How to Trade USD, EUR, GBP, JPY

Kathy Lien and Boris Schlossberg

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 Agenda

Every Currency Pair is Unique,

Here is Why…

B
B
United States Dollar
Background
•  Symbol US$

•  Nickname – Greenback, Buck

•  85% of all Currency Transactions Involve the US Dollar.

•  The World’s Primary Reserve Currency

•  More Than 25 Currencies of Other Countries Peg Their Currency

to the US Dollar.
B
Central Bank

•  US Federal Reserve (FOMC)

•  Mandate: Price Stability and Sustainable Growth
•  Created: 1913
•  Central Bank Chairman: Janet Yellen
•  4 Quarterly Meetings Per Year, Minutes Released
Separately
Janet Yellen
 More Details
Most Important Import Main Industries
Partners •  Services: 76.7%
1.  Canada •  Industry: 22.1%
2.  China •  Agriculture: 1.2%
3.  Mexico
4.  Japan
5.  Germany
 United States
1.  Employment = Non-Farm Payrolls

2.  Retail Sales = Retail Sales

3.  PMI = ISM Manufacturing & Services

4.  Inflation = Monthly Consumer & Producer Prices (CPI/PPI)

5.  GDP = GDP

6.  Trade = Trade Balance

7.  Confidence = University of Michigan Consumer Confidence Index

 Most Active Trading Hours
•  3:00 AM ET / 8:00 GMT London Open
•  8:30 AM ET / 13:30 GMT US Economic Releases
USD TRADING TIP #1

Dollar Driven by U.S. Yields

and Risk Appetite
 USD TRADING TIP #2

Dollar Dictates where Commodity

Prices are Headed
 USD TRADING TIP #3

Positive US Data May Not Always

be Positive for the Dollar
 USD TRADING TIP #4

USD Flows Will Often Reverse

When EU Markets Close at 12
Noon ET
Euro
 Background
•  Symbol €
•  Currency Without a Country
•  19 Members in the Eurozone*
•  Collectively the Largest Economy in the World
•  Germany is the Largest and Most Important Country
in the Eurozone
•  Second Most Important Reserve Currency
 Trading Mechanics
Quote Convention: EUR
EUR/USD Pip Value = $10 for 100,000 Units
Average Daily Range = Approx. 80 pips
Key Metrics – GE-US 10 Yield, DAX
 Central Bank
•  European Central Bank (ECB)
•  Mandate: Price Stability – Keep Inflation Below 2%
•  Created: 1998
•  Central Bank Chairman: Mario Draghi
•  Press Conference Follows Meeting
Mario Draghi
 More Details
Most Important Export
Partners Main Industries

1.  United States •  Services: 70.5%

2.  China •  Industry: 27.3%
3.  Switzerland •  Agriculture: 2.1%
4.  Russia
5.  Turkey
 Europe
1.  Employment = Employment Change (Germany Key)
2.  Retail Sales = Retail Sales
3.  Activity = PMI Manufacturing & Services, German IFO Report
4.  Inflation = Consumer & Producer Prices (CPI/PPI)
5.  GDP = GDP
6.  Trade = Trade Balance
7.  Confidence = German ZEW survey, GFK Consumer
Confidence
8.  Central Bank Meetings & Minutes = ECB Press Conference
 Most Active Trading Hours
3:00AM ET / 8:00 GMT London Open
4:00AM ET / 9:00 GMT Economic Releases
8:30AM ET/ 13:30 GMT US Economic Releases
 EUR TRADING TIP #1

Most Liquid Trading Instrument in

the World (Over 1.3 Trillion/Day)
 EUR TRADING TIP #2

Tends to Trend Best Because of

Ample Liquidity
EUR TRADING TIP #3

Yield Spread!
EUR TRADING TIP #4

Correlates with Risk Assets

Unless Focus on EZ Credit
 EUR TRADING TIP #5

Key Levels Generally Broken

After London & Before NY Close
Euro Crosses
British Pound
 Background
•  Symbol £ GBP

•  Nicknames – Pound, Sterling, Cable

•  4th Most Actively Traded Currency

•  EUR/GBP just as important as GBP/USD

 Trading Mechanics
Quote Convention: GBP
GBP/USD Pip Value = $10 for 100,000 Units
Average Daily Range = Approx. 150 pips
Key Metrics – FTSE, UK-US 10 Yield
 What You Need to Know
•  5th Largest Economy in the World

•  Service Oriented Economy

•  One of the Most Developed Capital Markets in

the World (BREXIT Risks)

•  Net Importer
 Central Bank
•  Bank of England (BoE)
•  World’s Oldest Central Bank, Created in 1694
•  Mandate: Price Stability – Keep Inflation Below 2%
•  Central Bank Chairman: Mark Carney
•  Minutes Released after Meeting
•  Carney Speaks after Quarterly Inflation Reports
Mark Carney

Until June 2019

 United Kingdom
1.  Employment = Jobless Claims, Average Hourly Earnings

2.  Retail Sales = Retail Sales

3.  PMI = PMI Manufacturing & Services

4.  Inflation = Consumer Prices

5.  GDP = GDP

6.  Trade = Trade Balance

7.  Central Bank Meetings & Minutes = BoE Meeting, Quarterly Inflation
Report
 Most Active Trading Hours
3:00AM ET / 8:00 GMT London Open
4:30AM ET / 9:30 GMT UK Economic
Releases
8:30AM ET/ 13:30 GMT US Economic
Releases
 GBP TRADING TIP #1

Follows Interest Rate Differentials

Closely

Has Weak Correlation with FTSE

GBP TRADING TIP #2

Peaks after News Releases

GBP TRADING TIP #3

Reversals Likely after

London Close
 GBP TRADING TIP #4

Likes to BREAK Round Numbers

GBP TRADING TIP #5

Strong Continuation Moves

GBP Crosses
Japanese Yen
 Background
•  No Nicknames

•  3rd Most Actively Traded Currency

•  Most Liquid Free Floating Asian Currency

•  Manufacturing Oriented Economy

 Trading Mechanics
USD/JPY Pip Value = $9.0 for 100,000 Units
Average Daily Range = Approx. 105 pips
JN Interest Rate = 3 Tiers
Key Metrics – Nikkei JGB-US 10 Yield
 Central Bank
•  Bank of Japan (BoJ)
•  World’s Oldest Central Bank, Created in 1882
•  Mandate: Price Stability – Keep Inflation Near 2%
 Haruhiko Kuroda

More QE and Negative Rates

 Japan
1.  Employment = Jobless Rate

2.  Business Confidence = Tankan

3.  PMI = PMI Manufacturing & Services

4.  Inflation = Consumer & Producer Prices (CPI/PPI)

5.  GDP = GDP

6.  Trade = Trade Balance

7.  Consumer Confidence = Eco Watchers Survey

 Most Active Trading Hours
8:00PM ET / 01:00 GMT Tokyo Open
10:00PM ET / 3:00 GMT Economic Releases
1:00AM ET / 6:00 GMT Economic Releases
8:30AM ET/ 13:30 GMT US Economic Releases
 JPY TRADING TIP #1

Can Sit Dormant for Days and

then Move Wildly
JPY TRADING TIP #2

Correlates well to
Risk OFF Trades
JPY TRADING TIP #3

#1 Funding Currency
JPY TRADING TIP #4

Vulnerable to Intervention
Squeezes
JPY TRADING TIP #5

Correlations with Yield

Spread & Nikkei
JPY Crosses
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