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Major currency pairs looking for direction ahead of the FOMC minutes’ release, what this means for the Dollar?
MORNING BRIEF
Major currency pairs remained range-bound yesterday as investors are looking for guidance and it looks like tonight’s FOMC minutes’ release will provide just that. The Euro hovered around the 1.3630 area and the Pound traded in a tight range near the 1.6400 price tag. So what are we expecting from tonight’s release? What will be important is the level of accordance among the FOMC voting members and how convinced they are about the prospects of the US economy. If the FOMC minutes reveal a shared sense of enthusiasm for tapering and a consensus inside the committee for further reductions going forward then Dollar should rally, driving both the Euro and the Pound significantly lower. However, if the voting members express their concerns about the high level of unemployment combined with the low inflation and stress that further reduction steps must be data dependant then Dollar will most likely give up its recent gains. It is important to see what these minutes will reveal because, apart from the short-term effect in the markets, the level of conviction between the policymakers will also determine the outlook for the US Dollar for the coming period.
Euro-zone Retail Sales and ADP Employment data ahead of the FOMC minutes’ release
Our Economic Calendar for the day ahead holds a few important released before the significant FOMC minutes’ release. Early in the morning, the Euro-zone’s Retail Sales and Unemployment Rate are scheduled for release and even though we don’t expect any changes in the unemployment data the Retail Sales are expected to rise. This could provide the Euro with some short-term demand lifting it moderately higher before tonight’s minutes’ release. Also earlier of the FOMC event, the ADP Employment Change figures are expected and given the recent uptick on the employment component of the ISM Non-Manufacturing index a surprise to the upside here is possible. However, we don’t a expect any major reaction from the Dollar to this release as all eyes will be focused on tonight’s release of the minutes from the last FOMC meeting when tapering was decided.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
10.00 |
EUR |
Euro-zone Retail Sales |
Medium |
0.3% |
-0.1% |
|
10.00 |
EUR |
Euro-zone Unemployment Rate |
Medium |
12.1% |
12.1% |
|
13.15 |
USD |
ADP Employment Change |
Medium |
200K |
215K |
|
19.00 |
USD |
Fed releases Dec 17-18 FOMC meeting’s minutes |
Medium |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro remained range-bound yesterday hovering between the 1.3600 and 1.3655 area. Our long entry was not triggered as the price edged above the recent high of 1.3652 for only a couple of pips so we remained on the sidelines yesterday. For the day ahead we suggest a similar approach like yesterday but with slightly modified targets: we like a long entry a few pips above the 1.3655 mark with targets at the 1.3690 and 1.3750 levels and a stop below the 1.3595 low. On the other hand should the 1.3570 level get broken downwards then we’d like to enter short there, target the 1.3520 and 1.3430 price tags and place a stop just above the 1.3655 peak. Euro’s outlook will be mostly influenced by tonight’s FOMC minutes release and it’s course will be determined on how the Dollar will react to the release.
GBP/USD
The Pound also remained pretty much unchanged yesterday and our long entry was also not triggered for a couple of pips. We’d like to offer the same suggestion as yesterday but with slightly modified targets to take into account yesterday’s swings: we’d like to enter long a few pips above the 1.6435 high, target the 1.6465 and 1.6520 levels and place a stop just below the 1.6375 low. The Pound has no UK-related news for today and volatility will most probably be low for the morning session but we expect momentum to pick up later in the day as the FOMC release will affect Dollar flows.
FTSE 100
The FTSE 100 hovered around the 6,730 area yesterday and our short suggestion never got triggered. For the time being the index seems to have formed a sideways movement and we want to stand aside and see how the FTSE will react to tonight’s FOMC release, the important levels are the 6,780 resistance and the 6,700 support area. The UK index seems undecided on where to go next and more information are required to fully assess its intentions.
Gold
Gold seems to have settled in a tight range around the $1,230 level. This offers us a dual trade opportunity to take advantage of the breakout from this range: we like a long entry above the $1,233 level with targets at the $1,237.50 and $1,245 price tags and a stop below the $1,223 mark. However, if the $1,224 low is breached downwards then a short entry is advised, with targets at the $1,220 and $1,213 price tags and a stop just above the $1,233 high.
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 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 also low but Turnover is down year on year challenging 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 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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