Alpesh Patel's NEWSLETTERPRO – Dollar rallies over Yellen nomination and FOMC minutes, Pound crushed as data disappoint

PUBLISHED: 10 Oct 2013 @ 22:16 | Comments (0) |

MORNING BRIEF

It has been a pro-Dollar session yesterday across the board as the US currency was lifted over several developments through the day. President Obama’s decision to nominate Fed’s Vice Chairwoman Janet Yellen to succeed Ben Bernanke was perceived as a relief from market participants as her dovish views over the US economy have led investors to assume that Fed’s stimulus efforts are not likely to stop any time soon. The release of the FOMC meeting minutes also showed that a number of committee members thought that it might be a good idea to cut back asset purchases later this year and this was also perceived as an encouraging sign for the US economy. However, given the current stalemate that occurs in the discussions over the debt ceiling we feel that Fed won’t move for a reduction in stimulus any time soon, with December seeming the most possible target-period.

At the same time, it was a very bad day for the Pound yesterday as Industrial Production and GDP estimate figures both missed expectations driving the UK currency below the 1.6000 mark. It was the second time in recent days that the Pound takes a beating, the UK economy has been the crown jewel of the European region regarding fiscal recovery but recent data have spread doubts on whether this recovery has reached a peak and is now slowing down.

BoE Rate Decision and US Initial Jobless Claims

We don’t have many news events over the day so we will focus more on the two significant announcements scheduled for release over the next session. Coming at 12.00 the Bank of England will release its Rate decision and its Asset Purchase Target for October and given the recent decline in the UK currency all eyes will be focused on this event to better assess Pound’s prospects over the coming period. Later in the day the US Initial Jobless Claims is a key event to pay attention to as it is a very important figure that could hint us on when the Fed will start cutting back stimulus as the US recovery progresses.

Economic Calendar

Time	Currency	Event	Importance	Forecast	Previous
12.00	GBP	BoE Rate Decision	High	0.5%	0.5%
12.00	GBP	BoE Asset Purchase Target	Medium	375B	375B
13.30	USD	Initial Jobless Claims	Medium	311K	308K

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro exited the range formation it held for a couple of days after the US Dollar gained ground over news on Yellen’s nomination for the Fed job and it broke below the 1.3550 mark hitting our first target at 1.3520. The Single currency continued lower and came in close distance of our second target at 1.3470 before settling around 1.3485. We remain confident that our second target will also be hit but since the currency came so close to it we will now move our stops from the breakeven price to the level of our first target at 1.3520 to avoid missing on a large profit if the currency retracts higher.

GBP/USD

The Pound was hit yesterday by disappointing data about the UK economy. Both Industrial Production and GDP estimate figures missed expectations and this has provided extra steam to the recent sell-off in the UK currency. The pair seems to have settled around the key support of 1.5900 but with BoE Rate decision ahead of us and the Asset Purchase Target for October to be announced this could be a very difficult day for the Sterling. We will remain cautious for the day as the circumstances are not suitable for us to make a suggestion, we need to let the Pound settle in a more stable trend before dipping our feet in the water again.

FTSE 100

The FTSE 100 remained range-bound all day yesterday around the 6,350 points area, holding steady. We might get some movement today as the Calendar holds an important UK news event so we remain on our current scenario, our stops are placed at the breakeven price of 6,385 and we keep our eyes fixed on our secondary target lower at the 6,250 points.

Gold

It wasn’t a good day for Gold yesterday as the yellow metal’s price fell lower following the Dollar strength momentum that appeared across the board. Our stops have been hit at the $1,307 area before Gold’s price fell as low as $1,302 per ounce. As we can see on the chart above, Gold is still volatile and its swings and trends are rather sketchy for us thus we will stay clear from it for now as it’s not worth trading in such an environment, especially in the short-term timeframe.

All charts have been created using FXCM’s Trading Station platform.

This is the free, time-delayed version of NewsletterPro, a subscription-based product.

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