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2014-01-09 12:45 GMT (or 13:45 MQ MT5 time) | [EUR - Interest Rate]
if actual > forecast = good for currency (for EUR in our case)
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ECB Leaves Interest Rates Unchanged For Second Month
The European Central Bank left its key interest rates unchanged for a second straight month on Thursday, in line with economists' expectations.
Following the meeting in Frankfurt, the Governing Council decided to hold the main refinancing rate at a record low 0.25 percent.
The marginal lending facility rate was held at 0.75 percent. The deposit facility rate was kept at zero, where it has remained since July 2012.
2014-01-09 13:30 GMT (or 14:30 MQ MT5 time) | [EUR - ECB Press Conference]
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Live Video Coverage of ECB Press Conference with Mario Draghi - January 9, 2014The ECB has left the benchmark rate unchanged at historic lows at .25%
Press conference following the meeting of the Governing Council of the European Central Bank on 9 January 2014 at its premises in Frankfurt am Main, Germany, starting at 2:30 p.m. CET:
2014-01-10 02:00 GMT (or 03:00 MQ MT5 time) | [CNY - Trade Balance]
if actual > forecast = good for currency (for CNY in our case)
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China Export Growth Misses Forecast, Trade Surplus Falls
China's exports growth eased more than expected in December, while imports beat expectations signaling robust domestic demand, the latest figures released by the General Administration of Customs showed Friday.
As a result, the trade surplus missed forecast sharply at the end of the year.
Exports grew 4.3 percent year-on-year in December, slower than a 5 percent expansion forecast by economists. The pace of growth decelerated sharply from November's 12.7 percent increase.
Meanwhile, import growth accelerated unexpectedly last month, taking the annual growth rate to 8.3 percent. This followed a 5.3 percent gain in November and exceeded forecasts for a 5 percent rise.
The trade balance showed a surplus of $25.6 billion, down from $33.8 billion in November and $32.15 billion surplus forecast.
In the whole year of 2013, exports recorded a gain of 7.9 percent compared with 2012. Imports rose 7.3 percent. The trade surplus for the year amounted to $259.75 billion.
The country's exports and imports value totaled $4.16 trillion last year, recording an increase of 7.6 percent from the previous year. Customs spokesman Zheng Yuesheng said that this was the first time the total value exceeded the $4 trillion-mark.
Trading the News: U.S. Non-Farm Payrolls (based on dailyfx article)
U.S. Non-Farm Payrolls (NFP) are projected to increase another 197K in December and a better-than-expected print may heighten the bullish outlook for the dollar as it raises the Fed’s scope to further normalize monetary policy over the coming months.
What’s Expected:
Why Is This Event Important:
A pickup in job growth may spur a further shift in the policy outlook as the Fed starts to wind down its asset-purchase program, and the central bank may take a more aggressive approach in moving away from its easing cycle as the economic recovery gathers pace.
How To Trade This Event Risk
Bullish USD Trade: NFP Rises 197K+; Unemployment Holds or Falls from 7.0%
- Need to see red, five-minute candle following the print to consider a short trade on EURUSD
- If market reaction favors a long dollar trade, sell EURUSD 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: U.S. Employment Falls Short of Market Forecast2014-01-10 09:30 GMT (or 10:30 MQ MT5 time) | [GBP - Manufacturing Production]
if actual > forecast = good for currency (for GBP in our case)
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U.K. manufacturing production 0.0% vs. 0.4% forecast
Manufacturing production in the U.K. remained unchanged unexpectedly last month, official data showed on Friday.
In a report, National Statistics said that U.K. manufacturing production remained unchanged at a seasonally adjusted 0.0%, from 0.2% in the preceding month whose figure was revised down from 0.4%.Analysts had expected U.K. manufacturing production to rise 0.4% last month.
Nonfarm Payrolls
This market is short the 18-member single currency both outright and on the crosses, and to be fair, probably a tad concerned after European Central Bank (ECB) President Mario Draghi’s press conference yesterday. Consensus expects the ECB to remain dovish, act dovish, but the timing of having to do anything dovish may have been pushed further out. Hence, there is no real need to rush out and dispense with one’s EUR on a yield basis just yet. However, these shorts are at risk from an NFP surprise. Market vulnerability rests with a weaker print.
Consensus is looking for a December NFP gain of +190k to 215k, and an unemployment rate at or close to last month’s +7% print. Investors seem to be buoyed by the recent activity indicators — retail sales, industrial production, and construction spending — they have all firmed. If we throw in small business hiring plans improving in recent months, and this week’s ADP figures, it is difficult not to be optimistic.
EUR/USD halts decline ahead of important Gann level (based on dailyfx article)
Gold threatening to breach key Gann resistance (based on dailyfx article)
Swiss National Bank (adapted from dailyfx article)
Understanding a Central Bank
To get a good grasp of any central bank, it’s helpful to know three things. First, you need to know what economic measure they find important and worth managing as a central bank, also referred to as key mandates. Second, it’s important to know when they are meeting next so that you can manage your trades accordingly. Third, it’s important to know what major undertakings the central bank is involved in which has dramatically affected their currencies value and at some point they may soon unwind which will also have extreme importance to the future value of the currency you’re looking to trade.
These three elements will be discussed in relation to the Swiss National Bank or SNB, so that you have a clear understanding on how your CHF based trades could be affected by the SNB in your trading future.
Key Economic Mandates of the SNB
The SNB has committed to focusing on three economic mandates that will guide their monetary policy decision making going forward. The key mandates are:
1. Price Stability
Since 2009, Price Stability of the Swiss Franc or CHF has the key focus of the three mandates to be discussed. The focus was thrust upon them because the CHF has historically be recognized as a financial Safe Haven, so in 2009 when the Euro Crisis began to hemorrhage, billions of dollars, euros, and other currencies flew into Switzerland seeking safety. This caused demand for CHF bonds to fetch higher and higher payment which boosted the value of the CHF to unsustainable levels for the SNB and forced their hand. As an economy that depends on exports, an expensive home currency made CHF-based goods less attractive to foreign buyers which help explains the SNB’s aggressive action of the EURCHF peg. Even in 2014, SNB President Jordan reaffirmed the necessity of the peg for the “foreseeable future”.
2. Medium-Term Inflation
Inflation is a key focus of any central bank and the SNB is no different. When borrowing is low and the economy is struggling, then a central bank will often look to the lower interest rates to boost incentives to borrow, which is often the quickest way to grow the economy. The SNB has recently tracked home prices to gauge domestic inflation majors. When inflation gets out of hand, the SNB will look to raise interest rates to limit inflation from getting out of control. The current inflation target is near 2.0%, however the current readings have been at 0.10% so they’re a good way from the target.
3. Steering the Interest Rate in the CHF Money Market, using the 3-Month LIBOR
Steering the interest rate is the key method of controlling inflation to meet the SNB targets. When SNB meets, they often discuss how inflation is progressing and if their hand is pushed due to out of desired range inflation, they may adjust their reference rate. As of early 2014, the reference rate has been near 0.0%
Future Challenges for SNB
In recent interviews, SNB President Jordan, has mentioned that the Franc cap, where EURCHF is tied to 1.2000, is a necessary tool for the Swiss economy to thrive going forward. Real estate inflation is beginning to creep up which would normally cause a central bank to raise interest rates, however the periphery economies that trade heavily with Switzerland are still in recovery mode which means that in many ways, the Swiss economy is still in recovery.
USDCAD Technical Analysis (adapted from this article).
Trading Strategy: Staying long. I am looking to add to the trade. Support is estimated between 1.0775 and 1.0850 next week. Stop remains 1.0640.