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FX - EUR/USD: Trading the U.S. Consumer Confidence Survey |
| Samedi, 23 Avril 2011 13:00 | ||||||||||||||||||||||||||||||||||||||
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Trading the News: U.S. Consumer Confidence What’s Expected: Time of release: 04/26/2011 14:00 GMT, 10:00 EST Primary Pair Impact:EURUSD Expected: 64.5 Previous: 63.4 DailyFX Forecast: 62.0 to 65.0 Why Is This Event Important: Household confidence in the world's largest economy is anticipated to gather pace in April, with market participants forecasting the Conference Board’s index to increase to 64.5 from 63.4 in the previous month, and a rebound in consumer sentiment should spark a bullish reaction in the U.S. dollar as it reinforces an improved outlook for private consumption. As personal spending remains one of the leading drivers of growth, expectations for a rise in economic activity could heighten speculation for higher borrowing costs in 2011, and the Federal Reserve may see scope to gradually normalize monetary policy in the second-half of the year as policy makers see the recovery on a firmer footing. However, as the Fed continues to highlight the ongoing weakness within the real economy, the central bank may keep the benchmark interest rate close to zero for most of the year as it aims to encourage a sustainable recovery. Recent Economic Developments The Upside
The Downside
As employment picks up, with consumer credit conditions improving, the ongoing expansion in private sector activity should help to prop up household sentiment as the central bank continues to raise its fundamental assessment for the nation. However, as households cope with higher energy costs paired with subdued wage growth, consumer confidence may wane further over the coming months, and the central bank may continue to carry out the additional $600B in quantitative easing in an effort to strengthen the recovery. As a result, the FOMC is likely to maintain a neutral tone for monetary policy at its next rate decision on April 27 as the fundamental outlook remains clouded with high uncertainty. Potential Price Targets For The Release ![]() How To Trade This Event Risk Expectations for a rebound in household sentiment certainly reinforces a bullish outlook for greenback, and the market reaction to the confidence report could pave the way for a long U.S. dollar trade as growth prospects improve. Therefore, if the Conference Board’s index advances to 64.5 or higher in April, we will need a red, five-minute candle subsequent to the release to generate a sell entry on two-lots of EUR/USD. Once these conditions are fulfilled, we will set the initial stop at the nearby swing high or a reasonable distance after taking market volatility into account, and this risk will establish our first objective. The second target will be based on discretion, and we will move the stop on the second lot to cost once the first trade reaches its mark in order to protect our profits. In contrast, consumer confidence may deteriorate further given the ongoing slack within the real economy, and an unexpected drop in household sentiment could bear down on the exchange rate as the outlook for future growth falters. As a result, if the survey holds flat from the previous month or falls back from 63.4, we will implement the same strategy for a long euro-dollar trade as the short position laid out above, just in the opposite direction. Impact that the U.S. Existing Home Sales report has had on USD during the last month
March 2011 U.S. Consumer Confidence
Questions? Comments? Join us in the DailyFX Forum View the Expo Presentation on ‘Trading the News’ For Additional Resources To discuss this report contact David Song, Currency Analyst: dsong@dailyfx.com DailyFX provides forex news on the economic reports and political events that influence the currency market. Source: Dailyfx
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