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NZD/USD Retains Bearish Momentum Ahead of RBNZ- 0.7175 in Focus (based on dailyfx article)
Trading the News: U.S. Retail Sales (based on dailyfx article)
A rebound in U.S. Retail Sales may heighten the bullish sentiment surrounding the greenback and spur a further decline in EUR/USD as it fuels speculation for higher borrowing-costs in the world’s largest economy.What’s Expected:
Why Is This Event Important:
The Fed may stay on course to normalize monetary policy in mid-2015 as the central bank anticipates lower energy prices to boost private-sector consumption – one of the leading drivers of growth – and Chair Janet Yellen may adopt a more hawkish tone at the March 18 meeting as the board remains confident in achieving the 2% target for inflation.
Nevertheless, subdued wages along with the slowdown in private-sector credit may drag on retail spending, and another unexpected contraction may further delay the Fed’s normalization cycle as the ongoing weakness in household earnings undermines the central bank’s scope to achieve the inflation target.
How To Trade This Event Risk
Bullish USD Trade: U.S. Retail Sales Rebounds 0.3% or Greater
- Need red, five-minute candle following a positive print to consider a short EUR/USD trade.
- If market reaction favors a bullish dollar trade, sell EUR/USD with two separate position.
- Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
- Move stop to entry on remaining position once initial target is hit; set reasonable limit.
Bearish USD Trade: Household Spending Disappoints- Need green, five-minute candle to favor a long EUR/USD trade.
- Implement same setup as the bullish dollar trade, just in reverse.
Potential Price Targets For The ReleaseEURUSD Daily Chart
- Despite the long-term bearish outlook for EUR/USD, will
keep a close eye on the Relative Strength Index (RSI) as it approaches
key support levels.
- Interim Resistance: 1.1185 (23.6% expansion) to 1.1210 (61.8% retracement)
- Interim Support: 1.0375 (78.6% expansion) to 1.0400 pivot
Impact that the U.S. Retail Sales report has had on EUR/USD during the previous month(1 Hour post event )
(End of Day post event)
2014
EURUSD M5: 44 pips price movement by USD - Retail Sales news event
U.S. Retail Sales declined another 0.8% in January following a 0.9% contraction the month prior. Despite lower energy costs, discretionary spending at department stores slipped for the second consecutive month, while demand for motor vehicles and parts slid another 0.5% during the same period. Following the worse-than-expected print, the greenback struggled to hold its ground, with EUR/USD climbing above the 1.1400 handle and closed the day at 1.1428.
MetaTrader Trading Platform Screenshots
EURUSD, M5, 2015.03.12
MetaQuotes Software Corp., MetaTrader 5
EURUSD M5: 65 pips price movement by USD - Retail Sales news event
MetaTrader Trading Platform Screenshots
NZDUSD, M5, 2015.03.12
MetaQuotes Software Corp., MetaTrader 5
NZDUSD M5: 45 pips price movement by USD - Retail Sales news event
NZD/USD rallies over 1% after RBNZ holds rates (based on nasdaq article)
The New Zealand dollar rallied over 1% against its U.S. counterpart on Thursday, after the Reserve Bank of New Zealand left interest rates on hold, citing strong economic growth.
NZD/USD hit 0.7389 during late Asian trade, the pair's highest since March 9; the pair subsequently consolidated at 0.7408, rallying 1.58%.
The pair was likely to find support at 0.7249, the low of March 10 and resistance at 0.7519, the high of March 6.
In a widely expected move, the RBNZ held its benchmark interest rate at 3.50% and signalled that borrowing costs should remain unchanged through 2017.
Commenting on the decision, RBNZ Graeme Wheeler said "Our situation is quite different from some of those countries that have changed monetary policy or cut interest rates."
The economy is "growing at 3.25%, perhaps 3.5% and we're projecting it to continue to grow at those sorts of rates over the next two years," he added.
Meanwhile, the greenback weakened as investors eyed data on U.S. retail sales and initial jobless claims due later in the day, after the currency rallied broadly on the back of last week's strong employment report.
The kiwi was also higher against the euro, with EUR/NZD dropping 0.79% to 1.4343.
NZD/USD Technical Analysis: Recovery Seen as Corrective (based on dailyfx article)
The New Zealand Dollar launched a recovery against its US counterpart, putting in the largest daily advance in two months. Near-term resistance is at 0.7444, the 23.6% Fibonacci expansion, with a break above that on a daily closing basis exposing the 14.6% level at 0.7508.Alternatively, a reversal below the 38.2% Fibat 0.7340 opens the door for a challenge of the 50% expansion at 0.7256.
We see the dominant NZDUSD trend as bearish. As such, we will treat any on-coming gains as corrective, looking to enter short at a more attractive level rather than a seeing the move higher as a buying opportunity. In the meantime, we remain flat.
AUDIO - Rate Spotting with Don Dawson
With so many speculating on when the fed will ultimately raise interst rates, Master trader Don Dawson prefers to follow the money! Back in September of 2014, the money said the big boys were betting on June for a hike, and things have changed! Don walks through his method for spotting what the institutions are doing, and also offers some insights into popular commodity futures such as grains and interest rate products.
Trading News Events: Canada Employment Change (based on dailyfx article)
A 5.0K contraction in Canada Employment paired with an uptick in the jobless may drag on the loonie and produce fresh 2015-highs in USD/CAD as it fuels speculation for a further reduction in the Bank of Canada’s (BoC) benchmark interest rate.
What’s Expected:
Why Is This Event Important:
Even though BoC Governor Stephen Poloz endorses a wait-and-see approach, a dismal labor report may encourage the central bank to adopt a more dovish tone at the April 15 policy meeting in order to encourage a stronger recovery.
Nevertheless, lower input costs accompanied by the pickup in private sector activity may encourage Canadian firms to boost their labor force, and a positive development may keep the USD/CAD range intact as the BoC looks to retain its current policy over the near-term.
How To Trade This Event Risk
Bearish CAD Trade: Canada Sheds 5.0K Jobs or Greater
- Need green, five-minute candle following the report for a potential long USD/CAD trade
- If market reaction favors a bearish loonie trade, buy USD/CAD with two separate position
- Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to breakeven on remaining position once initial target is met, set reasonable limit
Bullish CAD Trade: Employment Report Exceeds Market Expectations- Need red, five-minute candle to consider a short USD/CAD position
- Carry out the same setup as the bearish Canadian dollar trade, just in the opposite direction
Potential Price Targets For The ReleaseUSDCAD Daily Chart
- Favor the approach to ‘buy-dips’ in USD/CAD following
the bullish RSI break, but seems as though the dollar-loonie needs a
fundamental catalyst for a break/close above the February high (1.2797)
- Interim Resistance: 1.2797 (Feb. high) to 1.2800 (38.2% expansion)
- Interim Support: 1.2390 (161.8% expansion) to 1.2420 (161.8% expansion)
Impact that Canada Employment Change has had on CAD during the last release(1 Hour post event )
(End of Day post event)
US Dollar Fundamentals (based on dailyfx article)
Fundamental Forecast for Dollar: Neutral
The day of reckoning is almost upon us. This Wednesday, the Federal Open Market Committee (FOMC) will deliver its forecasts for economic trends and interest rates. These projections are neither promises for action nor a commitment to a rigid time frame. In isolation, they may not have much sway over the Dollar or capital markets. However, context is everything. For the past six-years, stimulus has been a ubiquitous feature of the market and many believe the backbone to the exceptional exposure the markets have taken on. There is certainly big picture influence in this event. Then again, it also possess a short-term volatility risk – particularly for the Dollar – as a recent surge in speculative anxiety has focused the world’s attention.
There are eight FOMC policy meetings a year and those that fall on the standard quarters come with updated forecasts from the Committee’s members as well as a press conference from the Chairperson. The March 18 meeting falls on the quarter and will deliver updated predictions for employment, inflation and interest rates along with a closely dissected statement. There are a few things to watch in this particular event. For the focus the media has shaped, the top concern will be with the use of the word ‘patience’.
Given that a central bank cannot commit to policy ahead of time – data could change between their vow and the time of action – the market looks to interpret their intentions through carefully crafted remarks. Language was important for assessing the lead up to QE2 and QE3, the end of QE3 and now the shift towards the first rate hike. After the central bank capped its open-ended stimulus program, the emphasis was placed on the suggestion that rates would be held at an “exceptionally low” level for an “extended period”. Through off-handed central bank remarks, the inclusion of this phraseology in a statement was interpreted to mean the benchmark would be held near zero for at least another six months. This was abandoned at the end of last year.
Now, the focus is on “extended period”s replacement: “patient”. This particular adjective has been assigned a three-month time span which – if it is dropped at this week’s meeting – would tip a June 17 rate hike. The question that Dollar traders should be asking is how significant the impact a change or maintenance of the language will be. Given the currency’s record-breaking, eight consecutive month rally and the aggressive 7 percent rally these past few weeks (on the ICE Dollar Index); it would seem that the benchmark is set high. That said, there is certainly room for the bulls to carry on. While a June time frame seems the consensus amongst economists, Fed Fund futures are still pricing in the first move out to the October 28 meeting. There is market adjustment that can be made.
Looking beyond the excitement of timing the first rate hike for driving a pair like EURUSD down to parity, it is worth considering the bigger picture. Even if the first hike is realized in three months’ time, it is only a move off the zero bound. Moving forward, the pace of subsequent policy tightening becomes increasingly important. However, if the US does engage in a rate hike regime; it will increasingly contrast to major central banks (ECB, BoJ, PBoC) that are still exploring greater stimulus programs. So even if the FOMC downgrades its average December 2015 rate forecast from its 1.125 percent forecast at the December meeting, context is important.
For FX traders, the focus of the upcoming event risk is easily on the rates-Dollar connection. Yet, investors in any asset should take note of this event for its influence speculative appetite. A ‘yield chase’ has developed out of years of excessive monetary policy coupled with a moderate recovery. And, while the Fed’s own contribution to the system can notionally be replaced by the growing stimulus in Europe and Asia, risk aversion can still spread by the Fed’s shift. Given the dependency on low cost capital (chased with leverage) and the easy of contagion transmission across the global financial system (remember the Great Financial Crisis began in US housing), sentiment is on the edge of an inflated balloon. It also happens that the Dollar represents liquidity in a fire sale market.
USDJPY Fundamentals (based on dailyfx article)
Fundamental Forecast for Japanese Yen: Neutral
The Federal Open Market Committee’s (FOMC) March 18 meeting may overshadow the fresh commentary coming out of the Bank of Japan (BoJ) and heavily influence the near-term outlook for USD/JPY as Chair Janet Yellen and Co. are widely anticipated to remove the ‘patience’ language from the forward-guidance for monetary policy.
The Fed may implement a more hawkish twist to the forward-guidance and show a greater willingness to normalize monetary policy in mid-2015 as the central bank remains upbeat on the economy. Indeed, the 295K expansion in Non-Farm Payrolls along with the 5.5% unemployment rate may raise the Fed’s scope to raise the benchmark interest rate in June especially as the figure approaches the ‘natural rate of unemployment.’ However, the ongoing slowdown in retail/discretionary spending may becoming a growing concern for the central bank as lower energy costs largely fail to boost private-sector consumption, one of the leading drivers of growth. With that said, the updated economic projections coming out of the central bank may reflect a slower trajectory for the normalization cycle as the Fed continues to combat the disinflation environment.
In contrast, the BoJ interest rate decision may have a limited impact on the USD/JPY should we may get more of the same from Governor Haruhiko Kuroda. The central bank head may continue to endorse a wait-and-see approach as he remains confident in achieving the 2% target for inflation over the policy horizon, and market participants may end up turning a blind-eye to the event as we approach the end of Japan’s 2014 fiscal year.
With that said, the long-term outlook for USD/JPY remains bullish as the FOMC remains well on its way to remove the zero-interest rate policy (ZIRP), but the fresh development coming out of the central bank is likely to heavily impact near-term volatility in as market participants continue to speculate on the timing and the pace of the Fed’s normalization cycle.
GBPUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for British Pound: Neutral
The British Pound tumbled to fresh five-year lows versus the high-flying US Dollar as traders repriced UK interest rate prospectives. Can a key Bank of England MPC Minutes report boost the Sterling ahead of a critical US Federal Reserve interest rate decision?
A potentially pivotal week ahead points to major volatility across GBP pairs, and whether or not domestic yields can recover versus the USD equivalents will likely determine direction in the GBPUSD. The fact that the Sterling actually trades near 8-year highs versus the Euro (EURGBP lows) helps explain the significance of interest rate differentials. Traders have sent the Euro to major lows across the board as the European Central Bank cuts interest rates into negative territory, while the Sterling remains a relative outperformer as a higher-yielding European alternative.
Will Bank of England MPC Minutes boost expectations for the future of domestic interest rates? As it stands, interest rate derivatives currently predict that the BoE and the US Fed will be the only two G10 central banks to raise interest rates in the coming 12 months. Yet the Sterling has fallen significantly versus the US Dollar as BoE Governor Mark Carney dampened speculation that rate hikes were imminent. Carney highlighted GBP appreciation (versus the Euro) as a key reason to keep interest rates lower for longer. It seems like a paradox: the GBP remains strong because of beneficial interest rate expectations, but currency strength itself makes those same rate hikes less likely.
Short-term forecasts for the Sterling seem especially uncertain ahed of the release of Bank of England MPC Meeting Minutes and a highly-anticipated US Federal Open Market Committee meeting. FX options traders have sent 1-week and 1-month GBPUSD volatility prices/expectations to their highest since the Scottish Referendum. And with uncertainly surrounding upcoming UK Government Elections, traders may prove especially skittish on any surprises.
NZDUSD Fundamentals (based on dailyfx article)
Fundamental Forecast for the New Zealand Dollar: Neutral
The New Zealand Dollar managed to find support against its US counterpart after the RBNZ signaled it was in no hurry to cut interest rates at its monetary policy meeting. Governor Graeme Wheeler highlighted a range of factors underpinning strong economic growth and dismissed soft inflation readings in the near term as largely reflective of the transitory impact of oil prices. Speaking directly to the benchmark lending rate, Wheeler projected “a period of stability” ahead.
Still, the familiar refrainwarning that “future interest rate adjustments, either up or down, will depend on the emerging flow of economic data” was repeated. This makes for a news-sensitive environment going forward as markets attempt to divine the central bank’s likely trajectory alongside policymakers themselves. With that in mind, all eyes will be on the fourth-quarter GDP data set in the week ahead.
Output is expected to increase by 0.8 percent, an outcome in line with the trend average. On balance, that means a print in line with expectations is unlikely to drive a meaningful re-pricing of policy bets and thereby have little impact on the Kiwi. New Zealand economic data outcomes have increasingly underperformed relative to consensus forecast since January however. That suggests analysts are over-estimating the economy’s momentum, opening the door for a downside surprise. In this scenario, building interest rate hike speculation may push the currency downward.
The external landscape is likewise a factor. A significant correlation between NZDUSD and the S&P 500 (0.52 on 20-day percent change studies) hints the currency is sensitive to broad-based sentiment trends. That will come into play as the Federal Reserve delivers the outcome of the FOMC policy meeting, this time accompanying the statement with an updated set of economic forecasts and a press conference from Chair Janet Yellen. Fed tightening fears have proven to be a potent catalyst for risk aversion since the beginning of the month. That means a hawkish tone is likely to sink the Kiwi, while a dovish one may offer the currency a lift.