[B][U]GROWTHACES.COM Forex Trading Strategies:[/U][/B]
[B][U]Taken Positions:[/U][/B]
[B]EUR/USD trading strategy[/B][B]:[/B] long at 1.1575, target 1.1745, stop-loss 1.1550
[B]GBP/USD trading strategy[/B][B]:[/B] long at 1.5200, target 1.5350, stop-loss 1.5135
[B]USD/JPY trading strategy:[/B] short at 117.20, target 113.50, stop-loss 117.00
[B]USD/CAD trading strategy:[/B] long at 1.1880, target 1.2200, stop-loss 1.1890
[B]NZD/USD trading strategy[/B][B]:[/B] long at 0.7690, target 0.8000, stop-loss 0.7730
[B][U]Pending Orders:[/U][/B]
[B]AUD/NZD trading strategy[/B]: sell at 1.0680, if filled target 1.0350, stop-loss 1.0760
[B][U]EUR/USD:[/U][/B][U] [B]How The ECB’s QE May Look Like? Will It Work?[/B][/U]
(long in anticipation for lower U.S. CPI today)
[ul]
[li] The ECB rhetoric suggests that [B]the full-blown quantitative easing will be announced already next week.[/B]
[/li][li] [B]How the ECB’s quantitative easing may look like? [/B]The package will probably include [B]purchases of sovereign bonds[/B], as well as [B]non-financial corporate[/B] [B]bonds[/B]. The government bonds part of the package could be worth about [B]EUR 500 bn or even more[/B]. [B]The ECB will not have senior status over other investors.[/B] As a reply to objections from some Euro zone member we should expect also some [B]restriction to risk distribution among the Euro zone members[/B]. It is possible that government will be purchased by national central banks that will hold the risk on their own balance sheets. The ECB will probably leave the [B]door open to do more, if needed. [/B]
[/li][li] [B]The ECB Executive Board member Benoit Coeure[/B] said that the aim of a euro zone quantitative easing plan would be to anchor long-term financing conditions and restore confidence in the inflation target. He said that [B]the bank must decide whether the bond-buying would focus on specific countries or would be spread across the whole euro zone.[/B]
[/li][li] [B]Will the QE work? [/B]There will be [B]no[/B] real economic [B]benefit from pushing government bond yields lower, because most of them is already at the bottom[/B]. The main potential benefit is the [B]impact on other asset prices like equities[/B] and market expectations. One of the most important channels through which the QE can help spur growth and revive inflation expectations is [B]the foreign exchange channel[/B]. [B]The fall in the value of the EUR will be helpful for the international competitiveness of exports and increase import prices[/B]. However, in our opinion [B]the EUR is unlikely to depreciate significantly[/B] because its current level already discounts the ECB action. [B]We can even see strengthening of the common currency on profit taking on recent EUR-selling positions and diminishing expectations for early interest rates hikes in the USA.[/B]
[/li][li] The head of Germany’s central bank and the ECB’s Governing Council member Jens Weidmann signaled that his critical position on a long-awaited move to print fresh money to buy government bonds had not changed.
[/li][li] Another very important event for EUR/USD traders next week will be [B]general election in Greece on Sunday, January 25[/B]. [B]Greek leftist opposition party Syriza holds a steady lead over the ruling New Democracy. [/B]The survey by pollsters Pulse for Action 24 television showed Syriza would garner 31.5% of the vote against 28% for Samaras’ New Democracy party. If Greeks vote as the poll indicates, Syriza would receive 142 of the 300 seats in parliament, according to Pulse, short of an overall majority. [B]Syriza’s top economic adviser, Yiannis Milios, said the party had totally ruled out the possibility of a Greek exit from the euro zone.[/B]
[/li][li] Eurostat confirmed today its earlier estimate that CPI inflation in December fell to -0.2% yoy from 0.4% yoy in November. Data showed that energy prices plunged 6.3% yoy and unprocessed food prices were lower by 1.0% yoy. Core inflation amounted to 0.7% yoy vs. 0.8% yoy in the earlier estimate.
[/li][li] [B]Investors are waiting for U.S. CPI data (13:30 GMT) today. [/B]The median forecast is 0.7% yoy. [B]In case of lower reading a jump in the EUR/USD is very likely.[/B] [B]That would be one more sign[/B] (after very weak December U.S. retail sales data released earlier this week) [B]that Fed’s hikes will be delayed[/B]. [B]Given already discounted QE decision in the Euro zone, [/B]such a change in market expectations [B]will be bad news for the USD bulls.[/B]
[/li][li] [B]What is our trading strategy for today? We got long on the EUR/USD at 1.1575 in anticipation for lower U.S. CPI data. We set the target 1.1745. Due to high uncertainty on the markets we will keep the stop-loss tight and close the position in case of neutral or higher CPI reading.[/B]
[/li][/ul]
[B]
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[U]Significant technical analysis’ levels: [/U]
Resistance: 1.1647 (hourly high Jan 16), 1.1748 (recovery high Jan 15), 1.1792 (high Jan 15)
Support: 1.1568 (low Jan 15), 1.505 (low Nov 12, 2003), 1.1445 (low Nov 11, 2003)
[B][U]GBP/USD: Profit Taken. Long Again.[/U][/B]
(long for 1.5350)
[ul]
[li] The GBP appreciated strongly against the EUR yesterday and we took profit on our short EUR/GBP position (0.7850-0.7700). [B]Our GBP/USD long reached the stop-loss level at 1.5170, but we took profit lower than expected (1.5080-1.5170).[/B] After yesterday’s hurricane the market seems to be less volatile today. That is why [B]we got long on the GBP/USD again at 1.5200, in anticipation of lower U.S. CPI reading. We set the target at 1.5350. Due to high uncertainty on the markets we should keep the stop-loss tight and close the position in case of higher CPI reading.[/B]
[/li][li] [B]GBP traders will soon shift their focus to next week’s UK labour data and minutes from the Bank of England’s latest meeting. [/B]
[/li][li] [B]We should focus mainly on average weekly earnings data (Wednesday, 9:30 GMT),[/B] because of high importance of these data for the monetary authorities.
[/li][li] [B]The BoE releases the minutes of the MPC’s January meeting also on Wednesday[/B]. We expect that the vote to keep the rate will remain 7-2, with Ian McCafferty and Martin Weale as dissenters. The discussion in the minutes will be probably dominated by the fall in the price of oil and inflation, but also on signs of an acceleration in wages growth. A slight positive influence of low oil prices on economic growth is the argument of two hawks, while doves may see oil prices as the factor that may de-anchor medium-term inflation expectations.
[/li][/ul]
[U]
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[U]Significant technical analysis’ levels: [/U]
Resistance: 1.5267 (high Jan 15), 1.5270 (high Jan 14), 1.5274 (high Jan 6)
Support: 1.5151 (low Jan 15), 1.5145 (low Jan 14), 1.5077 (low Jan 13)