Canada GDP

Contract: Canadian Dollar Futures
Result: No Trade

Prior: 0.4%
Expected: 0.2%
Actual: 0.1%

Set my deviation to 0.3% weak 0.5% strong. Deviation was 0.1% so a no trade. Market didn’t really react to it much.

USA GDP Annualised

Contract: Euro Futures
Result: No Trade

Prior: 2.2%
Expected: 2.2%
Actual: 2.5%

I set my deviation to 0.5% weak and 1.0% strong. Didn’t hit so a no trade. This report caused the YM to move up slightly to the high of its consolidation range so I shorted with a limit order at the top of the consolidation range got filled at 12450. Took half off at 12445, then price moved up again and I took the other half off at 12455 for +5, -5 – a breakeven trade. There was a high chance that price would collapse down as we got to 70 points above yesterday’s close.

Euro

YM 130min consolidation

YM Trade

DAX

USA Durable Goods (Exc Transport)

Contract: Dax futures
Result: Sell

Prior: -3.1%
Expected: 1.8%
Actual: -0.1%

I tried the DAX futures today and what a lovely contract that is to trade the news reports. I took it easy as this is a new contract for me to trade so set a wide deviation of 0.8 for 1 contract and 1.8 for 2 contracts. Turns out that the deviation was 1.9, so I got in the trade with 2 DAX contracts which move at  EUR 25 per tick combined. I got filled at a good level considering the spread widened a lot a few seconds before the release. Got in at 6874 within 3 seconds, which is OK, but not fantastic – pretty good considering I’m in the UK using a US broker trading a German market.

The max peak move of this trade was 48 ticks which is EUR1200 or about $1500 for 2 contracts. I got out with only 8 ticks as I didn’t really have much experience on how this contract behaves, and as it was a bit jumpy at the weekly pivot (cyan solid line on the chart), I just closed the trade for a profit of about $250. Not great, but at least I know in the future I can get very good fills and this thing moves nicely. I need to come up with an exit strategy for this.

Dax Tape

British pound futures

Euro

mini Dow

From all the four markets shown above we can see very clearly that the DAX is the biggest mover – it also has nice spreads, and is a big contract the minimum move being about $15 per tick (half a point), or $30 per point.

UK GDP QoQ and Current Account

Contract: British Pound Futures
Result: Sell
Peak move: 39 tick

GDP
Prior: 0.8
Expected: 0.8
Actual: 0.7

Current Account
Prior: -9.4B revised to -10.5B
Expected: -9.0B
Actual: -12.7B

This report usually does not move the market much and as its a composite of two different reports I decided to stand aside on it as the risk is not worth a small reward, in my opinion. The max I would expect including slippage on this would be 5-10 ticks – not worth bothering with.

GDP came out slightly worse than expected and current account came out significantly worse, so the market moved more than I thought it would. Last month’s number was revised down too to help with the down pressure. Potential to get 20-30 ticks there with a good fill and lightning reflexes, but more realistically probably 10-15 ticks at the most.

Tape 

USA New Home Sales

Contract: British Pound Futures
Result: Buy

Prior: 0.94M revised to 0.88M
Expected: 0.99M
Actual: 0.85M

As it’s Monday morning, I didn’t have full focus and concentration and I mistakenly left my mini-Dow (YM) platform open. My autoclick clicked on the YM instead of the british pound and got me long in the YM. Not happy with that as the YM dropped 90 ticks on the news. So I lost 20 ticks on that trade.

IF I had my platform set up correctly, I would have got in to the pound at around 1.9679 which is about 20 ticks slippage. However the pound did trend up on the news to 1.9717 within half an hour so scaling out of that trade could have yielded a nice profit. There was no retracement to speak of during the aftermath of the report either, so it’s unlikely I would have got stopped out.

This is a lesson to me to double-check everything before getting into the trade. I am usually very careful.

Tape

mini Dow futures

The DAX also moved very strongly on this news, moving 186 ticks in one hour. Even with a realistic fill to take account of slippage the DAX would have yielded  154 ticks at its peak.

USA Existing Home Sales

Pair: GBP/USD or British Pound Futures
Result: Sell
Peak spike 5 minutes: 8 ticks
Peak move: 50 ticks (within one hour)

Prior: 6.46M (revised to 6.44M)
Expected: 6.34
Actual: 6.69M

Set my trigger price to sell at 6.5 or higher for a small trade with quarter size. I had a bigger order at 6.7 or higher. Got a bad fill on this one at 1.9630, stop got placed at 1.9640 – I should have moved it up to the previous candle’s close price, but got stopped out for -10. Price consolidated for a bit and then gradually sold off for 50 ticks.

Tape

Notice the wide spreads on tape and the big slippage – very thin market.

Description
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.

UK Retail Sales

Pair: GBP/USD or British Pound Futures
Result: Buy
Peak spike 5 minutes: 80 ticks
Peak move: 80 ticks

Prior: -1.8% (revised to -1.5%)
Expected: 0.6%
Actual: 1.4%

Very nice trade; deviation was 0.8% with the revision of last month’s number better too. I got big time slippage on this report. However it didn’t matter as the market moved 80 ticks. I did get filled within 1 second of the report coming out at 1.9696. When the market moved 15 ticks in my favour I moved the stop to breakeven. Price did start to hesitate at the 1.9710 level so I moved my stop to +10. Market then touched my stop before moving up to R1. The better way to have played this would have been to set a target at 3 ticks in front of R1. I will pay more attention to the pivots next time and not focus so much on protecting profit, but on managing risk and setting a realistic target. All very well in hindsight of course.

Tape

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.

US FOMC

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

Prior: 5.25%
Expected: 5.25%
Actual: 5.25%

The FOMC announcement rarely (if ever) deviates from the expected number. What we are looking for is the way the announcement is worded. Of course, I don’t do that I just watch how the market reacts to the wording. The strategy for currencies would be to straddle 15-20 ticks either side 15 seconds before the report is released. This is risky so I didn’t do it this time, but I may well do it next time. Notice how price slammed into the daily pivot and then retraced followed by a further pushup?

I did however trade this report on the mini Dow futures and this is my preferred lower risk market to trade it on. The way to trade it is to look for the first thrust, then the market will retrace, then you get in on the third move. The Dow moved over 200 points, much further than the pound. I caught some of that move, but not all of it. Very good trading day.

The DAX also moved in a very similar way to the dow:

And finally, the S&P 500 minis also moved well:

description
The central bank’s governing body, the Federal Open Market Committee (FOMC), releases an Interest Rate Statement eight times per year. The statement contains the latest decision regarding changes to the nation’s short term interest rate (“fed funds rate”), a brief report of the economic conditions that effected their decision, and most importantly, clues on what the next rate decision will be. 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.

Canada Retail Sales (Core)

Pair: Canadian Dollar Futures
Result: No Trade

Prior: 2.0% (revised to 1.9%)
Expected: 0.4%
Actual: 0.3%

Came out slightly better than expected, I want to see at least 0.4% better (or worse). A definite no trade, market hardly noticed.

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.

BoE Meeting Minutes

I tried to straddle this report 10 seconds before the report came out. However, liquidity dried up, bids and offers were pulled from the exchange and spreads widened considerably. This translates to very jumpy, jerky movement and I didn’t want to get stopped into a trade before the meeting minutes were released. I tried to straddle with 10 ticks either side but the market was whippy for me. Look at the tape before the release, lots of widening spreads:

Tape at release

This was a nice move if you managed to straddle – straddling would have been much easier on the forex market as it wouldn’t have been so jumpy prior to the release. It’s interesting to me how the pound bounced of the daily pivot and retraced pretty much all the way back to the entry point to resume the prior larger timescale uptrend.

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 the official votes cast for/against a change in interest rates, and give traders insight into the latest policy shifts.

Minutes here

Canada CPI

Pair: Canadian Dollar Futures
Result: Buy

Prior: 0.1
Expected: 0.3
Actual: 0.7

Well, I went shopping with my wife and missed the trade. Won’t do that again. Nice buying opportunity on canadian dollar futures for a peak move of about 50 ticks within a half hour. Not bad at all. Canadian Dollar futures move in $10 increments, giving a potential max profit of $500 per contract for this trade.

Tape

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 CPI (month on month)

Pair: British Pound Futures
Result: No Trade

Prior: -0.8%
Expected: 0.3%
Actual: 0.4%

Set my deviation to 0.2% so got a no trade. The year on year figure was released at the same time which was also better; this had a big effect on the trade which pushed the pound up over 100 pips within half an hour or so. Shame I missed that with my conservative triggers.

As this is such a popular report to trade, there was some big slippage with it today – up to 35 ticks if filled within 3 seconds. The worst fill I’ve had has been 3 seconds so I need to be pessimistic.  Here’s the start of the tape run:

Here’s the worst fills at the end of 3 seconds:

Could still have made at least 60 pips on this with a good exit strategy. Oh well, next trade…

USA Industrial Production

Pair: Euro Futures
Result: Sell

Prior: -0.5% (revised to -0.3%)
Expected: 0.3%
Actual: 1.0%

A nice deviation for a sell signal. However the euro held up with good support and didn’t move far at all. I got in with 5 ticks slippage (no spread) and moved by stop to break-even+1 when price moved down to +10. Euro then bounced back up and took me out for +1 which will cover my broker’s commission. I wasn’t willing to keep my stop wide as we had a strong uptrend prior to the release.

Tape

Dax

Mini Dow

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.

USA CPI (exc. Food and energy)

Pair: Euro Futures
Result: No Trade

Prior: 0.3%
Expected: 0.2%
Actual: 0.2%

No deviation for a no trade. Set my deviation for 0.2 for a weak signal and 0.4 for a strong signal. I know these are wide, but when trading futures you need to overcome the slippage with a good deviation. This means less trades per month, but the ones that hit usually work out nicely.

I’m still studying how the DAX responds to these events, and interestingly it moved a lot on NO deviation at all. I may start using the DAX instead of the euro in a few months time if it reacts so well – plus it is a big contract so fat profits all round.

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.

US PPI and Empire State Business Conditions Index

Pair: Euro Futures
Result: No Trade

US PPI (Core)
Prior: 0.2
Expected: 0.2
Actual: 0.4

Empire State Business Conditions Index
Prior: 24.4
Expected: 16.0
Actual: 1.9

Two reports at the same time. PPI was slightly better than expected with headline PPI quite a lot better, but Empire State was lower than expected creating a mixed reaction from the market. I stayed out of this one as the news was mixed.

US PPI (Core)
Derivative of the Producer Price Index (PPI) that excludes the Food and Energy items. Although Food and Energy can be very volatile from month to month, they play an important role in pass-through inflation. Therefore Core PPI usually has less impact than the overall PPI.

Empire State Business Conditions Index
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 Trade Balance

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

Prior: -7.1B (revised to -7.0B)
Expected: -7.0B
Actual: -6.2B

I used a .5 deviation for a weak signal and .6 for a strong signal and we had .8 deviation. I got filled at 1.9313 2 seconds after the release came out and I expected price to move a good 20-30 ticks however it started hesitating so I moved my stop to break-even + 1. A few seconds later price collapsed and stopped me out of 1 tick profit which I’ll hand over to my broker.

Tape:

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.

UK PPI

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

Prior: -2.0% (revised to -2.5%)
Expected: 0.8%
Actual: 1.3%

I set a 0.6 deviation and got another no trade. I prefer to get the no trades than to trade on marginal reports on the hope that I can make a few measly pips. I prefer the higher probability setups. The marginal ones can and often do go the other way or whipsaw. This report moved about 20 pips in 5 minutes, nothing to write home about. I’ve had to use the forex chart because the pound futures were so thin that it’s not really a recognisable chart. Monday morning for you.

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.

US Non-Farm Payroll & Trade Balance

Pair: Euro Futures
Result: No Trade

Non Farm Payroll
Prior: 111K (revised to 146K)
Expected: 100K
Actual: 96K

Trade Balance
Prior: -61.2B (revised to -61.5)
Expected: -59.5B
Actual: -59.1B

It’s a shame that these two reports came out at the same time as it complicated things a little. Esp. when the Non farm payroll has a habit of large revisions, and the fact that last month it appeared it had been leaked. So, the strategy was to go with a 50K deviation making sure the revision didn’t go against more than 18K. I used a 3B deviation with Trade Balance to confirm the NFP trade. If either the revision or Trade Balance conflicted, the trade would be aborted immediately. However, I got a no-trade although the market did move quite nicely on the revision.

Some friend of mine staddled this trade and made some good money. I will be looking into straddling but have not done it before because it is very risky. Once I’ve worked to eliminate or reduce the downside to an acceptable level, I’ll give it a try. Looking at the tape, a straddle would have been filled on the euro futures at around 1.3151 – 1.3149 ish. Not a bad fill, seems to have been plenty of liquidity around, even 30 lot orders got filled fine.

I have also been watching the DAX lately with respect to US reports and it reacts very strongly to the major US economic news releases. As the DAX is $30 per point per contract, with high liquidity, it may be a good plan to straddle the DAX instead of the euro. The vol today on the euro was 157,00 contracts whilst on the DAX it was 226,000. The DAX also moved 126 ticks in 5 minutes on this report which equates to $2000 per contract. Not bad. The euro moved 36 ticks which equates to $450 per contract. So the DAX yielded 4 times as much per contract. Very attractive indeed.

DAX

Let me know what you think in the comments section, thanks.

Canada Employment Figures

Pair: Canadian Dollar Futures
Result: No Trade

Prior: 89K
Expected: 8K
Actual: 14K

Small deviation giving a no-trade.

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 Industrial Production

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

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

Small deviation, no trade. I set my deviation to 0.5 which is high, however when trading futures I’d rather have a strong signal than an iffy one and lose money.

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.

ECB Interest Rate Statement

Contract: Euro
Result: No Trade
Spread: didn’t see

Prior: 3.5%
Expected: 3.75%
Actual: 3.75%

Rates were raised as expected. Interest rate raise was already priced into the market so not much movement.

Description
The European Central Bank (ECB) Governing Council releases an Interest Rate Statement each month. The statement contains the latest decision regarding changes to the euro area’s short term interest rate (“minimum bid 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.

UK Interest Rates

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

Prior: 5.25%
Expected: 5.25%
Actual: 5.25%

There was an outside chance of rates being raised today, but they stayed the same.

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.

Canada Interest Rates

Pair: Canadian Dollar Futures
Result: No Trade

Prior: 4.25
Expected: 4.25
Actual: 4.25

I wasn’t expecting a rate change, but you never know. The market was quiet before the statement, and rallied over a period of time after the release.

Description
Canada’s central bank, the Bank of Canada (BOC), releases an Interest Rate Statement eight times per year. The statement contains the latest decision regarding changes to the nation’s short term interest rate (“overnight rate”), a brief report of the economic conditions that effected their decision, and most importantly, clues on what the next rate decision will be. 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.

ISM Manufacturing

Contract: Euro Futures
Result: No Trade

Prior: 49.3
Expected: 50.0
Actual: 52.3

I didn’t trade this report as the stock index futures were going crazy so I was focused on those.

Description
The Institute of Supply Management (ISM) Manufacturing Index 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.