[B]Trading the News: Euro Zone Industrial New Orders[/B]
[B][U]What is Expected[/U][/B]
Time of release: [B]09/24/2007 09:00 GMT, 05:00 EST[/B]
Primary Pair Impact : [B]EURUSD[/B]
Expected: [B]-3.0%
[/B]Previous: 4.4%
[B]
How To Trade This Event Risk[/B]
It is a slow day for economic indicators if the EZ industrial new orders report is the most promising market moving indicator on the docket. However, Monday holds few economic releases in an otherwise busy week. The bookings report for industrial goods for the entire Euro Zone is expected to report a 3.0 percent drop over the month of July. However, there are a number of supplementary indicators that may suggest the opposite. Over the same month, industrial production actually grew 0.6 percent following a stagnant June. Whats more, in terms of demand, the trade balance recorded its fifth consecutive surplus on export demand while domestic spending grew 0.1 percent. While the consumer indicator wasnt very strong, the previous months 0.6 percent increase in receipts may have boosted orders to restock emptied shelves. For overall fundamental impact, we suggest considering an event-driven trade only when there is a considerable surprise. Should the actual print diverge considerably from expectations, the indicator may very well have a marked influence on the euro since there are no other indicators to interfere with its impact. Furthermore, with the euro reaching new highs, market participants may be increasingly on edge and especially sensitive to otherwise overlooked indicators.
Taking a trade on a better than expected report should be considered only if the actual print is close to unchanged or, more favorably, a positive number. An upside surprise could be market moving as it counters the markets bearish outlook. On the other hand, an overextended euro may stifle the usual, gradual follow through this indicator can generate since it is taking greater and greater fundamentals to drive this tiring engine. For a possible trade, we should see a remarkable fundamentals and the obligatory five-minute green candle. If these two objectives are met, two EURUSD lots should be taken at market with an initial stop at the nearby swing low or a reasonable fixed distance. The target on the first lot should equal risk and the second should be discretionary (taking into account the distance to the all time high). To conserve profit, move the second lots stop to breakeven when the first takes profit.
A worse than expected print could very well be the more market-moving outcome for the orders report. Given how extended the euro is, a technical correction could be fueled by a lower tier fundamental report. Once again, we suggest looking for a considerable disappointment.
