Trading the News: Federal Funds Rate (based on the article)
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
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
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:
EUR/USD Intra-Day Fundamentals: Federal Funds Rate and 89 pips price movement
2016-04-27 18:00 GMT | [USD - Federal Funds Rate]
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.
"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
EUR/USD M5: 89 pips price movement by Federal Funds Rate news event
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]
if actual > forecast (or previous one) = good for currency (for JPY in our case)
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
USD/JPY M5: 289 pips price movement by Japan Monetary Policy Statement news event
EUR/USD Intra-Day Fundamentals: U.S. Gross Domestic Product and 19 pips range price movement
2016-04-28 12:30 GMT | [USD - GDP]
[USD - GDP] = Annualized change in the inflation-adjusted value of all goods and services produced by the economy.
"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."
EUR/USD M5: 19 pips range price movement by U.S. Gross Domestic Product news event
EUR/USD Intra-Day Fundamentals: Spanish GDP and 27 pips range price movement
2016-04-29 07:00 GMT | [EUR - Spanish GDP]
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.
EUR/USD M5: 27 pips range price movement by Spanish GDP news event
USD/CAD Intra-Day Fundamentals: Canada Gross Domestic Product and 28 pips range price movement
2016-04-29 12:30 GMT | [CAD - GDP]
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.
USD/CAD M5: 28 pips range price movement by Canada Gross Domestic Product news event
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
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."
Forex Weekly Outlook May 2-6 (based on the article)