Today’s Forex Guide

Weekend summary & the week ahead


Mar.02.2015

Nothing major happened over the weekend and currency pairs started their dance moves smoothly Monday morning, with a slight upside for Mr. Euro, and downside for Mr. British Pound. Japanese Yen continues on a gradual weakness and Mr. Aussie/ Kiwi remain indecisive, although Mr. Aussie is leaning towards down moves.

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Week Ahead with a Bang

If you were bored with currency pairs dance moves in the previous weeks, then this is your week! We have major countries making hot statements that can provide excitement to TWO type of traders:

- Short term traders (trade the news)

-Long term trader (get a sense of the trends)

Aussie Movers

  • Building Approvals - Tuesday March 3 at 1:30 AM GMT
  • RBA Rate Statement - Tuesday March 3 at 4:30 AM GMT

Reserve Bank of Australia's (RBA) Governor Glenn Stevens is scheduled to announce their rate statement on Tuesday’s Asian trading session. With recent economic reports from the Land Down Under still failing to impress, some investors are counting on another 0.25% interest rate cut from the RBA.

However, the minutes of the previous RBA meeting indicated that policymakers are inclined to wait for the impact of their latest rate cut to kick in, which suggests that they might wait a couple more months before cutting again. Even if they don't make any changes this time, a dovish tone would confirm that they’re open for further easing later on and more down moves for Mr. Aussie.

Canadian Dollar Movers

  • Canada's Monthly GDP - Tuesday March 3 at 2:30 PM GMT
  • BOC Rate Statement - Wednesday March 4 at 4:00 PM GMT

Bank  of Canada (BOC) is set to announce its policy statement on Wednesday’s U.S. trading session. BOC Governor Stephen Poloz shocked the markets last month in announcing a surprise rate cut in order to prevent the potential economic downturn from the falling oil prices.

Not much has changed in Canada since then, as the economy continued to announce one dismal report after another. On a more upbeat note, crude oil seems to have bottomed out while market watchers anticipate a potential OPEC production cut, which hints that BOC policymakers might no longer need to implement more measures to support their economy for now.

Pound Movers

  • BOE Gov Carney Speaks -  Tuesday March 3 at 11:00 AM GMT
  • Services PMI - Wednesday March 4 at 10:30 AM GMT
  • Official Bank Rate - Thursday March 5 at 1:00 PM GMT
  • Monetary Policy Committee Rate Statement - Thursday March during London Session

Comparing to other major central banks, the Bank of England (BOE)  is one of the more optimistic major central banks out there and their upcoming policy statement might reaffirm their hawkish tone. In his recent testimonies, BOE Governor Carney has emphasized that the drop in price levels might actually translate to a pickup in consumer spending and overall economic growth.

Unless there are any changes to this outlook, Mr. British pound might continue to stay supported above the 1.53 level during this week’s BOE decision. After all, data from the U.K. economy have been stable, with their latest jobs report printing awesome numbers as usual which has helped Mr. British pound to reverse from its previous downtrend and dancing on a potential new uptrend.

 

Euro Movers

  • Spanish Unemployment Change - Tuesday March 3 at 9:00 AM GMT
  • Minimum Bid Rate - Thursday March 5 at 1:45 PM GMT
  • ECB Press Conference - Thursday March 5 at 2:30 PM GMT

Rounding up the central bank events for this week is the European Central Bank (ECB) rate statement also scheduled on Thursday, right after the BOE. Since Super Mario Draghi has pretty much used up all the monetary policy tools in his toolbox, no actual changes to interest rates or their QE program are expected to be announced this time.

What’s interesting to note is that, despite all the economic and fiscal troubles in the region lately, Draghi actually sounded relatively upbeat in his latest speech. He pointed out that the economy is seeing green shoots and emphasized the role of national central banks in fueling the potential recovery.

 

So, are you now ready to start your trading week with a bang? Which of the hot economic topics are you planning to trade, and how are you planning to adjust your long term trades?

A couple of quick tips here from Invest Diva:

 

Short term traders

Be cautious of the gossips and rumors. Set your stops and limits tight so you don't lose more pips than you can afford on sudden changes. Use sentiment analysis gadgets and beware of false breakouts.

 

Long term traders

If extra volatility isn't your cup of tea, loosen up your stops and limits on your already in place trades so you don't get kicked out by the short-term traders temporary excitement that might have nothing to say about the long term trends.

 

 

Weekend Summary

 

The Greek situation seems ongoing, with the extension agreed by its creditors, but comments from one senior Syriza politician along the lines of  'what has been agreed with our creditors isn't going to be implemented and we all know it'. The comments come as Greece's cash requirements become more urgent and will probably look to issue some short term debt to cover immediate needs, rather than wait for monies to flow through from creditors who, unsurprisingly, want to see Athens at least show a bit of willing to change.

In Russia, tens of thousands of people gathered in Moscow last night to mourn opposition leader Boris Nemstov, who was killed near the Kremlin late on Friday night. You can draw your own conclusions as to why Mr Nemstov was killed, but many are linking it to Mr Putin and, whatever the circumstances, this has put Russia further away from democracy than it has been in the last ten years.

On a separate note, Moscow plans to raid its reserve fund to try and plug the mammoth holes in this years budget. Oil revenues being sharply lower and western sanctions that are likely to see the economy shrink by 4% mean that there is a large imbalance in the books which will be plugged by using as much as 50% of the total reserve fund. The fund is also made up of foreign currency, which means the central bank will have less firepower to try and halt the slide of the Rouble.

During the Asian session China cut interest rates by 25 basis points, which is said to be the first in a series of steps to prop up economic activity. The move saw their currency fall to a two year low, whilst stock markets in the region rallied on optimism that this might spark an uplift in Chinese consumption, though many analysts are doubtful that this will have a noticeable impact on expansion. Don't forget that China's moves can directly affect it's trading buddy, Australia's actions and there for Mr. Aussie.

 

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