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The bullish sentiment surrounding the British Pound may gather pace over the next 24-hours of trading as U.K. Jobless Claims are expected to contract another 20.0K in January.
What’s Expected:
Time of release: 02/19/2014 9:30 GMT, 4:30 EST
Primary Pair Impact: GBPUSD
Expected: -20.0K
Previous: -24.0K
Forecast: -10.0K to -25.0K
Why Is This Event Important:
Beyond the Bank of England (BoE) Minutes, an upbeat labor report may a more meaningful reaction in the GBPUSD as it raises the outlook for growth, and it seems as though Governor Mark Carney will look to normalize monetary policy sooner rather than later as the central bank anticipates a stronger recovery in 2014.
How To Trade This Event Risk
Bullish GBP Trade: Jobless Claims Contract 20.0K+, Jobless Rate Falls From 7.1%
- Need green, five-minute candle following the release to consider a long British Pound trade
- If market reaction favors buying sterling, long GBPUSD 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
Bearish GBP Trade: U.K. Employment Report DisappointsPotential Price Targets For The Rate Decision
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Your Strategy and the Market Condition (based on dailyfx article)
Trends show a bias that has been displayed in the market place; and when a strong trend is available, the trader’s job is simple: To trade in the direction of that trend. If the trend is up, the trader should look to buy; and if the trend is down, the trader should look to sell.
Unfortunately trends don’t always exist; and when that often entails congested, range-bound price movements as bulls and bears both fight to take over control of the market in search of the next trend. These range-bound environs can be more dangerous, and given the limited upside that might be available, many traders will often eschew trading the range; instead waiting for the inevitable breakout that may end the range and lead into a new trend.
The Benefit of Multiple Time Frames
The value of being able to get a ‘bigger picture’ view on a market cannot be understated. To think of the value of multiple time frame analysis, think of trading in a currency pair like buying a home.
If you’re going to buy a home, you’re likely going to want more of an overview than simply driving by and getting a quick glance. This is like trading a currency pair when only seeing one time frame.
When buying a home, you’ll likely want to get out of the car and walk around to ensure that the back yard isn’t in complete disarray. You want to check the foundation to make sure that you’re not going to have exorbitant repair expenses in your future. You want to get as much information as is feasibly possible to make the most intelligent purchasing decision that you can.
Trading in a market isn’t all that different, the more information you have the more of an informed decision that you can make.
If a trader is looking to hold a position for a few hours to a few days (commonly called ‘Swing Trading’), the four-hour chart can be the optimal time frame for entering positions.
And if the four-hour time frame is being used to enter positions, the daily chart can be used to gauge the trend (or lack thereof); so that the trader can ensure they are focusing the optimal approach on the prevailing market condition.
Or perhaps a longer-term trader wants to use the daily chart to enter trades. Well, then the weekly chart can be used as the longer time frame to guide the trader’s decision-making processes.
The benefit of using a longer time frame in the decision as to which strategy to utilize is that the trader can take more information into account, getting an idea of the ‘bigger picture’ before executing on their strategies.
Gauging Trend Strength (or lack thereof)
Once a trader has determined the time frame with which they want to look to grade the prevailing trend, focus can then be diverted to investigating the strength of that trend.
Price Action is a popular mechanism for doing so. Traders can simply look as to whether a market is in the process of making ‘higher-highs’ and ‘higher-lows.’ If this is taking place, then the trader is witnessing an
up-trend, and can look to move down to the shorter time frame in an effort to buy as efficiently as possible.
2013-02-19 13:30 GMT (or 14:30 MQ MT5 time) | [USD - Building Permits]
if actual > forecast = good for currency (for USD in our case)
==========
US Building Permits worse than expected 937K
US Building Permits released at 937K worse than expected. The potential for this event to affect exchange rates is High. Market impact primarily affects USD currency pairs although currency correlations may impact other currencies as well.
Unemployment in Britain Increases, Indicates for Trouble (based on forexminute article)
The latest data on unemployment in Britain is worrying for Britain as the jobless rate measured by the International Labor Organization methods rose to 7.2 percent. This according to several observers is going to give a tough challenge to the argument that the UK government has been keeping the country on the growth path.
The unemployment rate increase is the first increase since February last year wherein it stood at 7.1 percent in the three months through November. Nonetheless, Britain’s unemployment rate unexpectedly went up and this according to experts is suggesting the recent improvement in the labor market has lost some momentum and the
UK government needs to rethink.
A lot of things would be determined or decided on the basis of the latest unemployment increase and one of them is that earlier the Bank of England last week had abandoned its commitment not to consider raising interest rates as long as unemployment remained above 7 percent. Now that it is clear that it has indeed crossed the limit, it won’t be able to argue.
The Bank of England Will Consider Employment Data While Issuing Guidelines
Though the Bank of England was riding on the fact that the economy grew faster than officials predicted when forward guidance was introduced in August, unemployment has crossed the expectations. Now, the central bank will have to reassess the situation to chalk out any further decision on the raising of interest rates.
Earlier in the first week of this month, Bank of England policy makers agreed to keep the current policy stance as the bank believes that with unemployment remaining above the 7 percent threshold, the committee’s policy guidance therefore remained in place and no member thought it appropriate to tighten, or to loose, the stance of monetary policy.
Nonetheless, earlier on Feb. 12, Carney of BOE announced that policy makers are shifting their focus to more than a dozen indicators of slack in the economy. Then he had said that the indicators such as the demand for more working hours would be included in it as in the fourth quarter, the number of part-time workers who want full-time work fell 29,000 to 1.43 million.
Currently, the BOE is focusing on eliminating spare capacity in the economy within the next three years; however, it wants at the same time to tame inflation which according to it fell below 2 percent target in November for the first time since 2009.
NZDUSD Techbical Analysis (based on dailyfx article)
LEVELS: .8136 .8187 .8237 | .8310 .8345 .8362
2013-02-20 01:45 GMT (or 02:45 MQ MT5 time) | [CNY - HSBC Manufacturing PMI]
if actual > forecast = good for currency (for CNY in our case)
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Economists React: Another Bad Sign for China’s Economy
The preliminary or “flash” reading of HSBC and Markit’s manufacturing purchasing managers’ index came in well below expectations for February, adding to the dark clouds gathering over China’s economy. The index dropped to 48.3 from a final reading of 49.5 in January, where anything below 50 indicates contraction.
The flash PMI is the only major piece of data to arrive before the month is out, making it a focus of attention for markets. Copper and aluminium prices, as well as the Australian dollar, all highly sensitive to Chinese demand, all fell on the news. Some analysts cautioned that the PMI could be distorted by the weeklong Lunar New Year holiday, which moves around from year to year and plays havoc with China’s statistics. But for others it was confirmation that a serious slowdown is under way.
IMF Sees Downside Risks From Emerging Economies
The International Monetary Fund urged advanced economies to avoid a quick exit from monetary stimulus, as capital outflows and sharp currency depreciation in the emerging economies pose a risk to recovery. In a note prepared for the G-20 meeting in Sydney on February 22 and 23, the lender said Wednesday the recovery is still weak and significant downside risks remain.
2013-02-20 08:00 GMT (or 09:00 MQ MT5 time) | [EUR - French PMI]
if actual > forecast = good for currency (for EUR in our case)
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French Private Sector Downturn Deepens In February: Markit
France's private sector activity decreased at a faster pace in February, led by a further marked fall in service sector activity, survey data released by Markit Economics and CDAF revealed Thursday.
The seasonally adjusted composite output index, which gauges the performance of the manufacturing and service sectors, dropped to a two-month low of 47.6 in February from 48.9 in January. Index readings below 50 indicate contraction of the sector.
New orders received by private sector firms fell for a fifth consecutive month in February, with both service providers and manufacturers recording faster declines.
In line with the weakness in activity, employment fell for a fourth successive month. Input price inflation in the sector eased to a five-month low, and output prices continued to fall.
The purchasing managers index (PMI) for the manufacturing sector decreased to 48.5 in February from 49.3 in the beginning of the year. Economists had forecast the index to rise to 49.5.
China Seeks Seat On Gold Fix Table. What Does It Mean For The Gold Price? (based on Forbes)
This week reports emerged that South Africa's Standard Bank was in negotiations to take Deutsche Bank's seat at something known as the London fix: the group of banks who chair the price-setting mechanism for the global gold benchmark. On first glance it looked interesting and perhaps practical that South Africa, as a leading gold producer, should seek a seat at this particular table. But that is to miss the point. What is much more interesting is that Standard Bank is 20% owned by China's Industrial and Commercial Bank of China (ICBC) - which is also in the process of buying a majority stake in Standard's UK-based markets business, including commodities.