Chapter 12 – Putting it all together (Part 2)

Euro Zone: Thursday Minimum Bid Rate,
Trichet Press Conference

 

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Thursday Plan: I will be watching Interest rate decision from ECB. Again, an overwhelming majority of analysts agreed that no change to the interest rate. I will wait for the release and then for the press conference at 8:30am.

If a surprise hike or cut is announced, I will trade the spike or trade the retracement. There will be no pre-news trade as the outcome will depend primarily on Trichet’s speech.

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I will be listening to the speech and trying to decipher whether Trichet is hawkish or dovish. If he is dovish, I will SELL EUR/USD, if he is hawkish, I will buy EUR/USD.

If I see an established trend during Toyko session and perhaps early London session, I will trade with this sentiment. Since Trichet has been a hawk as of late, I am anticipating market sentiment to be pro Euro prior to his speech.

Result: During early London Session, I observed an established trend of buying EUR/USD with short term market sentiment of expectation for a hawkish speech from Trichet. I entered the market going long on EUR/USD. Before the actual press conference, I am up about 60 pips of gain.

At 7:45am ECB announced an unchanged decision for the interest rate. Market didn’t move much as it was widely expected. The bullish trend for EUR/USD continues as market prepares for Trichet’s speech in about 45 minutes.

At 8:30am, Trichet came out hawkish first but then went dovish immediately. EUR/USD lost 100 pips in a matter of 10 minutes and continued to lose up to 500 pips by Friday. One of the most notable phrase from Trichet is his new motto, “ECB has no bias”, which also caused a significant sell-off of Euro last rate decision press conference. It was a good SELL trade, with FOMC being semi-hawkish and ECB dovishness; we saw a perfect combination for EUR/USD weakness.

Please read below Trichet’s complete statement with Q&A transcript. It is a little long and boring, but I definitely recommend that you take the time to read through it at least once.

 

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About Kelvin Ching

I'm a professional Forex trader and I have been trading for over 7 years. I was a series 3 broker and a registered CTA with the NFA, the main regulatory agency in the United States, and I have been involved at the highest levels in commodity trading. I also have a background in Information Technology, graphics design, and programming... I'm the co-founder of CurrencyNewsTrading.com, a site dedicated to fundamental analysis and news trading.

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