Press review - page 392

[Sergey Golubev]

Trading the News: Federal Funds Rate (based on the article)

What’s Expected:



Why Is This Event Important:

Even though Fed Chair Janet Yellen remains largely concerned about the ‘external risks’ surrounding the region, a growing number of Fed officials may look to further normalize monetary policy in the first-half of 2016 especially as the U.S. economy approaches ‘full-employment.’

However, easing confidence along with the slowdown in household spending may dampen Fed expectations for a ‘consumer-led’ recovery, and more of the same from the central bank may drag on the dollar as market participants push out bets for the next Fed rate-hike.

How To Trade This Event Risk

Bullish USD Trade: Policy Statement Highlights Growing Dissent Within FOMC

• Need red, five-minute candle following the rate decision to consider a short EUR/USD position.
• 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 cost; at least 1:1 risk-to-reward.
• Move stop to entry on remaining position once initial target is met, set reasonable limit.

Bearish USD Trade: Fed Votes 9-1 Once Again to Retain Current Policy

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

Potential Price Targets For The Release
EURUSD Daily

• The diverging paths for monetary policy casts a long-term bearish outlook for EUR/USD, but the pair appears to be carving a major bottoming-process especially as the Relative Strength Index (RSI) largely preserves the bullish formation carried over from March 2015.
• Interim Resistance: 1.1510 (50% retracement) to 1.1520 (61.8% expansion)
• Interim Support: Interim Support: 1.0370 (38.2% expansion) to 1.0410 (61.8% expansion)

[Sergey Golubev]

Interview with Benoît Cœuré, Member of the Executive Board of the ECB, conducted by Alessandro Merli on 25 April and published on 27 April 2016

There are some key point from this interview:

• "Central bankers do not like to talk about currency wars and the ECB always says that the exchange rate is not a target. However, with the dollar and emerging markets’ currencies weakening, is the euro “losing the war” and therefore making it more difficult for the ECB to reach its target?"
• "The euro has stabilised over the last month after a clear depreciation. It is not an obstacle to our monetary policy. Only if there was a sharp appreciation of the euro would that be a concern."

[Sergey Golubev]

EUR/USD Intra-Day Fundamentals: Federal Funds Rate and 89 pips price movement

2016-04-27 18:00 GMT | [USD - Federal Funds Rate]

• past data is 0.50%
• forecast data is 0.50%
• actual data is 0.50% according to the latest press release

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

[USD - Federal Funds Rate] = Interest rate at which depository institutions lend balances held at the Federal Reserve to other depository institutions overnight.

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"Against this backdrop, the Committee decided to maintain the target range for the federal funds rate at 1/4 to 1/2 percent. The stance of monetary policy remains accommodative, thereby supporting further improvement in labor market conditions and a return to 2 percent inflation."
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EUR/USD M5: 89 pips price movement by Federal Funds Rate news event :

[Sergey Golubev]

USD/JPY Intra-Day Fundamentals: Japan Monetary Policy Statement and 289 pips price movement

2016-04-28 03:01 GMT | [JPY - Japan Interest Rate Decision]

• past data is -0.10%
• forecast data is -0.10%
• actual data is -0.10% according to the latest press release

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

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USD/JPY sees a 200-pips fall:

"The yen jolted nearly 200-pips higher versus the American dollar in a knee-jerk reaction to the BOJ policy announcement, as the central bank keeps monetary policy steady, maintains 80 trln Yen base money target and 0.1% negative interest rate. USD/JPY plunged to fresh one-week lows of 108.78 immediately after the BOJ decision, before recovering some ground to now trade around 109.25, still down –2.03% on the day."

"The Japanese currency received a huge boosts as markets were expecting more easing from the BOJ in wake of the recent appreciation in the yen against the greenback and underlying subdued price trends. However, markets were disappointed as BOJ decided to adopt loan support programme only for banks in areas hit by southern Japan quake."

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USD/JPY M5: 289 pips price movement by Japan Monetary Policy Statement news event :

[Sergey Golubev]

Trading News Events : U.S. Gross Domestic Product (GDP) (based on the article)

What’s Expected:



Why Is This Event Important:

A soft growth figure may encourage the Federal Reserve to retain its current policy throughout most of 2016 amid the ongoing 9 to 1 split within the central bank, but a marked rebound in the core Personal Consumption Expenditure (PCE), the Fed’s preferred gauge for inflation, may put increased pressure on Chair Janet Yellen and Co. to further normalize monetary policy over the coming months especially as the U.S. economy approaches ‘full-employment.’

Nevertheless, the pickup in housing accompanied by ongoing improvement in labor-market dynamics may help to boost economic activity, and a positive development may generate a bullish reaction in the U.S. dollar as it puts increased pressure on the Federal Reserve to further normalize monetary policy sooner rather than later.

How To Trade This Event Risk

Bearish USD Trade: 1Q GDP Report Warns of Slowing Recovery

• Need to see green, five-minute candle following the GDP report to consider a long trade on EURUSD.
• If market reaction favors a bearish dollar trade, buy EURUSD 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 entry on remaining position once initial target is hit; set reasonable limit.

Bullish USD Trade: U.S. Expands Annualized 0.6% or Greater, Core PCE Rebounds

• Need red, five-minute candle to favor a short EURUSD trade.
• Implement same setup as the bearish dollar trade, just in the opposite direction.

Potential Price Targets For The Release
EURUSD Daily

• EUR/USD may continue to consolidate going into the end of the month as it remains stuck within a near-term triangle/wedge formation, but the continuation pattern may ultimately give way to a further advance in the exchange rate especially as the Relative Strength Index (RSI) largely preserves the bullish trend carried over from March 2015.
• Interim Resistance: 1.1510 (50% retracement) to 1.1520 (61.8% expansion)
• Interim Support: Interim Support: 1.0370 (38.2% expansion) to 1.0410 (61.8% expansion)

[Sergey Golubev]

EUR/USD Intra-Day Fundamentals: U.S. Gross Domestic Product and 19 pips range price movement

2016-04-28 12:30 GMT | [USD - GDP]

• past data is 1.4%
• forecast data is 0.6%
• actual data is 0.5% according to the latest press release

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

[USD - GDP] = Annualized change in the inflation-adjusted value of all goods and services produced by the economy.

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"Real gross domestic product -- the value of the goods and services produced by the nation’s economy less the value of the goods and services used up in production, adjusted for price changes -- increased at an annual rate of 0.5 percent in the first quarter of 2016, according to the "advance" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 1.4 percent."

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EUR/USD M5: 19 pips range price movement by U.S. Gross Domestic Product news event :

[Sergey Golubev]

EUR/USD Intra-Day Fundamentals: Spanish GDP and 27 pips range price movement

2016-04-29 07:00 GMT | [EUR - Spanish GDP]

• past data is 0.8%
• forecast data is 0.7%
• actual data is 0.8% according to the latest press release

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

[EUR - Spanish GDP] = Change in the inflation-adjusted value of all goods and services produced by the economy.

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EUR/USD M5: 27 pips range price movement by Spanish GDP news event :

[Sergey Golubev]

USD/CAD Intra-Day Fundamentals: Canada Gross Domestic Product and 28 pips range price movement

2016-04-29 12:30 GMT | [CAD - GDP]

• past data is 0.6%
• forecast data is -0.1%
• actual data is -0.1% according to the latest press release

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

[CAD - GDP] = Change in the inflation-adjusted value of all goods and services produced by the economy.

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• "After rising for four consecutive months, real gross domestic product edged down 0.1% in February. The output of goods-producing industries declined in February, while the output of service-producing industries was essentially unchanged."
• "After increasing 0.9% in January, the output of goods-producing industries contracted 0.6% in February primarily as a result of decreases in manufacturing and mining, quarrying, and oil and gas extraction. Declines were also registered in the agriculture and forestry sector as well as in utilities. Construction edged up."
• "The output of service-producing industries was essentially unchanged in February, after rising for four consecutive months. A notable decline in wholesale trade was offset by gains in retail trade and, to a lesser extent, the public sector (education, health and public administration combined) and accommodation and food services."

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USD/CAD M5: 28 pips range price movement by Canada Gross Domestic Product news event :

[Sergey Golubev]

Fundamental Weekly Forecasts for Dollar Index, EUR/USD, GBP/USD, USD/CNH, USD/CAD, AUD/USD and GOLD (based on the article)

Dollar Index - "The fading interest in the US monetary policy advantage can be recharged if the event risk can override the market’s skepticism. Both data and Fedspeak will offer an opportunity to shake rate speculation to life. There is a long list of data including sentiment surveys, trade, factory and service activity, housing and credit; but the real weight rests with the April labor report on Friday. The wage figure is where the data still has room to lift the hawks. Fed officials may also maintain their effort to bridge the gap of market skepticism."

EUR/USD - "Expectations for bullishness down-the-road could be well-founded, as we have that recently triggered set of policies out of the ECB mentioned above; and price action is even making a similar case as prices have continued to rise. But the latter of these thesis are likely more-driven by larger overall macro-economic flows (mainly, the US Dollar being extremely weak) than organic, legitimate strength in the Euro."

GBP/USD - "GBP/USD may make a more meaningful attempt to break out of the downward trend carried over from last August especially as the Relative Strength Index (RSI) preserves the bullish formation from earlier this year. A close above near-term resistance around 1.4620 (50% expansion) to 1.4660 (50% retracement) may fuel a further advance in the exchange rate, with the next topside region of interest coming in at 1.4800 (61.8% retracement)."

USD/CNH - "Chinese regulators have introduced tightened rules on commodity trading this past Wednesday in the effort of curbing excess speculation. Following the introduction of the new rules, the upward trend for major commodities had temporarily stopped. Yet, two days after those policies were rolled out commodities began to regain its earlier momentum. Cooking coal and iron ore hit the increased limit-up levels under the new rule while other commodities saw significant increase as well. With this aggressive price action, traders will want to keep a close eye on the commodity market in case of any major change in capital flows."

USD/CAD - "There are three components that have led to a Canadian Dollar surge since the end of January in Oil, US Dollar, and Canadian Economic Data. However, if you would like to boil these factors down to one market to watch, the closing of the gap in 2Y sovereign yields between the United States and Canada is great."

AUD/USD - "While the Fed has made steady progress on the employment side of its mandate, nailing down price growth has proved tricky. The pace of wage expansion is critical here because a steady pickup would signal rising structural inflation pressure, a welcome sign that the underlying trend is heading in the right direction independently of flighty oil- and FX-inspired price swings."

GOLD (XAU/USD) - "Will the US economy add jobs as expected? That is a question to be answered on Friday May 6. US Non-Farm Payrolls are set to be released and the market is anticipating that 215k jobs were added. If the market sees the jobs report as an inflationary number, then we may see gold price sell off. This, in my opinion, would be the resulting recognition that inflation is trying to bubble up and rate hikes may come sooner. If the market sees the jobs report as a disinflationary figure, Gold prices may continue to bump higher."

[Sergey Golubev]

Forex Weekly Outlook May 2-6 (based on the article)

1. Mario Draghi speaks: Monday, 15:00. ECB President Mario Draghi will speak in Frankfurt.
2. US ISM Manufacturing PMI: Monday, 15:00.
3. Australian rate decision: Tuesday, 5:30. The Reserve Bank of Australia maintained the official cash rate at a record low 2% for a 10th straight meeting.
4. NZ employment data: Tuesday, 23:45. New Zealand’s labor market recovered in the last quarter of 2015 as unemployment plunged to a six-year low of 5.3% from 6% in the third quarter.
5. US ADP Non-Farm Employment Change: Wednesday, 13:15.
6. US ISM Non-Manufacturing PMI: Wednesday, 15:00.
7. US Crude Oil Inventories: Wednesday, 15:30. Economists believe the recent rose in inventories is fueled by the weakness on the dollar.
8. US Unemployment Claims: Thursday, 13:30.
9. Canadian employment data: Friday, 13:30. Canada’s labor market created 40,600 jobs in March, reducing the unemployment rate from 7.3% in February to 7.1%.
10. US Non-Farm Employment Change and Unemployment rate: Friday, 13:30. US monthly Job growth is expected to reach 206,000 as the unemployment rate should remain at 5%.