Currency Trading : Tips for the Day
Posted by cvbasheer on January 20, 2010
· Today at 1:30 pm we have the UK Consumer Price Index (CPI) expected to come out at 2.6% vs. 1.9%. CPI is one of the leading indicators of inflation where it measures the changes in the prices of goods & services. Consumer prices account for majority of overall inflation. Inflation is important to currency valuation because rising prices lead the central bank to raise interest rates.
If the data comes out at 2.8% or more then buy GBPUSD for 30 pips.
If the data comes out at 2.4% or less then sell GBPUSD for 30 pips.
· At 1:30 pm we have the UK Retail Price Index (RPI) expected to come out at 2.1% vs. 0.3%. RPI measures the changes in the price of goods and services purchased by consumers for direct consumption. RPI differs from CPI in that it only measures goods and services bought for the purpose of consumption by the vast majority of households, and it includes housing costs which are excluded from CPI.
This data is less important than the CPI so we would either ignore this data or use it along with the CPI data for more number of pips.
· At 2:00 pm we have the German ZEW Economic Conditions expected to come out at 49.8 vs. 50.4. This data is an important It’s a leading indicator of economic health – investors and analysts are highly informed by virtue of their job, and changes in their sentiment can be an early signal of future economic activity. A level above 50 is considered as expansion and a level below is known as contraction.
If the data comes out at 51 or more then buy EURUSD for 25 pips.
If the data comes out at 49 or less then sell EURUSD for 25 pips.
· At 5:30 pm we have the Canadian Leading Indicators expected to come out at 1 vs. 1.3. Leading Indicators is a combined reading of 10 economic indicators related to employment, production, new orders, consumer confidence, housing, stock market prices, money supply, and interest rate spreads. It is considered as a minor data as it is difficult to derive each on an individual level so we would ignore this data.
· At 6:00 pm we have the US Treasury International Capital Long term Purchases expected to come out at 30.3Bn vs. 20.7Bn. It is defined as difference in value between foreign long-term securities purchased by US citizens and US long-term securities purchased by foreigners. We would not recommend trading this data.
Important Data: News Insight
· At 6:00 pm we have the Canadian Interest Rate decided by the Bank of Canada (BOC) expected to come out at 0.25% vs. 0.25%. Interest Rate is the rate at which the major financial institutions borrow and lend overnight between themselves. Bank of Canada governor Mark Carney has repeatedly given a conditional pledge to keep the central bank’s benchmark interest rate at its current historic low of 0.25 per cent until the middle of the year. But precisely when rates will rise, and how quickly they will do so, is an open debate. The Bank of Canada will tend to hold its interest rate until a major growth aspect is seen as they have decided to hold it until the middle of the year.
· The trend of EURUSD seems to be bearish as the EUR fell against the dollar last week from the high of 1.4578 to a low of 1.4333. EURUSD having a resistance of 1.4440, we would recommend selling at higher levels until any confirmation of uptrend breaking the resistance.
· The trend of GBPUSD is still bullish as there is no major retracement seen in the sterling. The GBPUSD having a low of 1.5895, it rose to 1.6400 during the Asian Session. Intraday support for GBPUSD is 1.6300. We would recommend buying at lower levels near the support, it is better to get the CPI data at 1:30pm to get more confirmations for buying or selling near the 1.6300.
· USDJPY fell last week to a low of 90.35 creating a good support as the trend is a downtrend. Resistance level of USDJPY is 91.00 levels; we would recommend selling USDJPY near the resistance levels.
· The trend of AUDUSD last week was bullish but at the end of last week there were some retracement seen to a low of 0.9170 creating a double bottom which is acting a major support for the Australian Dollar. Intraday resistance for AUDUSD is 0.9275.
· Gold is in a consolidation range as we can see no major direction for the GOLDUSD. We are waiting for a breakout for Gold as the intraday resistance level for Gold is 1141$ an ounce and intraday support level for Gold is 1131$ an ounce.