USA New Home Sales

Contract: Euro Futures
Result: No Trade

Prior: 1.12M revised to 1.23M
Expected: 1.09M
Actual: 0.94M

Not enough deviation for me to take the trade. I’m using high deviations with more contracts now to increase my probability percentage and increase my profits. It will mean fewer trades, but a high win rate is important.

USA GDP

Contract: Euro Futures
Result: No Trade

Prior: 3.5%
Expected: 2.4%
Actual: 2.2%

Small deviation, no trade, not much else to say.

Description
Gross Domestic Product (GDP) measures the total value of all goods and services produced by the economy. A rising trend has a positive effect on the nation’s currency. GDP is the broadest measure of activity and the primary gauge of the economy’s health. To foreign investors, a strong economy is viewed favorably because it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the nation’s currency.

USA Consumer Confidence and Existing Home Sales

Contract: Euro

Consumer Confidence
Prior:  110.2
Expected: 109
Actual: 112.5

Existing Home Sales
Prior:  6.27M
Expected:  6.25M
Actual: 6.46M

Both of these reports were bullish for the dollar hence the euro dropped 25 ticks or so on the news. I didn’t trade this as I was caught up in the ES and ER2 and gold markets as they sank like a stone. I have included it here for my own reference for future reports.

Consumer Confidence Description
Measures the mood of consumers in regard to economic conditions. The reading is derived from a monthly survey that asks respondents to evaluate the prospects for the economy in the future. Higher readings point to higher consumer optimism. When consumers are optimistic they tend to purchase more goods and services, which stimulates the economy.

Existing Home Sales
Measures the annualized number of existing homes sold in the previous month. Existing Home Sales make up a larger portion of the housing market than New Home Sales, and therefore are an important indicator of trends in the housing market. This indicator is published monthly by the National Association of Realtors.

US Durable Goods

Contract: Euro
Result: Buy

Prior: 2.7% revised to 2.6%
Expected: -0.2%
Actual: -3.1%

I set my deviation to 0.8 for a fairly safe trade. Quite a big drop in durable goods for a buy on the euro. My trading software has not been working right since I moved to my new futures broker so I didn’t get into the trade. However it was good for maybe 10 ticks. Not a great trade this one, I’m actually glad my software broke this time. I would have expected a bigger move on those numbers.

After looking at the tape I notice that the whole spike was filled within 1 second of the news release. This means that had I got into this trade, I would more than likely have lost money or broken even.

I have been dabbling with the DAX in my day trading lately and I have noticed that it responds very well to some US events, sometimes better than the currencies. Also the Dow Eurostoxx reacts in a similar manner and has more liquidity than the DAX. I will be watching these markets closely in future on US economic releases to see how they react.

Looking at the DAX tape the price range for the first 3 seconds was 6926.0 – 6917.0. This is an 18 tick range since the DAX moves in increments of 0.5. Still an acceptable range and better than the euro as the DAX slid to 6891.5 within a few minutes. A move of 50 ticks if we take the worst fill price of 6917. Not bad at all when you consider that a DAX tick is worth EUR12.50 per contract. That’s around $16.50 at the time of writing this per tick, per contract or the move value is $825 per contract.

Below is a screenshot of the Eurostoxx which has about half the liquidity of the ES S&P mini contract on the CME. I don’t have any experience of this market, but it may be a good one to watch and possibly better than the DAX because of liquidity. DAX liquity vol for 27/2/07 was 128,384 contracts. Eurostoxx 50 was 647,917 contracts.

Description
Measures the total value of new purchase orders placed with domestic manufacturers for hard goods with a life expectancy of more than 3 years, such as automobiles, computers, appliances, and airplanes. A rising trend has a positive effect on the nation’s currency because an increased level of purchase orders signals that manufacturers will be busy in the months to come as they work to fill the orders. Traders watch this indicator closely because of it’s predictive abilities.

UK GDP

Contract: British Pound Futures
Result: No Trade

Prior: 0.8%
Expected: 0.8%
Actual: 0.8%

I had zero expectations for this report, I have never actually got a trade out of it. Deviation set to 0.2 for a decent move, 0.1 can cause unexpected movement.

Description
Gross Domestic Product (GDP) measures the total value of all goods and services produced by the economy. A rising trend has a positive effect on the nation’s currency. GDP is the broadest measure of activity and the primary gauge of the economy’s health. To foreign investors, a strong economy is viewed favorably because it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the nation’s currency.

FOMC Meeting Minutes

I just observed this event with a view to building some history on it to spot any recurring patterns. If you know of a good website that has a history of these trades with screenshots of charts or a strategy for trading it, please let me know, thanks. I tracked the euro futures and the S&P 500 mini for a potential setup.

Euro:

S&P 500 emini (ES):

Description
The Federal Open Market Committee (FOMC) Meeting Minutes are a verbatim record of the committee’s meeting held about two weeks earlier. The minutes give traders insight into the latest interest rate decision and policy shifts.

Canada Retail Sales (Core)

Contract: Canadian Dollar Futures
Result: No Trade

Prior: 0.1% revised to 0.2%
Expected: 0.7%
Actual: 2.0%

This report came out at the same time as USA CPI. The CPI is usually a bigger mover so I focused on that and let the canadian one go. Turns out the canadian one had more deviation but still did not move very impressively at all. This would have been a sell if I had traded it and you may have got 10-15 with good slippage and spread. Forex chart:

Futures chart:

Description
Derivative of Retail Sales that excludes the Automobile Sales component. Automobile Sales make up roughly 25% of Retail Sales, but they can be very volatile from month to month and can distort the picture. Retail Sales with the exclusion of this volatile component is thought to be a better indicator of the underlying trend in consumer spending.

USA CPI (exc. Food and energy)

Contract: Euro Futures
Result: No Trade

Prior: 0.2% revised to 0.1%
Expected: 0.2%
Actual: 0.3%

A 0.1 deviation in favour of the dollar but the revision was slightly worse so a bit of conflict which can be seen very clearly from the tape. Lots of buys and sells at the market with a dominance on the sellers. I set my deviation to 0.2 and got a no trade.

The DAX dropped significantly on the news also which I find interesting:

Why did the DAX drop? Answers in the comments section please, I’d be grateful.

Description
Derivative of the Consumer Price Index (CPI) that excludes the Food and Energy items. Food and Energy account for roughly 25% of CPI, but they can be very volatile from month to month and can distort the overall picture. CPI with the exclusion of these volatile components is thought to be a better indicator of the underlying inflation trend.

Bank of England Meeting Minutes

There is no number to wait for on this release as the announcement already came out. The only number to watch for are numbers voting for and against. I decided to try a straddle technique as the market can move a long way on meeting minutes. I tried just one contract so that if I did get spanked, then it wouldn’t hurt my PnL too much. Turns out I got spanked.

I set a sell stop order at 1.9550 and a buy stop order at 1.9565 with a target of 25 and stop of 10 ticks. I set this up about 60 seconds before the report. 52 seconds before the report came out a nasty spike got me into the market with 16 ticks slippage and then came right back up to stop me out with another 3 ticks slippage for a total loss of 13 ticks – not too painful as I only used one contract, so a loss of $85 or so with commissions. If I had waited to submit my straddle order until a few seconds before the report it would have been a nice trade as the market continued down for 50 pips or so. Frustrating experience, but I learnt something nevertheless. If you have any ideas or tips on trading this one please let me know in the comments section, thanks!

Nastiness on tape:

Description
The Bank of England (BOE) Meeting Minutes are a verbatim record of the bank’s meeting held about two weeks earlier. The minutes give traders insight into the latest interest rate decision and policy shifts.

Canada CPI (Core)

Contract: Canadian Dollar Futures
Result: No Trade

Prior: -0.2%
Expected: 0.1%
Actual: 0.1%

Well it seems the Canadian economists are far too good at predicting their reports which means we rarely get a decent deviation from the forecast. No trade. This market is very thin – I’m not sure I really want to be trading it but will try with small size and see what happens on a good report. Volume is very light.

Description
Derivative of the Consumer Price Index (CPI) that excludes the eight most volatile items, including fruit, fruit preparations and nuts, vegetables and vegetable preparations, mortgage interest costs, natural gas, fuel oil and other fuel, gasoline, inter-city transportation, and tobacco products and smokers’ supplies. CPI with the exclusion of these volatile components is thought to be a better indicator of the underlying inflation trend and the central bank uses it as their primary inflation gauge, aiming to keep it at an annualized rate of 2%.

USA PPI and Housing Starts

Contract: Euro Futures
Result: No Trade

Core PPI
Prior: 0.2% revised to 0.1%
Expected: 0.2%
Actual: 0.2%

Housing Starts
Prior: 1.64M
Expected: 1.61M
Actual: 1.41M

Nice deviation on the housing starts and if PPI had confirmed in the same direction I would have got in, but PPI was static. Used a 0.5 deviation for PPI as the main number to watch and got a no trade.

PPI Description
The Producer Price Index (PPI) measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. When manufactures pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. PPI is highly regarded, and at extremes will have a market impact equal to that of its CPI counterpart.

Housing Starts
Measures the annualized number of new single-family homes or buildings constructed throughout the previous month.

US Net Foreign Securities (TIC report)

Contract: Euro Futures
Result: No Trade

Prior: 68.4B revised to 84.9B
Expected: 60.0B
Actual: 15.0B

I set a high deviation as this one historically recently as not moved very much. Deviation watched at 50B but I did not set up the software to trade, I wanted to just watch this one. The euro moved 20 ticks on a big deviation, too risky for me.

Description
The Treasury International Capital (TIC) Report measures foreign demand for US debt and assets. Strong demand tends to strengthen the dollar as foreigners convert their money in order to purchase US securities.

USA Industrial Production

Contract: Euro Futures
Result: Buy

Prior: 0.4% revised to 0.5%
Expected: 0.0%
Actual: -1.2%

I set a fairly high deviation of 0.5 and got in at 1.3178. Price looked a little jumpy and didn’t move far so I got out immediately for a gain of 1 tick.

Description
Measures the total value of output produced by factories, mines, and utilities. A rising trend has a positive effect on the nation’s currency because high levels of production are a sign of a strong economy. Industrial Production reacts quickly to the ups and downs of the business cycle and can be a leading indicator of manufacturing employment, average earnings, and personal income. Traders pay special attention to Industrial Production because it’s one of the few growth indicators that is produced directly by the Federal Reserve.

US Empire State Business Conditions Index

Contract: Euro Futures
Result: No trade

Prior: 9.13
Expected: 10.5
Actual: 24.4

I set a deviation of 15 so would have needed 25.5 to get into a trade, so I just missed this one. Glad I did miss it as there was a nasty wick spiking down then retracing back past the entry.

Description
Measures the general business conditions of manufacturers in New York State. The index is derived from a survey that asks respondents to rate the level of general business activity as ‘decrease’, ‘increase’, or ‘no change’. A rising trend has a positive effect on the nation’s currency because good manufacturing conditions are a sign of a strong economy. Although this survey is limited to manufacturers in New York only, traders pay close attention because the New York Federal Reserve releases it weeks before other major reports on manufacturing (e.g., Industrial Production, ISM Manufacturing Index).

UK Retail Sales

Contract: British Pound Futures
Result: Sell
Profit: 25 ticks
Peak spike move: 74 ticks (2min chart)
Peak move: 109 ticks

Prior: 1.1%
Expected:0.2%
Actual: -1.8%

Massive deviation of 1.6 gave a huge trade. I set my deviation to 0.4 and got in within 2 seconds of the release at 1.9636 and set a target of 25 pips as that has been the average move lately. My target was hit within 19 seconds and price continued to tank. Perhaps next time I will take half off at the target, move the stop to breakeven, and then let the other half run (just thinking out loud). Great trade.

Looking at the tape, I notice that someone got into the trade with 40 contracts at 09:30:00 exactly the time of the release. Would love to know what software they’re using.

Description
Measures the value of sales at the retail level. A rising trend has a positive effect on the nation’s currency because Retail Sales make up a large portion of consumer spending, which is a major driver of the economy and has a sizable impact on GDP. Traders pay close attention to Retail Sales because it is usually the first significant indicator of the month that relates to consumer behavior and is susceptible to surprises.

USA Retail Sales (Core)

Contract: Euro Futures
Result: No Trade

Prior: 1% revised to 1.3%
Expected: 0.4%
Actual: 0.3%

Not enough deviation for a trade.

Description
Derivative of Retail Sales that excludes the Automobile Sales component. Automobile Sales make up roughly 25% of Retail Sales, but they can be very volatile from month to month and can distort the picture. Retail Sales with the exclusion of this volatile component is thought to be a better indicator of the underlying trend in consumer spending.

UK Claimant Count

Contract: British Pound
Result: No Trade

Prior: -5.5K
Expected: -5.0K
Actual: -13.5K

A no trade even though the headline figure was a strong one to the upside. I set my software to only trade if the ILO figures were in agreement, which they weren’t. Not much else to say. I’m glad the ILO figures kept me out of this one as the candle spiked up and then came down past the entry point. Not nice as the peak of the move up was only 8 ticks, not much room for profit there after slippage.

Description
Measures the change in the number of people claiming unemployment related benefits over the previous month. A falling trend has a positive effect on the nation’s currency. Working people tend to spend more, and consumer spending is a major driver of the economy.

USA Trade Balance

Pair: EUR/USD or Euro Futures
Result: No trade

Prior: -58.1B
Expected: -59.5B
Actual: -61.2

A small deviation resulting in no trade. I used Euro futures instead of british pound as there is more liquidity. The first three seconds gave a 6 tick spread, very tradeable. Look at the tape there were some fairly large orders going in – one at 56 cars which translates to $700 per tick. Price only moved 10 ticks on the spike and then retraced, and then trended upward for a while. Not a high probability trade for me, personally.

Tape

Chart

Description
Measures the difference in value between imported and exported goods and services. A positive Trade Balance indicates that more goods and services were exported than imported over a given period. A rising trend has a positive effect on the nation’s currency. When higher levels of exports are sold to the world, demand for the nation’s currency is elevated as foreigners convert their native currency to purchase the exports. The Trade Balance also has a sizable impact on GDP because high demand for exports creates increased employment and production, as domestic factories work to fill this demand.

UK CPI (month on month)

Pair: GBP/USD or British Pound Futures
Result: Sell
Peak spike: 60 ticks (2min chart)

Prior: 0.6%
Expected: -0.6%
Actual: -0.8%

A nice deviation for a strong sell signal. Even 0.1 deviation moves the market on this report. The bp futures moved 60 ticks in the first 2 minutes then trended down for a while after. I missed the trade due to a software issue which is rather annoying. Oh well, there are plenty of other trades down the road. Now, what I find interesting is the price I MIGHT have got in at. Last time my order got filled within 3 seconds, so if we look at the tape we can see the range of prices within the first three seconds shown below, which happens to be 1.9492 – 1.9467 a spread of 25 ticks. (Click to enlarge)

Risky for the smaller reports but for a good number on a strong report there should be a bit more meat left in the trade for a healthy profit. Indeed when you look at the chart price goes a further 60 ticks from the lower edge of the entry band.

The other thing to note from the tape is that this is a very thinly traded market. Not many orders were submitted and they were all quite small generally under 10 contractsm, but the market moved a lot which shows there were not many orders at the bid to soak up the sell market orders. If you want to trade this contract be careful because the market is thin and you could get slipped quite badly if trying to trade a large size.

Description
The Consumer Price Index (CPI) measures the rate of inflation (i.e., the rate of price changes) experienced by consumers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates to bring prices down. Higher interest rates attract foreign investment, thus increasing demand for the nation’s currency. CPI is one of the most closely watched indicators and will usually have a high impact upon release.

UK PPI

Pair: GBP/USD or British Pound Futures
Result: Sell

Prior: 0.1%
Expected: -0.8%
Actual: -2.0%

Good deviation on the  Input figure, sold at the market and got filled on British Pound futures at 1.9485 (open was 1.9488). The Output figure was conflicting and price started to jump around so I exited for a 3 tick profit. Price could easily have gone back through my entry. Good fill on the futures market even though I got in quite late with the autoclick at 04:30:03.

Description
The Producer Price Index (PPI) Input measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when purchasing goods and services. A rising trend has a positive effect on the nation’s currency. When manufactures pay more for goods and services, they are likely to pass the higher costs to the consumer, so PPI is thought to be a leading indicator of consumer inflation. PPI is highly regarded, and at extremes will have a market impact equal to that of its CPI counterpart.

Output
The Producer Price Index (PPI) Output measures the rate of inflation (i.e., the rate of price changes) experienced by manufacturers when selling goods and services. Manufacturers are unlikely to pass Output inflation to the consumer, so it has much less market impact than its PPI Input counterpart.

UK Trade Balance

Pair: GBP/USD or British Pound Futures
Result: No Trade

Prior: -7.2B
Expected: -7.0B
Actual: -7.1B

Very small deviation, no trade.

Description
Measures the difference in value between imported and exported goods. A positive Trade Balance indicates that more goods were exported than imported over a given period. A rising trend has a positive effect on the nation’s currency. When higher levels of exports are sold to the world, demand for the nation’s currency is elevated as foreigners convert their native currency to purchase the exports. The Trade Balance also has a sizable impact on GDP because high demand for exports creates increased employment and production, as domestic factories work to fill this demand.

Canada Employment Figures

Pair: USD/CAD or Canadian Dollar Futures
Result: Buy (futures, sell for forex)

Prior: 62K revised to 52K
Expected: 25K
Actual: 89K

The number came out much better than expected which sent the canadian dollar strengthening against the US dollar. I didn’t trade this report as my platform was not set up for CAD. I will make sure it is set up next time… Nice trade if you caught that.

Description
Measures the number of new jobs created in the previous month. A rising trend has a positive effect on the nation’s currency. The number of new jobs being created is one of the most important indicators of the economy’s health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.

UK Interest Rate Statement

Pair: GBP/USD or British Pound Futures
Result: No Trade
Prior: 5.25%
Expected: 5.25%
Actual: 5.25%

No change, no trade. I wasn’t expecting a trade for this one.

Description
The central bank’s governing body, the Bank of England (BOE) Monetary Policy Committee, releases an Interest Rate Statement each month. The statement contains the latest decision regarding changes to the nation’s short term interest rate (“Bank rate”). A rising trend has a positive effect on the nation’s currency. Short term interest rates are the paramount factor in currency valuation; traders look at most other indicators merely to predict how interest rates may change in the future. What makes interest rates so important is that high rates attract foreigners looking for the best “risk-free” return on their money, which significantly increases demand for the nation’s currency. The primary objective of the central bank is to achieve price stability; when inflation rises above an annualized rate of approximately 2%, they will respond by raising interest rates in an attempt to bring prices down. This is what makes inflation-predicting indicators so important. Traders know that rising prices will lead the central bank to raise interest rates, which ultimately leads to a more valuable currency.

USA Non Farm Payroll

Pair: EUR/USD or Euro Futures
Result: No Trade

Prior: 167K (revised to 206K)
Expected: 146K
Actual: 111K

I set my deviation to 50K and my revision deviation to 20K to abort the trade. I got a no trade as the deviation was only 35K, however the revision was huge and in the opposite direction. Nasty trade if you took that one.

It also looked like the number was leaked beforehand. Look at the spike one minute before the release was due (08:30). That alone would have been a good reason not to trade this time.

Description
Measures the number of new jobs created in the previous month, excluding the farming industry. A rising trend has a positive effect on the nation’s currency. The number of new jobs being created is one of the most important indicators of the economy’s health because consumer spending, which is highly correlated with labor conditions, makes up a large portion of GDP. This report is the first of the month that relates to labor conditions, making it susceptible to big surprises.

UK PMI

Pair: GBP/USD or British Pound Futures
Result: No Trade

Prior: 51.7
Expected: 51.9
Actual: 52.8

Not enough deviation for a trade.

Description
The Manufacturing Purchasing Manager’s Index (PMI) measures the activity level of purchasing managers in the manufacturing sector, with a reading above 50 indicating expansion. A rising trend has a positive effect on the nation’s currency. To produce the index, purchasing managers are surveyed on a number of subjects including employment, production, new orders, supplier deliveries, and inventories. Traders watch these surveys closely because purchasing managers, by virtue of their jobs, have early access to data about their company’s performance, which can be a leading indicator of overall economic performance.

USA GDP

Pair: GBP/USD or British Pound Futures
Result: Sell

Prior: 2.0%
Expected: 3.0%
Actual: 3.5%

A good deviation in favour of the british pound gave a sell signal and I entered the market within 1 second of the number coming out. I used british pound futures this time and the average price for my fill was 1.9522. The price moved in my favour and then retraced very sharply. Often on a sharp retrace, the price will go all the way back up and hit your stop. I don’t like my stops getting hit as I like to keep my losses small so I exited immediately and got filled on my exit at 1.9525 for a 3 tick loss.

Soon after I exited, the market continued down, however I wasn’t willing to risk it. Better to take a small loss than risk a big one with low probability.

I will continue with the futures platform for a while longer with small lots to see how I get filled. Today was not good for fills as the open price of the 0830 candle was 1.9539 and I got in at 1.9522 – 17ticks slippage.

In the screenshot below there are two tapes, the left one is all orders filled and the right one is all orders 10 contracts or higher filled. As you can see the bid/ask spread is pretty wide which explains the fills. The best bid at the time I placed my SELL_MARKET order was 1.9535 where someone got in with 6 contracts at the bid. I may consider trading the euro at news time as this is more liquid. The biggest order on the british pound was only 19 contracts as you can see from the tape.

When you look at the euro tape, things look a bit different:

Here we can see that the largest order is 70 contracts – substantially more. Check back here for more updates in the future.

Description
Gross Domestic Product (GDP) measures the total value of all goods and services produced by the economy. A rising trend has a positive effect on the nation’s currency. GDP is the broadest measure of activity and the primary gauge of the economy’s health. To foreign investors, a strong economy is viewed favorably because it spurs investment opportunities in the domestic stock and bond markets. More importantly, the central bank is more likely to raise interest rates in the face of a strong and growing economy. The combination of these effects can have a large impact on the demand for the nation’s currency.