EUR/AUD, EUR/CAD and GBP/USD - The Pairs to Range Trade

EUR/AUD - Looking back over years of price action, EURAUD has shown a proclivity to consolidation. While the pair is not necessarily in the middle of this large range, it is close. Therefore, it may take a significant change in behavior or rates to shake this pair.
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Event Risk Eurozone and Australia
Trading Tip – The data from both sides of the pair are expected to be somewhat mixed, allowing for enough volatility in EUR/AUD to fill out the range. Caution should be taken the Tuesday Asian session to monitor risk inherent in RBA Gov. Stevens testimony before parliament. Since the indicators for this pair are evenly dispersed, breakouts on momentum are less likely as long as price action is not at the range top or bottom at the time of the important releases.
Eurozone – Scheduled data that may impact the euro is sparse and somewhat evenly dispersed. Weighing the probabilities, the German producer price index and IFO Business Climate survey will likely rally the biggest reaction. Inflation has grown ever more important after the ECB’s Trichet brought back the term ‘strong vigilance’ in his last monetary policy statement. On the other hand, the uncertainty still floating around after the January VAT will be alleviated modestly with the IFO business confidence report.
Australia – Economic events from Australia could be considerable more volatile depending on how they print. RBA Governor Glenn Stevens’ testimony before parliament will most likely offer an update on inflation and growth outlooks as well as possible monetary policy biases since the central bank last lifted the overnight cash rate. Should inflation remain a concern, the wage reports will find themselves far more market moving than under normal circumstances.

<FONT face=Arial size=2> EUR/CAD

Trading Tip – Upcoming data is expected to be negative for the Australian Dollar, providing risks to the upside to the EUR/AUD. On the flipside, any negative surprises in German GDP could send prices immediately lower. A break above 1.6771 on a dovish RBA could provide a good price for a short on a strong profit potential to stop loss ratio.

Eurozone – The European calendar will offer more than a few fundamental traps for traders looking for complacent price action. German, French and Euro-area growth will influence the market in that order. The German ZEW survey could be surprising as traders look for any clue to the investment and consumer climate following January’s VAT hike.

Canada – A front-ended calendar provides significant event risk on the RBA Quarterly Monetary Policy Statement. Markets expect Australian officials to soften their stance on inflation, as a downtrend in Consumer Prices eases the need for further monetary policy tightening. This could lead the Aussie lower through early trade.

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<B style=“mso-bidi-font-weight: normal”>GBP/USD

Trading Tip - These are the event risks that are the most important to watch in the week ahead. Data expected to be relatively neutral for the GBPUSD >> Noteworthy trendline support makes early GBPUSD longs an attractive choice, but a break below 1.9400 effectively clears the currency for declines until 1.9260. Watch for key event risk through midweek and be prepared to exit positions on any data surprises.

UK – Pound traders should watch for key data releases on Wednesday and Friday, while an earlier Monday report has an outside chance to move GBP pairs. Event risks line up very well with their dollar counterparts, as the 21st will be the clear focus of GBPUSD traders. Any surprises through Wednesday’s BoE minutes could send the GBPUSD considerably higher, as previously dovish central bank news leaves risks to the upside for future interest rate speculation.

US – The US calendar is very sparse, with Wednesday’s Consumer Price Index and FOMC Minutes to create foreseeable event risk for the Dollar. This provides relatively clear skies for effective range trading, as speculators are unlikely to breach key technical levels without a shift in underlying fundamentals. It serves to note, however, that traders should be prepared to cover positions ahead of Wednesday’s economic data. With key CPI and FOMC news on tap, markets may move all USD-denominated pairs beyond key levels if numbers surprise.