Forex Signal (Wednesday August 4, 2011 - 7:45am NY Time EDT) - EU ECB Interest Rate

[Stavro D'Amore]

EU ECB Interest Rate
Forecast: 1.50%
Previous 1.50%
Pair to trade: EUR/USD
Triggers we need: 0.25 BUY/ -0.25 SELL

Economical Impact: High
Typical Result: Actual forecast is good for the currency
Occurrence: Released monthly

About our Triggers:
It is unlikely the ECB will hike rates to 0.25%. We will BUY EUR/USD as per my method of trading below.
The same rule will apply if the ECB suddenly decides to lower the rate, which seems highly unlikely. Should the ECB decrease rates, please look for a short term possible SELL of the EUR/USD pair. This will be a widely watched release considering all the issues the ECB are facing with Greece, Portugal and now Italy. It is very important that you stay diligent during this release, as in 45 minutes (after news release) President Jean-Claude Trichet, of the ECB, will make either bullish or dovish comments. These comments will have a long term effect on the EUR/USD and the direction it will face.

If our tradable releases are reached, there is a good expectation that the market will move 60-70 pips within 2 spikes in the first 15 minutes, after news release.

Why do we care?
Short term interest rates are the key factor in currency valuation - traders look at most other indicators merely to predict how rates will change in the future.

Method to trade this: Stavro D’Amore Trading Method
The rate decision is often priced in the market, so it tends to be overshadowed by the ECB Press Conference, held 45 minutes after the news release.

I would recommend spike trading as the best option when there is great uncertainty in the markets; also the liquidity is very good at the moment if you are using an ECN broker.

I will look for a 30% retrace in the original spike before entering a trade.
I will sell half my position as soon as I hit the original high point of the first initial spike and place a SL at entry price. My TP level would be just before a resistance level, or if the chart decides to form a level looking at a 15 minute time frame. I would not stay in this trade longer than 25 minutes, due to the ECB Press Conference.

Historical Chart and Data for ECB Interest rate

What is the ECB Interest Rate?
Interest rates are the main refinancing operation which provides the bulk of liquidity to the banking system.

All the best

Stavro D’Amore

 

[fazli]

thanks

thanks,.....

 

[clifford]

ECB

if the ECB retain there rate what should happen buy or sell?

 

[samfx]

Retracement method

Thank you Stavro for the great analysis.

My question is about the retracement method...

You have said to set TP at resistant level after it moves up to the initial spike level and set the stop loss at entry price. How about stop loss before moving it to entry price. How many pips stop loss do you consider setting up when entering the trade before it moves in our direction.

Or is it a good idea to use Fibinacci levels. Entry around 0.38 level and stop loss around 0.61 level?

Initial spike... is that on the 1 minute chart or 5 minutes chart... ?

Thank you

 

[samfx]

For resistance levels, do you use daily, 4 and 1 hour time frames.
How about Pivot points, do you consider these levels are a big resistance levels as well?

Thank you again

 

[Stavro D'Amore]

Thank you Stavro for the great analysis.

My question is about the retracement method...

You have said to set TP at resistant level after it moves up to the initial spike level and set the stop loss at entry price. How about stop loss before moving it to entry price. How many pips stop loss do you consider setting up when entering the trade before it moves in our direction.

Or is it a good idea to use Fibinacci levels. Entry around 0.38 level and stop loss around 0.61 level?

Initial spike... is that on the 1 minute chart or 5 minutes chart... ?

Thank you

I use a 15 - 25pip SL on high impact data, depending on the original spike to and how much it retrace’s if it retraces more than 30% I use a larger SL as there is more vitality

 

[Stavro D'Amore]

if the ECB retain there rate what should happen buy or sell?

I would asume it would go down so Sell is likely

 

[Stavro D'Amore]

For resistance levels, do you use daily, 4 and 1 hour time frames.
How about Pivot points, do you consider these levels are a big resistance levels as well?

Thank you again

When trading news i look at past highs and lows looking at a 15min time frame.

 

[Anthonia Taiwo]

Is the ECB Interest Rate same as the Minimum Bid rate as the calendar has it now.

 

[samfx]

Initial spike

Initial spike, is it on the one minute chart? Which is the first minute bar when data was released. Or the initial spike is the first highest level before it retraces 30% to 50%.

Stavro, you have answered that you use 15 to 25 pips for stop loss, do you set that as soon as you take the trade at 30% or 50% retracement. Or do you wait till the market reach a certain level or resistance? I understood whenever market reaches initial spike you set stop loss at break-even.

One last thing, on the retracement method, sometimes you say to wait for 30% retracement before entering the trade if we got the certain deviation, like on the "UK Services PMI". Or in some cases we should wait for 50% retracement, like on the "NZ Employment Change" yesterday. So my question is how do we know market will stop at 30% and reverse back in our direction. It could continue on going down to 50% or even more like the AUD Retail Sales trade couple days ago. Should we wait for a reversal signal at these levels. I mean by that candle paterns? or pin bar, hammer candle? All that on the 15 minute chart? including resistance level.
I guess you don't use the 1 minute chart even for the initial spike.

Do you recommend Oracle Trader for Auto-Click software and their service?

Thank you very much for your help,

Do you have web site?