in the second-half of the year, we will carry out the same strategy for a short euro-dollar trade as the long position mentioned above, just in the opposite direction.

    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)
    MAY 2013 05/02/2013 11:45 GMT 0.50% 0.50% +27 -88

    May 2013 European Central Bank Interest Rate Decision



    The European Central Bank pushed the benchmark interest rate to a fresh-record low of 0.50% in May in an effort to steer the region out of recession, but the Governing Council may have little choice but to carry its easing cycle into the second-half of the year as the governments operating under the single currency become increasingly reliant on monetary support. Despite the initial bounce in the EURUSD, the pair struggled to hold above the 1.3200 handle as ECB President Mario Draghi struck a dovish tone for monetary policy, and the euro continued to lose ground throughout the North American trade as the pair ended the day at 1.3063.
    --- Written by David Song, Currency Analyst


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    EUR/USD- Trading the U.S. Non-Farm Payrolls (NFP) Report

    Trading the News: U.S. Non-Farm Payrolls
    What’s Expected:
    Time of release: 06/07/2013 12:30 GMT, 8:30 EDT
    Primary Pair Impact: EURUSD
    Expected: 165K
    Previous: 165K
    DailyFX Forecast:160K to 200K

    Why Is This Event Important:

    The world’s largest economy is expected to add another 165K job in May and a positive development should heighten the appeal of the U.S. dollar as it limits the Fed’s scope to expand the balance sheet further. In turn, the FOMC may show a greater willingness to taper the asset purchase program in the second-half of the year, and the central bank may switch gears in the second-half of the year as the economic recovery gradually gathers pace.
    Recent Economic Developments
    The Upside

    Release Expected Actual
    Durable Goods Orders (APR) 1.5% 3.3%
    New Home Sales (APR) 1.9% 2.3%
    Advance Retail Sales (APR) -0.3% 0.1%
    The Downside
    Release Expected Actual
    ADP Employment Change (MAY) 165K 135K
    ISM Manufacturing (MAY) 51.0 49.0
    Gross Domestic Product (Annualized) (QoQ) (1Q P) 2.5% 2.4%

    The resilience in private sector consumption along with budding recovery in the housing market may encourage a marked rise in employment, and a strong print may prompt a greater discussion to scale back on quantitative easing as the region gets on a more sustainable path. However, the persistent slack in the real economy paired with the lull in business outputs may drag on the labor market, and we may see businesses scale back on hiring in order to boost their bottom line.

    Potential Price Targets For The Release



    As the EURUSD clears the May high (1.3241), the sharp advance in the exchange rate dampens the scope of seeing the head-and-shoulders formation pan out, and we may see the euro-dollar continue to retrace the decline from earlier this year should the NFP report renew speculation for more QE. However, a strong employment report may trigger a sharp rebound in the greenback, and the EURUSD may make another run at the 23.6% Fibonacci retracement from the 2009 high to the 2010 low around 1.2640-50 should the data further the case to taper the asset-purchase program.

    How To Trade This Event Risk

    Trading the given event risk may not be as clear cut as some of our other trades as employment is expected to grow another 165K in May, but an upbeat print may pave the way for a long U.S. dollar trade as it dampens speculation for more quantitative easing. Therefore, if NFPs top market expectations, we will need a red, five-minute candle following the report to generate a sell entry on two-lots of EURUSD. Once these conditions are met, we will set the initial stop at the nearby swing high or a reasonable distance from the entry, and this risk will establish our first target. The second objective will be based on discretion, and we will move the stop on the second lot to breakeven once the first trade hits its mark in order to preserve our profits.

    On the other hand, the ongoing weakness in the real economy may continue to drag on the labor market, and a dismal print may weigh on the greenback as it fuels bets for additional monetary support. As a result, if the employment report disappoints, we will implement the same strategy for a long euro-dollar trade as the short position laid out above, just in reverse.

    Impact that the U.S. Non-Farm Payrolls 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)
    APR 2013 05/03/2013 12:30 GMT 140K 165K -60 -26

    April 2013 U.S. Non-Farm Payrolls



    U.S. Non-Farm Payrolls increased another 165K in April following a revised 138K expansion the month prior, while the unemployment rate unexpectedly slipped to 7.5% from 7.6% as discouraged workers continued to leave the labor force. Indeed the U.S. dollar tracked higher following the positive print, with the EURUSD slipping back below the 1.3000 handle, but the greenback struggled to hold its ground throughout the North American trade as the pair closed at 1.3113.
    --- Written by David Song, Currency Analyst


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    GBP/USD- Trading the U.K. Jobless Claims Report

    Trading the News: U.K. Jobless Claims Change

    What’s Expected:
    Time of release: 06/12/2013 8:30 GMT, 4:30 EDT
    Primary Pair Impact: GBPUSD
    Expected: -5.0K
    Previous: -7.3K
    DailyFX Forecast: -10.0K to -5.0K

    Why Is This Event Important:

    U.K. Jobless Claims are expected to contract another 5.0K in May and the ongoing improvement in the labor market should increase the appeal of the British Pound as the region skirts a triple-dip recession. As the Bank of England (BoE) sees a sustainable recovery in Britain, the Monetary Policy Committee appears to be slowly moving away from its easing cycle, and we may see a growing number of central bank officials adopt a more hawkish tone for monetary policy as the board continues to operate under its inflation-targeting framework.

    Recent Economic Developments
    The Upside
    Release Expected Actual
    Purchasing Manager Index - Services (MAY) 53.1 54.9
    Purchasing Manager Index - Manufacturing (MAY) 50.3 51.3
    Gross Domestic Product (QoQ) (1Q P) 0.3% 0.3%
    The Downside
    Release Expected Actual
    Mortgage Approvals (APR) 54.6K 53.7K
    Retail Sales ex Auto Fuel (MoM) (APR) 0.1% -1.4%
    Total Business Investments (QoQ) (1Q P) -- -0.4%

    The pickup in manufacturing and service-based activity may encourage U.K. firms to expand their labor force, and a positive development should produce a bullish reaction in the sterling as market participants scale back bets for more quantitative easing. However, the slowdown in private sector consumption may prompt businesses to scale back on hiring, and a dismal development may weigh on the exchange rate as it renews speculation for additional monetary support.

    Potential Price Targets For The Release



    Although the shift in the BOE’s policy outlook favors a bullish outlook for the British Pound, the GBPUSD appears to be capped by the 38.2% Fibonacci retracement from the 2009 low to high around 1.5680, and we may see the pair consolidate further as the relative strength index comes up against overbought territory. Nevertheless, as an upward trending channel appears to be taking shape, we will look to buy pullbacks in the GBPUSD on a longer-term scale, and the sterling may outperform in the second-half of the year as the BOE appears to be slowly moving away from its easing cycle.

    How To Trade This Event Risk

    Forecasts for another drop in U.K. Jobless Claims instills a bullish outlook for the sterling, and a positive development may pave the way for a long British Pound trade as market participants scale back bets for more quantitative easing. Therefore, if claims contract 5.0K or greater in May, we will need to see a green, five-minute candle following the release to generate a buy entry on two-lots of GBPUSD. Once these conditions are met, we will set the initial stop at the nearby swing low or a reasonable distance from the entry, and this risk will establish our first target. The second objective will be based on discretion, and we will move the stop on the second lot to cost once the first trade hits its mark in an effort to preserve our profits.

    On the other hand, the persistent slack in the real economy may continue to drag on the labor market, and a dismal development may spark a selloff in the sterling as it dampens the outlook for growth. As a result, if the report misses market expectations, we will carry out the same strategy for a short pound-dollar trade as the long position laid out above, just in the opposite direction.

    Impact that the U.K. Jobless Claims 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)
    APR 2013 05/15/2013 8:30 GMT -3.0K -7.3K +48 +11

    April 2013 U.K. Jobless Claims Change



    Unemployment claims slipped another 7.3K in April following a revised 9.9K contraction the month prior, while the claimant count rate narrowed to 4.5% from 4.6% to mark the lowest rate since April 2011. Indeed, the British Pound tracked higher following the better-than-expected print, with the GBPUSD climbing above the 1.5250 region, but we saw the sterling consolidate during the North American trade as the pair closed at 1.5233.

    --- Written by David Song, Currency Analyst


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