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Dollar continues to retreat against other majors as the tapering and budget ceiling discussions attract investors’ attention
MORNING BRIEF
Dollar was in the backseat for yet another day as most major currency pairs continued gaining ground against it. The Euro climbed higher and almost reached 1.3800 while the Pound hovered around the 1.6450 area, affected by the mixed reports that came out yesterday. Industrial Production rose 0.4% which is slightly lower than the 0.9% increase in September and the Trade Deficit did narrow to -9.7B but a bit less than the -9.2B eyed. The most significant sell-off in Dollars however was seen in Gold that broke above the important $1,255 barrier to reach $1,268. On the other hand, we must note that apart from Gold, Dollar’s decline yesterday was at a slower pace than what we’ve seen since Friday’s NFP reports. Rumors coming from the US that a deal regarding the budget ceiling will be easily reached this time and the whole mess that occurred last time can be avoided have halted the steep decline in Dollar prices. U.S. Senator Patty Murray, a Democrat, and Republican Representative Paul Ryan said the budget proposal avoids a government shutdown and helps the economy. This could mean that the Fed might have one less thing to worry about during their meeting next week and potentially drive the FOMC members to pull the tapering trigger at last. We expect the instability in Dollar prices to continue throughout the week as the significant FOMC meeting draws near and some profit-taking might drive the high-beta Euro and Cable pairs a bit lower towards the end of the week.
German CPI and US Monthly Budget
Our Economic Calendar for today has little to focus on as does this whole week. The German Consumer Price Index will be the only event expected during the European session and expectations are that the index will print at 1.3% Year-on-Year which could be beneficial for the Euro. A surprise to the downside here however might trigger some profit-taking in the European currency flows and this is something to keep an eye on. During the US session, the Monthly Budget Statement will be the only important figure to note but we expect no reaction by the Dollar to this second-tier announcement.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
7.00 |
EUR |
German CPI (YoY) |
Medium |
1.3% |
1.3% |
|
7.00 |
EUR |
German CPI – EU Harmonized (YoY) |
Medium |
1.6% |
1.6% |
|
19.00 |
USD |
Monthly Budget Statement |
Medium |
$-140.0B |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro printed a new high almost at 1.3800 yesterday but pulled back and settled lower during the US session. For the day ahead, we can expect a dual trade opportunity for the European currency. If it edges higher to print a new high then a long entry just above the 1.3795 area is suggested, with targets at the 1.3820 and 1.3870 levels and a stop placed below the 1.3740 low (green levels on the chart above). However, if the Euro continues to go lower and drops below the 1.3740 support area then we suggest that you follow it with a short trade, target the 1.3710 and 1.3660 marks with a stop placed just above the 1.3795 peak (red levels on the mark). We need to stress here that for the short trade to trigger please make sure that the 55-period EMA is well breached which means that a bit of patience needs to be applied at the time of the triggering.
GBP/USD
The Pound remained mostly unchanged yesterday forming a narrow sideways pattern. The exit from this formation will show us the way thus we lay out our scenarios: a long entry is advised just above the 1.6465 peak with targets at the 1.6490 and 1.6535 marks with a stop placed below the 1.6415 area. However, if the 1.6415 support is taken out then we’d like to enter short, target the 1.6390 and 1.6350 marks and place a stop above the recent 1.6465 high.
FTSE 100
The FTSE 100 triggered our short entry yesterday but fell short on reaching our first target. We remain confident on the trade and we wait for the UK index to fall lower. However, please move your stops a bit lower since the first target has almost been hit, please place them at the 6,550 points area.
Gold
Gold finally broke out of this huge range it held for some time now and moved higher. For the day ahead, we’d like to enter long if Gold manages to print a new high and our entry level is just above the $1,268 peak with targets levels placed at the $1,274 and $1,285 price tags and a stop placed just below the $1,256 low. Gold could retrace lower however during the day and try to retest the $1,255 support area, we’d like to monitor Gold’s swings today and act accordingly.
The above charts have been created using FXCM’s Trading Station platform.
STOCK MARKET FOCUS
[Restricted Content] Plc.
The Alpesh Patel Value/Growth filter has indicated [Restricted Content] Plc as our stock of the day.
Company Information: [Restricted Content]
Created using Sharescope Pro
[Restricted Content] Plc has been rated an 8 out 10 in our Value/Growth rating and gets an A Grade rating on our Bullish Momentum meter. The P/E ratio is relatively low suggesting that the stock might be underpriced, Turnover is up year on year suggesting good growth but the ratio of the price earnings is medium challenging the growth potential. From a technical standpoint, the MACD indicator has been pointing upwards on the weekly chart above pointing towards higher levels. The recommended holding period for a stock of this type is 6-12 months.
Important Information
The filters and settings in the Special Edition of the Sharescope software use Alpesh Patel’s proprietary criteria to generate suggestions of securities worthy of further investigation. They DO NOT CONSTITUTE INVESTMENT ADVICE.
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