Forex News Trading Events 18th - 22nd August

Jarratt Davis

Special Consultant to the FPA
Messages
1,495
Hey everyone,

I’ve put together some analysis of this week’s Forex news events, which I hope will give everyone a good understanding of how I’m viewing the market for this week.

[video=youtube;b9ClaC8dNFo]https://www.youtube.com/watch?v=b9ClaC8dNFo[/video]

This week we have a few “high impact” news events that I will be looking to actively trade.

Tuesday 19[SUP]th[/SUP] August 2014

AUD Monetary Policy Meeting Minutes – 02:30AM London Time

The reason why this is so important is due to the fact the market are in a flux regarding the AUD, with some uncertainty been placed on whether they will cut or hike rates. At present it would appear there is a minor inclination towards a hike, based on the fact that inflation is at the top end of the RBA’s band between 2/3%. Couple this with the fact that the economic recovery in Australia is quite amenable at present.

Having said that there is a case to be put forward for the potential of a cut if the economic recovery starts to hesitate, given that there have been a few indicators lately that the recovery isn’t advancing at the rate that the RBA would have hoped for.

Subsequently the RBA is erring on the side of caution and been very moderate relating to rate increasing, actively trying to avoid a dovish or hawkish tone until more data has been released. I am however bullish on the AUD as they have changed to a neutral stance from a dovish stance in February this year. I feel that if AUD/USD hits the 0.9000 level it will be supported, and if we get any hawkish tone from the RBA we can expect to see AUD/USD rally to 0.9700.

We know however that the RBA would rather see the AUD at a lower level which could have some bearing on the route the AUD is likely to take.

To sum up I am bullish on the AUD but would want to get in early, as a change of tone from the RBA would affect price action over the next few months, there are several hundred pips to be made either way depending on whether RBA comes out dovish or hawkish.

I am keen to garner a greater insight into what the RBA are thinking and will be keeping a close eye on anything they have to say over the coming weeks, as any change in tone will dictate what course the AUD will trend.


UK CPI – 09:30am London Time

This is a substantially important piece of data as this is one of the main mandates of the BoE, given that it is the BoE’s primary task to get inflation to 2% and maintain that level.

If however inflation continues to rise it will be in the BoE’s best interest to counteract this, which they no doubt will. The most effective way of curbing the gain in inflation is to raise interest rates, last week we saw the selloff of the GBP as there was a lot of talk from the BoE regarding wage growth. However wage growth is not a policy mandate of the BoE and it would appear they are picking data out of the air in an attempt to avoid raising rates, if inflation goes above 2% they will have to change their tone as they can’t let inflation take flight just on account of one piece of data (wage growth).

In summary at present with CPI under 2% they have a certain degree of freedom to adjust their stance and maintain an even flow, however if CPI comes out at 1.9-2.0% + we will see a big rally on the GBP.


US CPI – 01:30pm London Time

The US CPI is of great importance as the Federal Reserve has stated that this, in conjunction with employment data is what they are scrutinising when deciding whether to raise interest rates.

As they approach there target inflation level we can view this as an indication that they need to raise interest rates, making us fundamentally bullish about the USD particularly against the weaker currencies and especially those with low interest rates and no feasible expectation for a rate hike in the coming months.


Wednesday 20[SUP]th[/SUP] August 2014


RBA Gov Stevens Speaks – 12:30am London Time

As a reiteration of what was previously stated regarding AUD Monetary policy meeting minutes we are going to paying close attention to what language Gov Stevens uses in his speech. If he refrains from using a dovish tone when referring to the AUD we can be certain that the AUD will rally, as the market will take that as an indication that they are going to focus on inflation and subsequently can’t talk the AUD as he will be proceeding towards raising rates.

This is because it is near impossible to talk a currency down when they are approaching a hike in rates, any talk of weakening the currency is in direct contradiction to their actions of raising rates which makes the currency an attractive purchase.

Just to emphasise then; if the RBA removes a neutral tone or applies a dovish tone we can expect to see a significant alteration to the price action, we’re not clear on the direction at the moment and remain fundamentally bullish on the AUD but expect a noteworthy shift over the next few weeks as a lack of tone is unfeasible as an enduring position for the RBA to take given that this has been their position over the previous 3-4 months and they are getting close to their inflation boundary whilst aspiring for a weaker currency.


UK MPC Meeting Minutes– 09:30am London Time


This is in all likelihood one of the biggest events of the week, previously the figure has sat at 9-0 and it is expected to be 9-0, there is however the slightest prospect that a few members will vote to hike the rates sooner. If this becomes a reality and there is a vote of 8-1 or 7-2 for example with a few members of the bank asserting that we should raise sooner, it will put a great deal of pressure on the bank to raise rates sooner.

This will cause a large rally on the GBP and I would be looking at seeing the GBPUSD hit 1.7000/1.7100, if however the vote remains at 9-0, I’m certain it will remain relatively unchanged. I personally am long on the GBP from around 1.6850 albeit not overly concerned as I believe that the data is going to continue breaking quite positively and it is conceivable that at some point over the next few months, inflation will go up.

Based on the fact that the key piece of data the BoE referred to when was wage growth which essentially isn’t in their mandate and as we move forward it is becoming abundantly clear that Carney cherry picked this snippet of data out of the ether in an attempt to deter the rise of inflation, looking at all other metrics we clearly see that the UK economy is doing relatively well.


Therefore the call for rate hikes is justified given the current conditions, especially as the BoE want to hike rates gradually. If the central bank wishes to hike rates gradually they need to get started as soon as possible so that they can assess the impact of each small hike as they proceed.

In summary this is potentially the biggest event of the week and could induce a decidedly large rally on the GBP if the votes are anything but 9-0.


Thursday 21[SUP]st [/SUP]August 2014


US Unemployment Claims 13:30pm London Time

Although this is a minor figure it is expected to be better than that of previous levels, if data continues to come out positive it will have an effect on the market as the Federal Reserve will use this as an opportunity to start taking a more hawkish tone.

This won’t have a large bearing on the market; however expect to see little spikes anywhere in the range of 20-50 pips with the overall trend been long and any selloffs of the USD will be supported particularly against the weaker currencies and currencies with no prospect of a rate hike anytime soon.

To sum up I don’t expect this to have a large play on the market but if the figure meets or exceeds expectations I would anticipate the USD to strengthen against the EUR, CAD and JPY.


Friday 22[SUP]nd [/SUP]August 2014


Canadian Core CPI - 13:30pm London Time


The BoC came out last month and stated that the reason that CPI has been getting better is transitory and it’s not going to last. So what we need to see is CPI figures deteriorate, the figure is expected to be released as 0.0%. If it sticks to expectations or comes out negative we could see a nice rally on USD/CAD as CAD starts to sell off again. Inflation was the only real reason why the CAD strengthened over the last few months, once that transitory/temporary high has passed and it drops to 0.0% again or breaks negative we can expect USD/CAD to return to its highs 0f 1.1000 – 1.1100.

This is because the BoC are pretty neutral/dovish and aren’t looking to hike rates whatsoever in the near future and are currently trying to keep rates low. In this case USD/CAD will rally again, particularly as the USD is continually getting strengthened and the Federal Reserve is getting more hawkish.

On the opposite end of the spectrum, if CPI comes out strong and it remains strong the USD/CAD will fall with the CAD strengthening simply because the market will start to believe that the BoC were wrong, and anticipate that the BoC will have to move to a more neutral/hawkish tone over the coming months.

This is a long term prospective and as with US unemployment claims, it’s not going to cause any major moves on the market but definitely something to keep an eye on this week.

In summary the main currencies to keep an eye on throughout the week are the AUD and GBP.

P.S - If you want to learn more about how I trade, check out this link below

http://www.forexpeacearmy.com/forex...e-trading-course-forex-pro-jarratt-davis.html
 
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OPHH

Private, 1st Class
Messages
51
Hi Jarratt:cool:
thank very much for all.
the signal AUDNZD in my platform demo Very good profits:)
 

ahmer

Recruit
Messages
147
As you mentioned in your video about UK CPI data, which was very disappointed today. I hope you will manage to recover from this draw dawn very soon.
Now we are focusing on two big news events on tomorrow.
MPC Asset Purchase Facility Votes
MPC Official Bank Rate Votes

Can you please share your thoughts, what BOE will look for now ?
 

HFT

Private
Messages
13
Hi Jarratt, thanks for your analysis.

Is there any chance that the gbp will drop any further?
Today the CPI data were disappointing, so I am assuming tomorrow the votes will remain 9-0

What do you think about it?
Can it drop further tomorrow bacause of this votes?

Thanks for your time

Sam
 

Jarratt Davis

Special Consultant to the FPA
Messages
1,495
Hi Jarratt, thanks for your analysis.

Is there any chance that the gbp will drop any further?
Today the CPI data were disappointing, so I am assuming tomorrow the votes will remain 9-0

What do you think about it?
Can it drop further tomorrow bacause of this votes?

Thanks for your time

Sam
Hi Sam,

The GBP seems to be hitting support at 1.66000 so we would be expecting to see a rally from there, if the vote does come out at 9-0 the market will take this as neutral data as it has been 9-0 for the last three years. If however we get 8-1 or 7-2 we can expect to see a rally on the GBP.

Hope that helps :)
 
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Jarratt Davis

Special Consultant to the FPA
Messages
1,495
As you mentioned in your video about UK CPI data, which was very disappointed today. I hope you will manage to recover from this draw dawn very soon.
Now we are focusing on two big news events on tomorrow.
MPC Asset Purchase Facility Votes
MPC Official Bank Rate Votes

Can you please share your thoughts, what BOE will look for now ?
Hi Ahmer,

The BoE are trying to hold off becoming more hawkish for as long as the data will allow them Instead of acknowledging the recent good data they have switched focus to the areas that have failed to show much improvement, namely, wage growth this would appear to be their response to slowing the rise of inflation. As we are well aware though the fundamentals remain the same as the UK's economy is strengthening exponentially faster than it's counterparts, therefore I personally will be viewing the recent sentiment of the GBP as a good opportunity to get in and hold a position as it rally's, Obviously just keep a close eye on the data as it is released.

Kind Regards
 
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