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Dollar gets pressured across the board as the lack of volume allows relief rallies in the high-beta currencies
MORNING BRIEF
Dollar has been in the backseat these past couple of days with the US currency giving up some of its gains against the Euro and the Pound. With the majority of traders and investors still away on holiday and with volatility levels down to a minimum the high-beta FX pairs are rebounding modestly versus the Dollar but this is a move that can’t be trusted as the driving volume behind it is significantly low. Yesterday, Initial Jobless Claims fell 42,000 to 338,000 marking the largest weekly drop since November 2012 and this is yet another bullish sign for the recovery of the US labor market. For the next week we expect trading conditions to remain pretty much unchanged and as long as the trading volume remains low we’d like to monitor the market, discuss the developments but suggest only pretty certain trades. With the New Year coming in Wednesday the whole week will mostly be unsuitable for trading but we expect traders and market participants to start returning to their desks on January 6 thus we are keen on picking up pace in our suggestions once again.
Empty Economic Calendar for today
On the Economic Calendar we have no important economic releases scheduled as the holidays’ season is under way. Early in the afternoon there are only Oil-related news scheduled for release but these are third-tier events and also outside of the scope of this newsletter.
Economic Calendar
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No Economic Releases Scheduled for Today |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro found the chance to rebound against the Dollar the last couple of days taking advantage of the lack of any significant trading volume. The recent demand for Dollars after the FOMC decision has halted due to the Christmas Holidays and the lack of most market participants has let the Euro form a relief rally against the Dollar. We consider this move to have little credibility and continue to believe that as soon as traders come back Dollar will once again start gaining against the Euro.
GBP/USD
Similar to the Euro, the Pound has also benefited from the lack of Dollar demand and pulled up higher to test the recent highs of 1.6450 but this move has low credibility and could pretty much be attributed to Dollar portfolios repositioning. Keep in mind that it’s the end of the year and around this period major portfolio managers are closing large positions to record yearly results and the low volume always magnifies such moves. We’re very eager to see how the recent Dollar demand will affect the Pound when volume picks up and whether the Pound’s strength will be enough to let the Cable hold on its previous gains.
FTSE 100
The FTSE 100 is still on the rise and the 6,700 points level has been reached. We’re monitoring the recent behavior of the UK index and we’re amazed from its strength during the recent sessions. We’ll most likely be bullish on the FTSE 100 for the next year and we’d like this uptrend to retrace a bit lower to allow us a decent entry point.
Gold
Gold climbed higher and is now testing the $1,212 resistance along with the 200-period EMA. Gold is on a similar mood with the Euro and the Pound and we can detect Dollar retreating these couple of days against all products we’re monitoring. At this point we assess that this development can only be characterized as a relief rally and the fundamentals supporting our pro-Dollar outlook for the coming period have not changed at all. We’re still bearish on Gold for the new year and we can’t wait for the markets to pick up volume and pace again to test our analysis.
The above charts have been created using FXCM’s Trading Station platform.
STOCK MARKET FOCUS
[Restricted Content] Plc.
The Alpesh Patel Momentum/Value 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 B Grade rating on our Bullish Momentum meter. The P/E ratio is relatively low suggesting that the stock might be underpriced, the ratio of the price earnings growth is also low and Turnover is up year on year supporting the growth potential. From a technical standpoint, the MACD indicator has stalled its incline for the past few weeks thus we suggest that you wait until the indicator is pointing upwards before adding the stock to your portfolio. The suggested holding period for a stock of this type is 2-3 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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