Key Events To Watch, Why, And Trade Strategy For Binary Option and Spot Market Traders of Forex, Stock Indexes, and Commodities.Wednesday BOE Inflation Report
Provides the latest insight on whether the BOE is leaning towards tightening. Thus far the BOE has dismissed high UK inflation figures as temporary, and is more concerned about an economic recovery already under pressure from austerity cuts. UK data has not been good, but the GBP has held up relatively well because markets believe the UK will be forced to raise rates in the coming months due to inflationary pressures.
Continued high inflation should be bullish for the Pound Sterling, and bearish for UK stocks.. Lower than expected inflation is bearish for the GBP though good for UK stocksHOW TO TRADE THE GBP
- Forex traders should look to go long the GBP vs. whatever counter currency is weak. The USD had been the recent choice, but that will depend on whether the EUR can stabilize. If it continues to weaken, the USD is likely to strengthen.
- Forex ETF traders: If higher inflation long FXB. I know of no short GBP ETFS
- Forex Binary Option Traders: If higher inflation-Bias to calls on major GBP pairs, especially those with weaker counterpart. If it’s a risk on day/week, examples would be the GBPUSD of GBPJPY. If it’s a risk off day/week, the buy puts on the EURGBP (especially if EUR worries are prominent next week) or calls on the GBPNZD. If inflation is low then bias to puts on the GBP vs. most counterparts. Check charts in your relevant time frame.
NB: As always consider overall risk appetite. If it’s strong as seen by rising stock indexes and commodities, then the GBP should rise vs. the safe haven JPY, USD, CHF, and fall vs. the others. UK stocks and indexes would also rise. Thus stock index binary option traders would likely be best off keeping a bias towards buying calls on the FTSE or other bell whether UK assets.Thursday US Retail Sales
This is always the big follow up data after the monthly jobs reports. If it confirms that jobs improvements are feeding consumer spending, that should be bullish for risk assets. It’s affect on the USD is unclear. If very good, that’s also bullish for the USD. Like jobs data, spending is the other key metric the Fed watches to determine its pace of tightening. A big upside surprise could raise expectations for tightening. These are very low now, so they’re sensitive to any positive news. If very poor then bad for risk appetite in general. Because the USD is a safe haven currency it may actually rise due to the resultant fear, though the USD has behaved less like a safe haven since QE2 began and even less like one since the last dovish FOMC meeting.HOW TO TRADE THE EVENT
If retail sales strongly beat expectations, trade ideas include:
- Bullish for US stocks: long S&P 500 or other indexes or their related ETFs. Index binary option traders buy calls on these US indexes or other risk assets.
- If retail sales miss expectations badly: the opposite: bias to short risk assets, buy puts on the S&P 500 or other risk assets
If inflation is higher than expected, that is bad for risk assets, but bullish for the USD because inflationary pressure is an incentive for the Fed to raise rates.TRADE IDEAS INCLUDE
- Forex traders: bias to be long the USD in the following hours vs. weaker currencies (which these are depends on overall risk sentiment for the day. If it’s a risk on day the USD could still be weak against most – check your charts).
- Forex ETF traders: To go long buy UUP, to be short the USD, buy UDN
- Forex binary option traders: bias to calls on the USD vs. whichever currencies are weaker that day.
Also: EU officials have been meeting about how to deal with Greece and Portugal. Leaked news good or bad could move markets, especially if the fear level is significantly raised or lowered. If last year is any guide, they’ll try first to calm markets with half measures. Those have tended to scare markets because they suggest the EU isn’t serious enough about solving the problem.
Current reports out of Luxembourg suggest Greece is seeking another 2+ years to reach its 3% of GDP deficit target (currently at 10.4%) and the creation of a fund to buy Greek bonds so that Athens can… take on yet more debt, during this period when they’re supposed to be reducing it. No, I don’t get it either.Selected Calendar Event Listing: Only the key events
It’s a typical light second week of the month calendar. Here are the key events to watch. The biggest are in boldface
GBP HALIFAX HPI MM
CAD HOUSING STARTS
AUD TRADE BAL
CNY TRAD BAL
AUD ANNUAL BUDGET
GBP KING SPEAKS INFLATION REPORT
CAD TRAD BAL
USD TRADE BAL
AUD EMPLOYMENT CHANGE, UNEMPLOYMENT RATE
GBP MFG PROD
USD RETAIL SALES, WEEKLY JOBS FIRST TIME CLAIMS
FRIDAY: USD CORE CPI
DISCLOSURE & DISCLAIMER: THE ABOVE IS FOR INFORMATIONAL PURPOSES ONLY AND NOT TO BE CONSTRUED AS SPECIFIC TRADING ADVICE. RESPONSIBILITY FOR TRADE DECISIONS IS SOLELY WITH THE READER.