Forex News Trading Events 2nd - 6th June

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. I have also written up the main points of the video posted below if you prefer.

[video=youtube_share;GeNKH_4IsWg]http://youtu.be/GeNKH_4IsWg[/video]

This week we have a lot of “high impact” news events that will provide some fantastic trading opportunities.

Monday 2[SUP]nd[/SUP] June


Australian Building Approvals


The main reason I’m looking out for this data point is because currently the AUD is sensitive to Australian data. This is because last week we had Private Capital Earnings which came in much worse than expected, but even with that, the AUD rallied. If we look at that data in more detail we saw industries away from mining are growing much faster than expected- showing that Australia is moving away from mining related industries towards non-mining which is fantastic for a more stable economy, this also means they are less reliant on countries like China. So this data point gave us an insight that things are improving for Australia overall. This has supported the bullish outlook for the AUD, and the reason I’ve picked this data point is because it’s expected much better than the previous and generally when data points are expected better than previous they normally are. Coupled with the fact that the AUD is already a bullish currency this is a great opportunity to buy AUD/USD before the figure is released with high expectations for a rally back towards the 0.9400 area.


German Prelim CPI

This data point is important because the ECB are under pressure to act on low inflation. Germany is one of the stronger countries in the EU, so if inflation is bad it will have a negative impact on the whole of the EU. I wouldn’t consider this a tradable event because we have the ECB meeting on the 5[SUP]th[/SUP] June, which is what the market will be focused on, but we will still be looking for CPI to be as expected or weaker.

UK Manufacturing PMI

The reason this event is tradable is simply because lately the UK data has been fantastic and the economy is booming at the moment. The BOE are trying to take a dovish stance but ultimately traders can see the economy is rapidly improving. With this in mind I’m expecting Manufacturing PMI to come out better than expected. Even if it comes out worse, it doesn’t change the bullish outlook, it just gives traders a better price to get in long. All high impact UK data gives us a great opportunity to make pips because the currency is so bullish
at the moment.

Tuesday 3[SUP]rd[/SUP] June


Australian Retail Sales


This data point is expected better than previous which is why we are looking at trading this news release. We are looking for a rally on AUD after this release. You don’t need to get in long before the release, you can wait for a pullback to get in long which is less risky. If it comes out worse than expected it will weigh on the AUD, however I don’t expect this to last because the market is ultimately bullish on the AUD.

RBA Rate Statement

I don’t expect the RBA to change interest rates but what I’m looking for is any comments from the RBA that are slightly more hawkish than previous. I’m basically looking for the RBA to recognize the recent run of good data and admit that the Australian economy isn’t as bad as previously thought, and maybe hint that they could look at raising interest rates sooner. If this happens, look to buy AUD/USD after the Rate Statement if it’s more hawkish. However if it isn’t more hawkish, I won’t look to trade AUD in the near term.

UK Construction PMI

Again another data point from the UK, and I’ve explained above why this is important. This is a great figure because it’s expected better than the previous and we’re already bullish on the GBP. If you want to be cautious then wait for the figure to come out and get in long on the pullback. If it comes out worse and drops, look for a good price to enter long because the market will still be buying pounds.

Eurozone CPI Flash Estimate

Similar to German CPI, this data point is important because it will put pressure on the ECB, it’s expected at 0.7%, which is way lower than the ECB’s target, and if it stays that way surely the ECB will have to act in their next meeting on June 5[SUP]th[/SUP]. This isn’t a figure we can trade, but it’s something to keep an eye on for now.

Wednesday 4[SUP]th[/SUP] June


Australian GDP

Again I’ve already been over why Australian data is important, and this figure is expected better than previous. So this is expected to support the AUD and keep its rally going, if this comes out worse it will sell off, but the market will probably buy it back because of the bullish outlook for the AUD.

UK Services PMI

This figure is expected slightly weaker than previous but it’s not much of a high impact news announcement, however because data from the UK has been continually coming out better than expected I’m looking for this data to come out better than expected. Again, it doesn’t matter if it comes out weaker because one data point won’t change the bullish outlook for the GBP, and it will give us a better price to get in long on GBP/USD.

US ADP Non-Farm Payrolls, Canadian Trade Balance, US Trade Balance

I’m not going to be trading any of these news releases mainly because I don’t think it will be market moving.

Bank of Canada Rate Statement

The reason this statement is so important is because I’m expecting the BOC to change their tone from dovish to neutral/hawkish. The reason for that is because I believe the BOC are now overly dovish on their own economy, and over recent months the data has come out better than you would expect based on how the BOC are talking. In the next few months I’m expecting the BOC to change their tone slightly to more hawkish. This would cause USD/CAD to fall more, the reason for this is because the BOC are dovish but the Canadian economy is doing better than they are saying. One or two things will happen because of this- either the data starts getting bad again and inflation starts getting weaker, which supports the BOC’s dovish tone, or the data keeps getting better and inflation gets higher, which will force the BOC to change their tone to more hawkish.

Thursday 5[SUP]th[/SUP] June


UK MPC Rate Statement


This rate statement is very important, this is because the MPC have already started disagreeing with each other on when to raise interest rates. The minutes from the recent MPC meeting showed a few members stating that if the BOE were to raise rates gradually, it will have to be sooner rather than later. With this in mind I’m expecting some members to show the same concerns which will keep the GBP rallying. This will put pressure on the Bank of England to go along with that action, and put forward the estimates for when the first rate rise will come.

ECB Interest Rate Decision

There is three scenarios I’m looking for from this event. They will either cut interest rates as expected from 0.25% to 0.10% which will cause the euro to fall. If that happens I’m expecting the market to start buying the euro back over the next few weeks. The reason for that is when they cut the rates in November 2013, the euro fell but then the market brought it back because the rate cut didn’t make any difference, the same applies to this scenario.

The second scenario is if they cut to a negative rate, and if this happens I’m not sure what to expect. I think the market will sell euro aggressively and not be so keen to buy it back while they wait and see the effects that negative rate has on the economy. This is one scenario I wouldn’t look to trade.

Thirdly they could cut the rate or not, then also implement QE. Some form of QE is what the market wants and if this is the case, they will sell the euro very aggressively. Even if the euro rallies you should be looking to sell it, and I’m fully confident that the EUR/USD will keep falling if the ECB implement a solid QE programme down the 1.3000 level without any recovery.

Also if the ECB don’t act and they do absolutely nothing, the EUR/USD pair will rally and I would expect it to get back above 1.3700 very quickly and continue to 1.3800 to 1.3900 over the coming weeks.

Friday 6[SUP]th[/SUP] June


US Non-Farm Payrolls


Non-farm payrolls is a high impact event however it won’t be the figure I’m focused on. I will focus on the quality of the data, so don’t pay too much attention to the headline figure. If you look on your calendar you will see Average Hourly Earnings, basically we are looking for what kind of jobs have been created. Is the quality of those jobs getting better? Are they jobs that people want? Or are they zero-hour contract jobs or part-time jobs? If average hourly earnings are going down this means people are earning less money which is bad for the economy as a whole. So don’t just focus on the headline figure, focus on the data points behind it for a bigger picture of the whole economy.
 
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Greg Davies

Recruit
Messages
8
Thx Jarratt. Some good stuff here, appreciate it. Brett, everything is on Forex factory, just set your local time accordingly.
 

Brett Reynolds

Sergeant Major
Messages
717
Yea I know everything on forex factory..but I'm just being lazy....and also a lot of 'junk' on FF! Im only on a laptop too at moment...have to keep 'screenswapping'..but I'm just writing main news items down now..piece of paper..pasted to wall..:rolleyes:..High tech stuff!
 

Videep

Private, 1st Class
Messages
44
Not sure what you did, but great video Jarratt. Cool outdoor video with no background noise. 2 thumbs up :D
Also thanks for the critical news events analysis. Usually there are multiple very important/red events marked on different sites but most of the times nothing happens. That's why I stopped scalping the news events long time back(had created an ea & everything..). But good to know the most critical out of those critical events.
 
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