Forex Signal (Thursday December 8, 2011 - 7:45am) EDT - EU ECB Interest Rate

Stavro D'Amore

Former FPA Special Consultant
Messages
547
Hello,

Today we have EU ECB Interest Rate sentiment due.

EU ECB Interest Rate
Forecast: 1.00%
Previous 1.25%
Pair to trade: EUR/USD
Triggers we need: -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 . As per my method of trading below.
If the ECB suddenly decides to lower the rate, which seems likely. 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 and S&P Downgrades in speculation. 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.

What is it? Why do we care?
The European Central Bank (ECB) decision on short term interest rate. The decision on where to set interest rates depends mostly on growth outlook and inflation. The primary objective of the central bank is to achieve price stability. High interest rates attract foreigners looking for the best "risk-free" return on their money, which can dramatically increases demand for the nation's currency.

A higher than expected rate is positive/bullish for the EUR
A lower than expected rate is negative/bearish for the EUR

Method to trade this:
Stavro D’Amore Trading Method

Felix Trading:
Indicator Descriptions

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 close 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

All the best

Stavro D’Amore
 
Last edited by a moderator:
Hi Stavro,

Since it's widely reported & anticipated that the rates will indeed be cut by 0.25%, wouldn't it be strategic, and logical, to open short trades early whenever the EUR/USD trend upwards??

Thanks for your informative post.
 
thanks for the signal, but please what time is it ? GMT, ECT or what ? please i want to be sure .


EST – Eastern Standard Time I normally have this tabbed.

Forex Calendar @ Forex Factory Also helps (you can click the little green 'refresh' button next to the event 5 min prior to the release, to get it virtually on the DOT.

+ Also are you guys planning to SELL anyway, to try get the whole spike? It could be a great idea but could be suicidal............. Not sure if the risk would be worth it, even if we put stops just above it, the spike won't trigger the stops till like 10-20+ pips delay... So i'm not sure tbh. I might just go all out & sell just before the event too.
 
Why this happened ? It should go down as Stavro Said , If I understand correctly ..
 
Why this happened ? It should go down as Stavro Said , If I understand correctly ..

Expectations vs. market reactions don't necessarily meet. I was betting on the upside based on the PA pattern developing with increasing volume at the lows (going nowhere with increased volume forming HLs -> bullish sign). Still can turn down, market decides as always.
 
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