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Morgan Stanley: Outlooks For USD, EUR, JPY, GBP and AUD (based on efxnews article)
USD: Neutral
"We remain medium-term USD bulls, but we continue to believe USD will struggle in the near term. We believe inflation readings will have more importance with employment bouncing back but core inflation remaining low. Should inflation start materially surprising to the upside, the Fed may need to reconsider its plan for a very muted hiking pace."
EUR: Bearish
"We remain bearish EUR over the medium term, but see scope for near term support. Should European equities sell off as concerns about Greece rise, European investors would need to buy back their short EUR currency hedges. That said, Greece remains a major risk and tensions are escalating, which could drive markets to increase the risk premia in the price of EUR, weighing on the currency."
JPY: Bullish
"We believe JPY is likely to be one of the outperformers over the next few weeks, due to a few factors."
GBP: Neutral
"GBPUSD is being mainly driven by rate expectations. The strong wage data this week should bring forward the first rate hike in the UK and keep GBP supported. We particularly like buying against more vulnerable crosses."
AUD: Bearish
"We remain bearish on AUD as we expect risk appetite to soften amidst rising volatility and tighter liquidity, removing support for carry currencies. What’s more, the RBA suggested there is scope for further rate cuts, and specified the need for further currency depreciation going forward. With external and domestic factors both suggesting AUD should be lower, we remain bearish."
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How Forex News Traders Use ISM Numbers (adapted from dailyfx article)
NZDUSD M5 : 17 pips prrice movement by USD ISM Manufacturing PMI :
What is ISM?
A country’s economy is as strong as its supply chain. The Institute for Supply Management (ISM) measures the economic activity from both the manufacturing side as well as the service side. Formed in 1915, ISM is the first management institute in the world with over 40,000 members in 90 countries. Since it can draw from information gathered from the surveying its large membership of purchasing managers, the ISM economic news releases are carefully watched by Forex traders around the world as a reliable guide to economic activity.
ISM Surveys
ISM publishes three surveys; manufacturing, construction, and services. Published on the first business day of the month, the ISM Purchasing Managers Index (PMI) is compiled from surveys of 400 manufacturing purchasing managers. These purchasing managers from different sectors represent five different fields; inventories and employment, speed of supplier deliveries, production level, and new orders from customers.
XAUUSD M5 : 3345 pips price movement by USD - ISM Non-Manufacturing PMI news event :
In addition, ISM construction PMI is released on the second business day of the month, followed by services on the third business day. Forex traders will look to these releases to determine the risks at any given time in the market.
EURUSD M5 : 37 pips price movement by USD - ISM Non-Manufacturing PMI news event :
Forex Market Impact
The Manufacturing and Non-manufacturing PMI’s are big market movers. When these reports come out at 10:30 AM ET, currencies can become very volatile. Since these economic releases are based on the previous month’s historical data gathered directly from industry professionals, Forex traders can determine if the US economy is expanding or contracting.
Forex traders will compare the previous month’s number with the forecasted number that economists have published. If the released PMI number is better than the previous number and higher than the forecasted number, the US dollar tends to rally. This is where fundamental and technical analysis comes together to create a trade setup.
AUDUSD M5 : 21 pips price movement by USD - ISM Non-Manufacturing PMI news event :
In the example above, notice how the better than expected PMI number triggered a US dollar rally against the Euro. As seen in the chart above of the EURUSD, the ISM Non-Manufacturing was not only above 50 but at 55.4, beat the forecasts calling for a drop from 54.4 to 54.0.
When an economic release beats expectations, like in the example above, sharp fast moves can result. In this case, EURUSD dropped 22 pips in 15 minutes. Traders often choose the Euro as the “anti-dollar” to take advantage of capital flows between two of the largest economies.
The Euro zone has a large liquid capital markets which can absorb the huge waves of capital seeking refuge from the U.S. So a weak US ISM Non-Manufacturing number usually leads to a dollar sell-off and a rise in the Euro. Another scenario is when the number released is in line with forecasts and/or unchanged from the previous month, then the US dollar may not react at all to the number.
AUDUSD M5 : 32 pips price movement by USD - ISM Manufacturing PMI :
Overall, an ISM PMI number above 50 indicates that the economy is expanding and is healthy. However, a number below 50 indicates that the economy is weak and contracting. This number is so important that if the PMI is below 50 for two consecutive months, an economy is considered in recession.
PMI’s are also compiled for Euro zone countries by the Markit Group while US regional and national PMIs are compiled by ISM. As you can see, traders have good reason to pay special attention to the important releases from the Institute of Supply Management.
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Societe Generale: Greece is not the biggest EUR/USD driver (based on efxnews article)
"You could be forgiven for thinking that the biggest driver of the EUR/USD rate is not Greek debt talks, but the pricing of the December 2016 Fed Funds futures contract. This closed on Friday at 1.02%, the lowest level since mid-May."
"Neither is high profile enough to change market thinking about Fed policy, which prices a 1% rise in rates over 18 months. All of which just suggests we will get a stronger dollar once a faster pace of fed rate hikes is priced in, but this needs a catalyst that today’s data won’t provide. In the meantime, we watch the combination of (super-low) Fed pricing and hope of a Greek deal boost risk sentiment and undermine the dollar for the start of the week."
Deutsche Bank - Durable Goods Orders and PCE are the next big data (based on efxnews article)
EUR/USD continues to grind higher as Greece continues to dominate the headlines.
"The main focus was the June Fed meeting where early year expectations of a hike this month now feel a long time ago. There was speculation that Yellen shifted her 2015 dot lower, although as our US economist noted it is hard to tell. With the Fed still in data-dependent mode, more convincing evidence of a Q2 growth pick-up is needed. This week’s May durable goods orders and PCE are the next big data," DB argues.
"In any case, the median FOMC forecast for 2015 remained at 0.625%, while forecasts for 2016 and 2017 fell 25 basis points...Alan Ruskin looked into what current forward rates imply for EUR/USD based on the past relationship of the cross to rate spreads. A Fed funds rate of 275bp versus a zero EUR overnight rate would imply a further 20 big figure move lower in the cross. Clearly, however, the burden of EUR/USD weakness now lies on the Fed. With the Fed still in data-dependent mode, more convincing evidence of a Q2 growth pick-up is needed," DB adds.AUDIO - Weekend Edition with John O’Donnell
A decent down day on Friday couldn’t derail the strong weekly results for the markets! John O’Donnell joins Merlin for a look at interest rates, the Fed, inflation, gold and other factors influencing current market dynamics.
EUR/USD Double Top or About to Breakout? (based on dailyfx article)
'EUR/USD recorded a new month-to-date high late last weekand actually came within a few pips of testing the quarter-to-date closing high at 1.1442 before stalling out. Is the euro undergoing a double top backtest before turning lower or is it about to break out and extend the multi-month advance? The next 24-28 hours should prove key in determining which path the euro will take as near-term cyclical analysis suggests we have reached an inflection point of sorts. If the broader downtrend is going to re-assert itself here then EUR/USD shouldn’t really rally past last week’s 1.1435 high. Traction above this level would be a strong sign that multi-month correction in the single currency is nowhere near finished. A failure, on the other hand, at or around current levels followed by a break of median-line channel support at 1.1230 over the next few sessions would confirm a change in behavior and re-focus attention lower in the single currency.'
Video: Euro Tempts with Greece Progress, Equities Rally Bolsters Risk (based on dailyfx article)
The skirmish line between Greece and its creditors seems to have moved to start the week and the market is responding. Global equities took reports of progress to heart with a universal rally led by the biggest DAX (Germany's benchmark equity index) in years. Yet, the same optimistic response was not realized with the Euro. EURUSD held to its coiled wedge below 1.1500 as FX traders think 'we've been here before'. Skepticism and caution remains for an 'easy' solution to Greece - whether positive or negative - and the markets are unwilling to commit until the air is clear. That is as true for the limited risk response in equities as it is the cool Euro view. It is better wait for commitment from the speculative ranks before jumping in and sacrifice an early entry than jumping in on the wrong direction of a dramatic market move. We review the Euro, Dollar, global equities and unusual pairs like NZDJPY in today's Trading Video.
Trading News Events: U.S. Durable Goods Orders (based on dailyfx article)
Another 1.0% contract in demand U.S. Durable Goods may dampen the appeal of the greenback and generate a near-term advance in EUR/USD as ongoing slack in the real economy raises the risk for a further delay in the Fed’s liftoff.
What’s Expected:
Why Is This Event Important:
Fears of a slower recovery may encourage a growing number of Fed officials to adopt a more dovish tone for monetary policy, and we may see the Federal Open Market Committee (FOMC) retain the zero-interest rate policy (ZIRP) throughout 2015 in order to mitigate the downside risks for growth and inflation.
On the other hand, discounted prices paired with the pickup in private-sector wages may foster greater demand for U.S. Durable Goods, and a positive development may keep the Fed on course to raise the benchmark interest rate later this year as the central bank remains confident in achieving its dual mandate for full-employment and price stability.
How To Trade This Event Risk
Bearish USD Trade: Orders Contract Another 1.0% or Greater
- Need to see green, five-minute candle following the release to consider a long trade on EURUSD
- If market reaction favors a bearish dollar trade, buy EURUSD with two separate position
- Set stop at the near-by swing low/reasonable distance from entry; look for at least 1:1 risk-to-reward
- Move stop to entry on remaining position once initial target is hit; set reasonable limit
Bullish USD Trade: Demand for Large-Ticket Items Exceed Market Expectations- Need red, five-minute candle to favor a short EURUSD trade
- Implement same setup as the bearish dollar trade, just in the opposite direction
Potential Price Targets For The ReleaseEURUSD Daily
- Long-term outlook for EUR/USD remains bearish amid the
deviation in the policy outlook, but the single currency remains at risk
for a relief bounce as European policy makers work to keep Greece
within the monetary union.
- Interim Resistance: 1.1510 (61.8% expansion) to 1.1532 (February high)
- Interim Support: 1.0970 (38.2% expansion) to 1.1000 (50% retracement)
Impact that the U.S. Durable Goods report has had on EUR/USD during the last release(1 Hour post event )
(End of Day post event)
2015
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EURUSD, M5, 2015.06.23
MetaQuotes Software Corp., MetaTrader 5
EURUSD M5: 54 pips price movement by USD - Durable Goods Orders news event
MetaTrader Trading Platform Screenshots
USDJPY, M5, 2015.06.23
MetaQuotes Software Corp., MetaTrader 5
USDJPY M5: 36 pips price movement by USD - Durable Goods Orders news event
Barclays - Trading Setups For EUR/USD, USD/JPY, GBP/USD and AUD/USD (based on efxnews article)
EUR/USD: A succession of “doji” topping candles adds to our bearish conviction. We are looking for a move lower towards the 1.1050 area after reaching our initial downside targets near 1.1150. Beyond there we look for a move towards 1.0815 and then the 1.0460 year-to-date lows. The 1.1470 highs provide selling interest.
USD/JPY: Monday’s engulfing candle endorses our bullish view. We are looking for a move higher towards initial targets near 124.45 and then 125.85. Further out we are targeting the 132.20 area.
GBP/USD: We have turned neutral in the short term. Monday’s low close confirms the prior topping candle and signals a move lower in range as investors lock in profits from the June rally. Risk is seen towards 1.5640, possibly 1.5550, before a base can form. Overall we are bullish towards 1.6000 and then targets near 1.6200.
AUD/USD: We are bearish against the 0.7850 recent highs and look for a move lower towards targets near 0.7600 and then the 0.7530 year-to-date lows. Further out, we are targeting the 0.7100 area.
Credit Agricole: Is It Time To Sell EUR/USD Again? (based on efxnews article)
"This could be due to lingering uncertainty about the deal. Indeed, various media reports have highlighted creditors' concerns that the new proposal is putting too much emphasis on new taxes (on both businesses and households) to balance the books. Excessive taxation could hamper the Greek economic recovery and make the proposal less credible."
"In addition, there are concerns that the proposed VAT and pension reform could erode the support from Syriza's main coalition partners - the Greek Nationalist - when the measures are put for a vote in the Greek parliament."
"While investors' cautiousness could explain some of the recent EURunderperformance, the contrasting response of the FX and the European stock and peripheral bond markets may also indicate that investors have moved away from Greece to re-focus on the lingering policy divergence between the increasingly hawkish Fed and persistently dovish ECB. Indeed, a Greek resolution will arguably make it easier for the FOMC to hike rates as soon as September."
"At the same time, the ECB remains very committed to QE and this should continue the make the EUR an attractive funding currency."
"In addition, we suspect that renewed inflows into the Eurozone stocks and bondd could lead to renewed selling pressure on EUR in the forward markets."
"The above could suggest that EUR/USD could be offering attractive selling opportunity at current levels."