EUR/GBP - The Pair to Short-Term Range Trade

We feel that risk/reward and overall momentum favors continued EUR strength, and as such we will look to go long the EURGBP on a hold of recent support. According to recent Commitment of Traders Futures positioning, relatively healthy positioning in the EUR signals further potential gains.

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[B]Trading Tip - We feel that risk/reward and overall momentum favors continued EUR strength, and as such we will look to go long the EURGBP on a hold of recent support. According to recent Commitment of Traders Futures positioning, relatively healthy positioning in the EUR signals further potential gains. The position may be initiated near trendline and Fibonacci support, with the intraday daily stop to be placed at 0.6940. Yet a daily close below 0.6952 would tell us that the recent uptrend may see further correction before subsequent rallies. This is intended to be a short-term trade due to heavy event risk on October 4th, as both the ECB and BOE are scheduled to announce their rate decisions that day. [/B]
[B]Event Risk Euro-zone and UK[/B]
[B]Euro-zone[/B] - Event risk out of the Euro-zone will be scattered over the course of the week, and on October 1st PMI manufacturing and services numbers could get pummeled as demand for exports from the Euro-zone wanes. Unemployment data for the Euro-zone should hold steady, with a surprise gain in the figure boding ill for the economy. Finally, the big event risk comes on October 4th when the ECB announces their rate decision. Despite distress in the credit markets, the inflation-focused bank could still raise rates, though Bloomberg?s survey of economists is calling for no change in policy. Regardless of the rate decision, the markets will be listening for commentary from ECB President Jean-Claude Trichet at his press conference the same morning.
[B]UK[/B] - Similar to the Euro-zone, event risk in the UK will be scattered over the next week with the most market-moving data coming at the end of the week. First, traders may ignore PMI manufacturing to focus on housing equity withdrawals for the second quarter, as a marked drop-off could signal a decline in consumer spending. On October 2nd, markets may not notice PMI construction. The figure remains at very lofty levels, and a mild decline in the figure would not be surprising. Finally, the BOE rate decision will garner the most attention, despite the fact that no rate change is expected. Given the woes of mortgage lender Northern Rock and fears that a credit crunch will disturb economic growth in the UK, speculation has risen that the BOE will cut rates this year. Nevertheless, BOE Governor Mervyn King remains an ardent inflation hawk and with housing prices, energy prices, and RPI still high, his bias is unlikely to change. Furthermore, King is notorious for being against the implementation of policies that have even the smallest chance of introducing the risk of moral hazard.

                [B]Data for September 30 - October 5[/B]
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        [B]Data for September 30 - October        5[/B]
           [B]Date[/B]
        [B]Euro-zone Economic        Data[/B]
        [B][/B]
        [B]Date[/B]
        [B]UK[/B][B] Economic        Data[/B]
           Oct        1
        Euro-zone PMI Manufacturing        (SEP)
        
        Oct        1
        PMI Manufacturing        (SEP)
           Oct        2
        Euro-zone Unemployment Rate        (AUG)
        
        Oct        1
        BOE Housing Equity Withdrawal        (2Q)
           Oct        3
        Euro-zone PMI Services (SEP        F)
        
        Oct        2
        PMI Construction        (SEP)
           Oct        4
        ECB Announces Interest        Rates
        
        Oct        4
        BOE Announces Interest        Rates

[B] Terri Belkas, Currency Analyst for DailyFX.com[/B]