Forex News Trading EU Interest Rate 12/08/11

ECB (European Central Bank) will be rendering its rate decision today, and it will have a pivotal short term impact in the Euro dollar. However, it is widely believed that ECB will keep rate unchanged at 1.50%… Here´s the forecast:

7:45am (NY Time) EU ECB Rate Decision Forecast 1.25% Previous 1.25%
ACTION: EUR/USD SELL 1.00%

The Trade Plan
ECB rate decision comes in two part, the first one is the 7:45am rate announcement followed by the 8:30am Press Conference where ECB chief Draghi issues the official statement on this rate decision. Since it is extremely unlikely to get a surprise from ECB, there is usually no volatility following this release, and our time is better served to focus on Trichet´s speech in 45 minutes.

However, in the unlikely event that ECB surprises the market by cutting rates 25 basis points or more, then expect market to go into shock and we should jump in immediately on a spike trade because no matter what the slippage or spread is, we will end up making positive pips. Of course, if ECB decides to leave rates unchanged at 1.25% as expected, then we should stay out of the market.

For more information on my trading methods, please read:
http://www.currencynewstrading.com/how-to-get-started-with-news-trading/

The Market
As usual, the real event for ECB rate meeting is the Press Conference at 8:30am. ECB has been pausing during the last few meetings and it is very unlikely for a surprise to take place… Although ECB Chief Draghi is expected to continue with the rate easing cycle in the future, it is just highly unlikely that it will happen today. With current market being optimistic over the upcoming EU Summit, if Draghi were to be a bit positive, we’ll probably see EURUSD break recent resistance.

Here´s the link to watch the Webcast Live at 8:30am EST.
http://www.ecb.int/press/tvservices/webcast/html/webcast_111208.en.html

Additional Thoughts
It is important to understand that ECB press conference is delivered in 2 parts: The first part is the prepared statement by Draghi and copy of the statement will be available on ECB´s official website. Then it will be followed by a Q&A session, where onside media members will have a chance to ask questions, market reaction is usually unpredictable, therefore it is best to stay out of the market during the entire press conference.

Also it is important to note that most analysts agree that ECB may keep rates unchanged for the rest of 2011 in light of recent events.

Pre-news Consideration
There should be no pre-news consideration for this particular release, as the real event will be Draghi Press Conference at 9:30am.

Thanks,