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MORNING BRIEF
The US Dollar ended the week lower against its peers even though it pulled back higher on Friday. The US currency regained some lost ground on the week’s last session hitting 1.3550 against the Euro and almost 1.6000 against the Pound but overall it was dovish week for the buck. The potential consequences of a US default are weighing on the Dollar’s price as we are almost through one week of US shutdown and negotiations in Washington haven’t reached any agreements. Secretary of Treasury Lowe has warned both Democrats and Republicans that the cash remaining in the government’s coffers is enough until October 17 and after that an unprecedented US default will become reality. On the Fed’s front, the fact that on Friday we didn’t get to see the US job data due to the government shutdown means that the Federal Reserve will be even more reserved to cut back its asset purchases without any indication for improvement so this points to greater Dollar weakness in the short term at least.
Light news on the Calendar today
We’re starting off the week with a very light economic calendar today as we’re only expecting two interesting news announcements. Coming at 9.30 we’ve got the Euro-zone Sentix Investor Confidence index that is expected to rise since last month and although this is not a major index for analysts to watch we’re keen to see how investors gauge conditions in the European region. Later in the afternoon, we have the US Consumer Credit measure at 20.00 and this might be an interesting indication of how the consumer market is responding to continued stimulus from the Fed as this will play an important factor for Fed’s decision to taper or not in the future.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
9.30 |
EUR |
Euro-zone Sentix Investor Confidence |
Medium |
10.3 |
6.5 |
|
20.00 |
USD |
Consumer Credit |
Medium |
$12,000B |
$10,437B |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro retraced lower on Friday hitting our stops that have been placed on 1.3580 for +20 pips of profits on the second part of our previous week’s trade. This was a good trade for us that allowed us to capture enough profits over a few days. Now for today the Single currency seems to be settling down in a ranged move between 1.3540 and 1.3570 and we would expect it remain in that range for the rest of the day since there are no market-moving events scheduled for today. However, we need to be prepared for an exit from this formation so we will outline our two scenarios: we favor a long entry above 1.3580 with targets 1.3600 and 1.3630, with stops placed below 1.3530 or a short entry just below 1.3530 with targets at 1.3515 and 1.3480. stops placed above 1.3580. These are short targets so be prepared to jump into the trade when it triggers and to exit quite quickly.
GBP/USD
The Pound dropped heavily on Friday as it was hit by a temporary Dollar rally and some intense profit taking as we mentioned on our newsletter on Friday morning. We were extremely satisfied to see that our proposed entry on 1.6135 was triggered and over the day the currency hit both our targets offering us some 115 pips to take home for the weekend. For the day, we will remain patient on the sidelines as we expect the Pound to retrace a bit higher after that rapid sell-off. Conditions in the UK still remain bullish, however there are significant indications that we might have hit an important peak on the Pound for the short term. We will assess the situation as the day progresses and we will savor our profits from last week.
FTSE 100
The FTSE 100 crawled a bit higher on late Friday trading and triggered our entry just above 6,470 points even if we should have pulled the order back as the markets were closing for the weekend. No matter though, we are in the trade now and we want to see the index rising higher as our targets are lying at 6,500 and 6,550 points and our stops are placed below the 6,415 points area. We remain confident that the UK index will pull higher as we feel that a significant low was hit last week at the 6,400 points level and the market swings are pointing for a retracement higher.
Gold
Gold remained on the tight range we witnessed late last week between the $1,300 and $1,325 levels, nearly reaching our entry point above the $1,325 level. For the day we would want to see the yellow metal exiting this formation and we will enter long just above the $1,325 level with targets at $1,339 and $1,362 and a stop placed firmly below the $1,300 level. However, should the price fall below the $1,302 area then we will place a short trade targeting the $1,288 and $1,265 levels, with a stop above the $1,325 price level. Please refrain yourselves from placing big trade volumes on Gold as we have said again and again that this is a highly volatile instrument that requires smaller sizes.
All charts have been created using FXCM’s Trading Station platform.
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