Jason Rogers
FXCM Representative
- Messages
- 517
Forex volatility up on big week for economic event risk
Data source: Bloomberg, DailyFX Calculations
Data source: Bloomberg, DailyFX Calculations
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Jason Rogers
FXCM Representative
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Trading the News: Federal Open Market Committee (FOMC) Interest Rate Decision
The updated forecasts coming out of the Federal Open Market Committee (FOMC) meeting may generate a bullish reaction in the greenback and spur downside pressures for EUR/USD should the central bank show a greater disposition to remove the zero-interest rate policy (ZIRP) in 2015.
What’s Expected:
Expectations: Bullish Argument/Scenario
The Fed may continue to highlight an upbeat outlook for the U.S. economy as the central bank anticipates a stronger recovery to emerge in the second-half of the year, and the fresh forecasts may help the greenback resume the bullish trend from earlier this year should the dot-plot remain centered around 0.50% to 0.75% for 2015.
Risk: Bearish Argument/Scenario
Nevertheless, we may see a growing number of Fed officials show a greater willingness to retain the ZIRP for an extended period of time, and the central bank may sound more dovish this time around as the ongoing slack in the real economy limits the committee’s scope to achieve the 2% inflation target over the policy horizon.
How To Trade This Event Risk
[video=youtube;1OATW3xZG-U]https://www.youtube.com/watch?v=1OATW3xZG-U[/video]
Join DailyFX on Demand for live coverage of the entire event.
The updated forecasts coming out of the Federal Open Market Committee (FOMC) meeting may generate a bullish reaction in the greenback and spur downside pressures for EUR/USD should the central bank show a greater disposition to remove the zero-interest rate policy (ZIRP) in 2015.
What’s Expected:
Expectations: Bullish Argument/Scenario
The Fed may continue to highlight an upbeat outlook for the U.S. economy as the central bank anticipates a stronger recovery to emerge in the second-half of the year, and the fresh forecasts may help the greenback resume the bullish trend from earlier this year should the dot-plot remain centered around 0.50% to 0.75% for 2015.
Risk: Bearish Argument/Scenario
Nevertheless, we may see a growing number of Fed officials show a greater willingness to retain the ZIRP for an extended period of time, and the central bank may sound more dovish this time around as the ongoing slack in the real economy limits the committee’s scope to achieve the 2% inflation target over the policy horizon.
How To Trade This Event Risk
[video=youtube;1OATW3xZG-U]https://www.youtube.com/watch?v=1OATW3xZG-U[/video]
Join DailyFX on Demand for live coverage of the entire event.
Jason Rogers
FXCM Representative
- Messages
- 517
EUR/USD Volume & Sentiment Analysis
Retail Sentiment
As you see from the picture below, since Mid-March trader have been aggressively short EUR/USD. This has taken place as EUR/USD bounced off a decade plus low at 1.0462 retracing as high as 1.1460 so far.
Sentiment favors further upside as you can see when the client positioning is heavily leaning one direction, it often aligns with a strong trend that they’re hoping is about to reverse. Additionally, you can see that Retail Open Short Positions are at their greatest exposure since the market peaked in spring of 2014.
_
Retail Volume
Volume is shown at FXCM via blue bars on the bottom of the chart. The higher the bar, the greater the volume transacted. The lower the bar, the lower the volume transacted and the less trustworthy a move is treated.
You can see below that the recent move into the May high is done on a sharp drop in volume meaning that price is moving higher with less and less support. Without a lot of support or multitude of buyers, a reversal could be quickly joined as a lot of money is likely on the sidelines ready to make their move.
Retail Sentiment
As you see from the picture below, since Mid-March trader have been aggressively short EUR/USD. This has taken place as EUR/USD bounced off a decade plus low at 1.0462 retracing as high as 1.1460 so far.
Overlay of Trader Positioning at FXCM on EUR/USD via the Speculative Sentiment Index (SSI)
(Screen capture from DailyFXplus.com)
(Screen capture from DailyFXplus.com)
Sentiment favors further upside as you can see when the client positioning is heavily leaning one direction, it often aligns with a strong trend that they’re hoping is about to reverse. Additionally, you can see that Retail Open Short Positions are at their greatest exposure since the market peaked in spring of 2014.
_
Retail Volume
Volume is shown at FXCM via blue bars on the bottom of the chart. The higher the bar, the greater the volume transacted. The lower the bar, the lower the volume transacted and the less trustworthy a move is treated.
You can see below that the recent move into the May high is done on a sharp drop in volume meaning that price is moving higher with less and less support. Without a lot of support or multitude of buyers, a reversal could be quickly joined as a lot of money is likely on the sidelines ready to make their move.
Jason Rogers
FXCM Representative
- Messages
- 517
British Pound Expected to Continue Higher versus Yen
According to David Rodriguez's Weekly Speculative Sentiment Index report, the ratio of long to short positions in the GBP/JPY stands at -2.68 as 27% of traders are long. Yesterday the ratio was -1.97; 34% of open positions were long.
Long positions are 19.1% lower than yesterday and 20.7% below levels seen last week. Short positions are 10.0% higher than yesterday and 8.5% above levels seen last week.
We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the GBP/JPY may continue higher.
The trading crowd has grown further net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further bullish trading bias.
According to David Rodriguez's Weekly Speculative Sentiment Index report, the ratio of long to short positions in the GBP/JPY stands at -2.68 as 27% of traders are long. Yesterday the ratio was -1.97; 34% of open positions were long.
Long positions are 19.1% lower than yesterday and 20.7% below levels seen last week. Short positions are 10.0% higher than yesterday and 8.5% above levels seen last week.
We use our SSI as a contrarian indicator to price action, and the fact that the majority of traders are short gives signal that the GBP/JPY may continue higher.
The trading crowd has grown further net-short from yesterday and last week. The combination of current sentiment and recent changes gives a further bullish trading bias.
Jason Rogers
FXCM Representative
- Messages
- 517
FX Market Readies for Weekend Summit for Greece Deal, So Should You.
[video=youtube;jTqoeprp2bQ]https://www.youtube.com/watch?v=jTqoeprp2bQ[/video]
Talking Points:
- European FX pairs quiet as market awaits summit on Saturday.
- May be deemed best risk management to lower leverage today.
- See the June forex seasonality report.
[video=youtube;jTqoeprp2bQ]https://www.youtube.com/watch?v=jTqoeprp2bQ[/video]
Talking Points:
- European FX pairs quiet as market awaits summit on Saturday.
- May be deemed best risk management to lower leverage today.
- See the June forex seasonality report.
Jason Rogers
FXCM Representative
- Messages
- 517
Euro Set for Rocky Week as Greece Stares into the Abyss
What currency strategist Christopher Vecchio noted on DailyFX.com last Friday, but is absolutely worth reiterating now, is the notion of risk management with respect to the EUR-crosses. It may be deemed best risk management practice for traders to reduce position size and leverage in EUR-crosses for the foreseeable future.
While the potential outcome for Greece is unknown - the absolute magnitude of the fallout around a positive or negative outcome will be enough to have a significant impact on prices over the coming week at a minimum.
What currency strategist Christopher Vecchio noted on DailyFX.com last Friday, but is absolutely worth reiterating now, is the notion of risk management with respect to the EUR-crosses. It may be deemed best risk management practice for traders to reduce position size and leverage in EUR-crosses for the foreseeable future.
While the potential outcome for Greece is unknown - the absolute magnitude of the fallout around a positive or negative outcome will be enough to have a significant impact on prices over the coming week at a minimum.
Jason Rogers
FXCM Representative
- Messages
- 517
What are the Critical Dates for Greece and the Euro?
Data Source: Bloomberg, Wall Street Journal. Prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
What’s the Most Important Date on the Calendar?
In concrete terms, the single most significant deadline on the calendar is likely the European Central Bank bond repayment due on July, 19—assuming that the Greek Government remains solvent up until that point.
Any surprises could force substantial market moves, and traders should limit trading leverage—particularly in EUR pairs—ahead of the key dates. Caution is advised until we see a true breakthrough in negotiations.
Data Source: Bloomberg, Wall Street Journal. Prepared by David Rodriguez, Quantitative Strategist for DailyFX.com
What’s the Most Important Date on the Calendar?
In concrete terms, the single most significant deadline on the calendar is likely the European Central Bank bond repayment due on July, 19—assuming that the Greek Government remains solvent up until that point.
Any surprises could force substantial market moves, and traders should limit trading leverage—particularly in EUR pairs—ahead of the key dates. Caution is advised until we see a true breakthrough in negotiations.
Jason Rogers
FXCM Representative
- Messages
- 517
ADP Employment Change Significant Beat Ahead of Non-Farm Payrolls
Talking Points
The improved employment data comes in just before the June US Nonfarm Payrolls report, which is going to be released tomorrow at 12:30 GMT. The ADP data is the highest in 2015 and support’s the notion that the US economy picked up steam in Q2’15.
USD/JPY experienced a significant upward move at the release of the data with the pair trading at ¥123.10 at the time of writing. USD/JPY pair experienced session highs at the release of the data, and can further strengthen its position following the release of the NFP report tomorrow.
Talking Points
- US ADP Employment figures for June come in at 237K vs 203K surveyed
- May figures are slightly revised up to 203K from 201K
- US Nonfarm Payrolls to be released tomorrow, July 2, at 12:30 GMT
The improved employment data comes in just before the June US Nonfarm Payrolls report, which is going to be released tomorrow at 12:30 GMT. The ADP data is the highest in 2015 and support’s the notion that the US economy picked up steam in Q2’15.
USD/JPY experienced a significant upward move at the release of the data with the pair trading at ¥123.10 at the time of writing. USD/JPY pair experienced session highs at the release of the data, and can further strengthen its position following the release of the NFP report tomorrow.
Jason Rogers
FXCM Representative
- Messages
- 517
Holiday Trading Hours for July
Below are the CFD holiday trading hours for July. Forex trading hours remain unchanged, and you can view the holiday rollover interest schedule here: bit.ly/14Wwoso
Below are the CFD holiday trading hours for July. Forex trading hours remain unchanged, and you can view the holiday rollover interest schedule here: bit.ly/14Wwoso
Times below are in GMT
Jason Rogers
FXCM Representative
- Messages
- 517
Dollar Regains Control as Retail FX Traders Switch Direction
Below are highlights from David Rodriguez's weekly report on the Speculative Sentiment Index (SSI):
Talking Points
Below are highlights from David Rodriguez's weekly report on the Speculative Sentiment Index (SSI):
Talking Points
- US Dollar forecast turns bullish on substantial swing in forex sentiment
- Focus turns to Euro, Sterling, and Commodity Bloc as pairs break key lows
- See full analysis in the individual currency sections
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