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Trading News Events: ECB Interest Rate (based on the article)

What’s Expected:



Why Is This Event Important:

The deviating paths for monetary policy continues to encourage a long-term bearish outlook for EUR/USD especially as the Federal Reserve pledges to implement higher borrowing-costs in 2016 but, the single-currency may face another short squeeze should President Mario Draghi endorse a wait-and-see approach for the first-half of 2016.

Nevertheless, bright signs coming out of the real economy may push the ECB to the sidelines, and the Euro may face a similar reaction to the December rate decision should the central bank scale back its willingness to implement more non-standard measures.

How To Trade This Event Risk

Bearish EUR Trade: ECB Boosts Bets for More Non-Standard Measures

  • Need red, five-minute candle following the policy statement to consider a short EUR/USD trade.
  • If market reaction favors a bearish Euro trade, sell EUR/USD with two separate position.
  • Set stop at the near-by swing high/reasonable distance from cost; need at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is met, set reasonable limit.
Bullish EUR Trade: Governing Council Attempts to Buy Time
  • Need green, five-minute candle to favor a long EUR/USD trade.
  • Implement same strategy as the bearish euro trade, just in the opposite direction.
Potential Price Targets For The Release
EURUSD Daily


  • Even though the long-term outlook remains tilted to the downside, EUR/USD stands at risk of facing choppy prices ahead of the ECB rate decision as it remains stuck in a narrowing range; single-currency stands at risk for another short-squeeze should the central bank talk down bets for more monetary easing.
  • Interim Resistance: 1.1052 (November high) to 1.1090 (50% retracement)
  • Interim Support: Interim Support: 1.0380 (78.6% expansion) to 1.0410 (61.8% expansion)

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Forecast for Q1'16 - levels for EUR/USD

Sergey Golubev, 2016.01.21 10:00

EURUSD M5: 22 pips price movement by ECB Interest Rate news event :



 

EUR/USD Intra-Day Fundamentals: Philadelphia Fed Business Outlook Survey and 109 pips price movement

2016-01-21 13:30 GMT | [USD - Philly Fed Manufacturing Index]

if actual > forecast (or previous one) = good for currency (for USD in our case)

[USD - Philly Fed Manufacturing Index] = Level of a diffusion index based on surveyed manufacturers in Philadelphia.

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"The diffusion index for current activity increased from a revised reading of -10.2 in December to -3.5 and has now been negative for five consecutive months (see Chart 1 above). The index for current new orders remained negative but increased 10 points, to -1.4. Firms reported an increase in shipments to begin the new year: The shipments index increased 12 points, its first positive reading in four months. Firms reported continued declines in inventories: The inventories index remained negative and decreased 10 points. Firms’ backlog of unfilled orders also declined this month, and delivery times were shorter, according to the responding firms."

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EURUSD M5: 109 pips price movement by Philadelphia Fed Business Outlook Survey news event :


 

Russian Ruble Crashes To Record Lows In "Panic" (based on the article)


  • "The ruble has fallen for three consecutive years and is now under immense pressure both from Western economic sanctions and from crude’s inexorable decline. “The wish to hedge potential risks from geopolitics and commodities may well push the ruble to 75,” Evgeny Koshelev, an analyst at Rosbank PJSC in Moscow, told Bloomberg by e-mail in December. “It will be interesting to see if there’s a reaction from the central bank, government and households to this weakening.” Russian central bank Deputy Chairman Vasily Pozdyshev isn’t concerned. “There’s no systemic risk,” he told Rossiya 24 TV on Thursday."
  • "After the ruble crossed the psychological level of 80, traders sharply accelerated their selling,” Alexei Egorov, an analyst at Promsvyazbank in Moscow told Bloomberg. “The ruble is catching up with oil as investors review their view on Russian assets."
Russian Ruble Crashes To Record Lows In "Panic": "Some Investors Are Selling At Any Price" | Zero Hedge
Russian Ruble Crashes To Record Lows In "Panic": "Some Investors Are Selling At Any Price" | Zero Hedge
  • www.zerohedge.com
Late last month, we took a look at Russia’s economy and concluded that although the country has proven to be remarkably resilient in the face of collapsing crude prices, the outlook is darkening. The ruble has fallen for three consecutive years and is now under immense pressure both from Western economic sanctions and from crude’s inexorable...
 

Trading News Events: Bank of Canada Core CPI (based on the article)

What’s Expected:



How To Trade This Event Risk

Bullish CAD Trade: Sticky Inflation Dampens Bets for BoC Rate-Cut in 2016

  • Need to see red, five-minute candle following the release to consider a short trade on USD/CAD.
  • If market reaction favors a bullish loonie trade, sell USD/CAD with two separate position.
  • Set stop at the near-by swing high/reasonable distance from entry; look for at least 1:1 risk-to-reward.
  • Move stop to entry on remaining position once initial target is hit; set reasonable limit.
Bearish CAD Trade: Headline, Core CPI Fall Short of Market Forecast
  • Need green, five-minute candle to favor a long USD/CAD trade.
  • Implement same setup as the bullish Canadian dollar trade, just in reverse.
Potential Price Targets For The Release
USD/CAD Daily



  • Long-term outlook remains tilted to the upside USD/CAD amid the broader series of higher highs & lows in the exchange rate, but the sharp pullback in the Relative Strength Index (RSI) may foreshadow a larger correction in the dollar-loonie as the oscillator comes off of overbought territory and fails to preserve the bullish formation from back in November.
  • Interim Resistance: 1.4660 (78.6% retracement) to 1.4730 (78.6% expansion)
  • Interim Support: 1.3420 (38.2% expansion) to 1.3460 (61.8% retracement)

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USDCAD M5: 57 pips range price movement by Bank of Canada Core CPI news event :


 

GBP/USD Intra-Day Fundamentals: Retail Sales and 56 pips range price movement

2016-01-22 09:30 GMT | [GBP - Retail Sales]

if actual > forecast (or previous one) = good for currency (for GBP in our case)

[GBP - Retail Sales] = Change in the total value of inflation-adjusted sales at the retail level.

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  • "Year-on-year estimates of the quantity bought in the retail industry showed growth for the 32nd consecutive month in December 2015, increasing by 2.6% compared with December 2014.
  • The underlying pattern in the data, as suggested by the 3 month on 3 month movement in the quantity bought, showed growth for the 24th consecutive month, increasing by 1.1%.
  • Compared with November 2015, the quantity bought in the retail industry is estimated to have decreased by 1.0%.
  • When comparing the 2015 annual data with 2014, the quantity bought in the retail industry was estimated to have increased by 4.5%.
  • Average store prices (including petrol stations) fell by 3.2% in December 2015 compared with December 2014, the 18th consecutive month of year-on-year price falls.
  • The amount spent in the retail industry decreased by 1.0% in December 2015 compared with December 2014 and decreased by 1.4% compared with November 2015.
  • The value of online sales increased by 8.2% in December 2015 compared with December 2014 and decreased by 5.2% compared with November 2015.
  • Revisions to this release were caused by the incorporation of late data. The earliest revisions point for current price, non-seasonally adjusted data was December 2014. More information on revisions can be found in the background notes."

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GBPUSD M5: 56 pips range price movement by GBP - Retail Sales news event :


 

EURUSD: watching for support in the mid-1.0600s (based on the article)


  • "EUR/USD has been holding its long term trendline support since March 2015 (even the January low is right on the line). November and December trade produced a tweezer bottom (reversal candlestick pattern…bullish in this case) as well. 2 scenarios seem most likely from the current juncture; a continued range (with roughly 1.15 resistance) or a bullish base that leads to an eventual breakout into the 1.20s."
  • "Near term, we suggest watching for support on the shorter term median line (bold black line on the chart above) in the mid-1.0600s. The market has been in a tight range since December."
 

GBPUSD: 1.4069 as the next bearish target (based on the article)


  • "The next market level that might stem the freefall is the 1.40…in part due to the psychological aspect of the figure but also because of the presence of a parallel (parallel to line that extends off of the 1992 and 2007 highs).” Cable bounced higher this week but price needs to establish above 1.4400 in order to suggest that even a short term low is in place."
 

Week Ahead by Crédit Agricole (based on the article)

  • "Risk sentiment by the end of the week has stabilised, mainly in reaction to ECB President Draghi making a case of considering additional policy action as soon as March. Even if China-related growth uncertainty is likely to keep cross market volatilities high, further stabilising conditions cannot be excluded in the short-term. This is especially true as a relatively empty Chinese economic data calendar is keeping investors focused on developed markets next week."
  • "Commodity currencies: we remain of the view that rallies should be sold. This is especially true as central banks such as the RBNZ may reiterate a more dovish policy stance, especially after the most recent inflation data surprised lower."
  • "We increased our JPY forecast profile, mainly due to more elevated than anticipated risk aversion and as our economists see little scope of the BoJ turning more aggressive ahead of the April meeting. However, we remain of the view that the currency should gradually trend lower."


USD - "Given already low Fed rate expectations, we see little scope of the Fed surprising on the dovish side. We remain USD buyers on dips."

JPY - "The BoJ is unlikely to surprise next week, especially as central bank Governor Kuroda reiterated this week that inflation will gradually trend higher."

NZD - "Even if the RBNZ were to keep monetary policy unchanged, a more dovish rhetoric should keep currency downside risks intact."
 

Forex Weekly Outlook Jan. 25-29 (based on the article)

Market mood before it became better in a very busy week. Will the Fed and the BOJ go dovish? Apart from these rate decisions, we have GDP data from the US and the UK as well as other key releases.

  1. German Ifo Business Climate: Monday, 9:00. German business sentiment declined slightly in December, falling to 108.7 compared to 109 posted in November going below analysts’ predictions of 109.2. The current conditions section reached 112.8, lower than the 113.4 points booked in November amid weakness in external conditions. The outlook index remained unchanged at 104.7, a bit lower than the 105 estimated by economists. However, the German economy continued to grow in the third quarter amid robust domestic consumption, while the ongoing immigration wave also provided a little boost. Business climate is expected to decline further to 108.5 this time.
  2. Draghi speaks: Monday, 18:00. ECB President Mario Draghi will speak in Frankfurt. He may speak about the ECB decision to see a darker picture and may reveal clues about the chances for a change in the monetary policy at the next meeting in March. Market volatility is expected. His words impact not only the euro, but as we’ve seen, the whole market.
  3. Carney speaks: Tuesday, 10:45. BOE Governor Mark Carney will speak in London about the Financial Stability Report. He may explain his objection to raise interest rates despite the Federal reserve move on December 2015. Market volatility is expected. Any mention about the EU referendum and its implications could also move markets.
  4. US CB Consumer Confidence: Tuesday, 15:00. American consumer confidence rose in December amid improving labor market conditions. The index increased to 96.5 in from 92.6 in the previous month, beating expectations for a 93.9 reading. Both present conditions and the 6- month outlook improved. The US economy expanded 2% in the third quarter, also expecting a similar reading for the final quarter. Job growth averaged 210,000 in 2015 pushing the jobless rate down to 5% in November. Consumer confidence is forecasted to reach 96.6 in Janyary.
  5. Australia inflation data: Wednesday, 0:30. Australian inflation increased 0.5% in the third quarter of 2015, lower than the 0.7% rise predicted by analysts. The lower than expected rate was one of the main reasons for the rate cut in December. The weak inflation data “was broad-based, except for housing-related items. The weakening in underlying inflation may lead to further cuts in the near future. Consumer prices are expected to rise 0.3% this time. This is key to the RBA decision in the following week, and will be watched by other central banks.
  6. US rate decision: Wednesday, 19:00. The Federal Reserve took the plunge and raised its key interest rate from a range of 0% to 0.25% to a range of 0.25% to 0.5% on its December meeting. The raise affected investors, home buyers and savers. The increase was widely anticipated as the US economy continued to improve making a full recovery from the Great Recession. The Fed noted that future rate hikes will be gradual to avoid killing the economic recovery. No change is expected now and also the implied probability for a move in March looks slim. The big question is: will the Fed acknowledge the recent weakness and hint on a hiatus in rate hikes, joining the other dovish central banks.
  7. NZ rate decision: Wednesday, 21:45. The central bank of New Zealand cut its benchmark rate for the fourth time since June 2015 on its December meeting, unwinding former increases. Reserve Bank governor Graeme Wheeler noted that the economy weakened due to lower diary prices and rising unemployment following a surge in the number of immigrants. Inflation remained below the Bank’s target of 1%-3%, but Wheeler expects export prices to strengthen in 2016 raising inflation to the middle target range.
  8. UK GDP data: Thursday, 9:30. The UK economy eased its expansion rate to 0.4% in the third quarter according to the final read. The Service sector gave its best performance in nearly a year with growth of 0.7%. Construction output fell by more than 2% while industry contracted for a third consecutive quarter. The mild increase suggests the BoE will not be in a hurry to raise rates any time soon. However some economists claim the slowdown in the third quarter is not enough to hamper rate hikes in mid-2016. Economists expect GDP to rise 0.5% in the fourth quarter of 2015.
  9. US Durable Goods Orders: Thursday, 13:30. Orders for long lasting factory goods remained unchanged in November. Economists expected orders would decline 0.6%. Business investment plans fell in November. The strong dollar continued to weigh on manufacturing and spending cuts in the energy sector showed little sign of abating. Meanwhile core orders excluding transportation items declined 0.1% while expected to rise 0.1% in November. Durable Goods Orders is predicted to decline 0.7% in December, while Core orders are expected to remain flat.
  10. US Unemployment claims: Thursday, 13:30. The number of Americans filing for unemployment benefits increased to 293,000 last week, suggesting a setback in the labor market amid economic slowdown and major stock market selloff. The 10,000 rise was contrary to analysts’ expectations, predicting a drop to 279,000. Although layoffs have picked up in recent weeks, it does not necessarily suggest a downward trend but might be attributed to seasonally adjustments. The four-week moving average of claims increased 6,500 to 285,000 last week. The number of new claims is expected to reach 281,000 this week.
  11. Japan rate decision: Friday. The Bank of Japan maintained its monetary stimulus target in December but decided on operational changes for its purchases of government bonds, exchange-traded funds and real estate investment trusts. Governor Haruhiko Kurodasaid the changes were designed to make it easier for the BOJ to maintain the current policy and didn’t constitute additional easing. However, Kuroda reaffirmed that he wouldn’t hesitate to adjust monetary policy if needed. The Japanese currency has lost about 30% of its value against the dollar despite calls for companies increase their investments. Recent hints from both the central bank and the government talked about more stimulus. Japan certainly does not like the strength of the yen against the dollar, the yuan and even the euro.
  12. Canadian GDP data: Friday, 13:30. Canada’s economic output remained unchanged in October after contracting 0.5% in September. Mining, quarrying, oil and gas extraction expanded as well as the public sector, while manufacturing, utilities and retail trade offset this expansion, suggesting the Canadian economy weakened in 2015. Economists forecasted an expansion of 0.2%. Analysts also expect flat growth in the fourth quarter.
  13. US GDP data: Friday, 13:30. U.S. economy expanded at a pace of 2% annually according to the final read for Q3. Businesses gained $56.8 billion worth of inventory in the third quarter, the smallest since the first quarter of 2014 and down sharply from $113.5 billion in the April-June period. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, grew at a 3.2% after expanding at a 3.6% in the second quarter indicating solid domestic demand. Analysts expect GDP to reach 0.8% in the fourth quarter. It is important to note that the Fed may already have the data before we do.
 

USD/JPY Intra-Day Fundamentals: Trade Balance and 26 pips price movement

2016-01-24 23:50 GMT | [JPY - Trade Balance]

if actual > forecast (or previous one) = good for currency (for JPY in our case)

[JPY - Trade Balance] = Difference in value between imported and exported goods during the reported month.

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USDJPY M5: 26 pips price movement by JPY - Trade Balance news event :


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