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Dollar’s temporary weakness allows Euro and Pound to rebound higher, will it last further?
MORNING BRIEF
The US Dollar started the week lower against most of the major currencies yesterday in a week that could hold a lot of momentum for the currency. Today may have only Euro-zone related data expected but tomorrow the last FOMC meeting’s minutes will be released and market participants will want to look for any hints on how determined the Fed is on going forward with its tapering agenda. The weak Dollar allowed both Euro and Pound to bounce higher on a small relief rally and they are now trading around the 1.3620 and 1.6400 levels respectively. This weakness can be partially attributed to the decline of the ISM index that printed 53 against the 53.9 eyed. The Euro earlier in the day didn’t seem to care about the slightly weaker German PMI Services Index and today’s German Retail Sales and Unemployment data could add some fuel to this short-term relief rally. The British Pound also seemed unfazed by the small retreat in the Services PMI index and received demand mostly due to the rising employment and expectations components of the report that showed signs of continued growth. Looking ahead, we could see some volatility in the Euro today with the important German data expected but with no other important releases scheduled for today investors attention should be mainly focused on tomorrow’s FOMC minutes and Friday’s NFP report. The employment component in yesterday’s ISM report jumped to 55.8 from 52.5 and this could serve as an important hint for Friday’s event. Should the FOMC minutes reveal the members’ confidence in the domestic economy and the NFPs print strong then this could prove to be a very strong week for the Dollar.
Important data expected out of Germany today along with the US Trade Balance
The Economic Calendar for today holds a couple of important Germany-related releases. Early in the morning the German Retail Sales are scheduled for release and a couple of hours later the German Unemployment Change is also expected. These are important figures for the Euro as Germany is the steam engine of the European region and any improvements in any of the consumer and/or employment markets will be received with enthusiasm from the Euro traders. Later in the day the US Trade Balance is also scheduled for release but we don’t expect much reaction from the Dollar to this report as everyone will be focused on tomorrow’s FOMC minutes’ release.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
7.00 |
EUR |
German Retail Sales |
Medium |
-0.9% |
|
|
8.55 |
EUR |
German Unemployment Rate |
High |
6.9% |
6.9% |
|
13.30 |
USD |
Trade Balance |
Medium |
-$40.0B |
-$40.6B |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro pulled up higher yesterday and it seems that a retracement higher could be in play here, supported by the weak for the time being Dollar. Today’s German data could add fuel to the fire and spur a rally higher and we’d like to take advantage of it should it happen. Thus we favor a long entry just above the 1.3652 high with targets at the 1.3675 and 1.3720 marks, protected by a stop just below the 1.3570 low. On the other hand, should this retracement prove to be short-lived and the 1.3570 low gets broken downwards then we’d like to enter short and join the downtrend, targeting the 1.3520 and 1.3440 marks with a stop just above the 1.3655 high.
GBP/USD
The Pound also pulled up higher yesterday and our short trade was closed out at the breakeven price. Now, we’re looking to enter long if the currency continues to appreciate, we’d like to enter long just above the 1.6432 high, target the 1.6460 and 1.6500 marks with a stop just below the 1.6385 low. The Pound seems to be on a short-term relief rally and we want to take advantage of it while it lasts.
FTSE 100
The FTSE 100 hovered around the 6,730 area for yet another day and it seems that the index is looking for direction. We remain firm on our short scenario that is as follows: we’d like to short the UK index below the 6,695 points area and target the 6,665 and 6,610 marks with a stop just above the 6,750 high. With a lack of any UK-related news the FTSE could very well remain range-bound for the rest of the day, however we remain vigilant and we’re ready to jump into the trade should it trigger our entry levels.
Gold
Gold seems to have stalled its uptrend for the time being but not without demonstrating its recent volatile bursts. The precious metal’s price dived $20 instantly yesterday in a move that remains to be explained before pulling up again and settling around the $1,240 level for the rest of the day. We’d like to stand aside for now as we’d like to have more info on what’s going on with the recent bursts in Gold’s price prior to entering the market. Being the start of the year it is possible that major players are positioning their portfolios for the new year and we definitely don’t want to be in the middle of something like this.
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 9 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, the ratio of the price earnings growth is medium and Turnover is up year on year supporting the growth potential. From a technical standpoint, the MACD indicator is pointing upwards in the weekly chart above suggesting further incline. The suggested 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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