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MORNING BRIEF
Currency markets were quiet yesterday as US Dollar gave back some of the ground it gained on Wednesday with Euro and Cable moving a bit higher. Discussions in Washington seem to be heading somewhere as the Republican representatives agreed to deliberate with President Obama on a ‘temporary spending bill to fund governmental needs’ and extend US borrowing limit until late November or early December. Dollar had a bullish reaction to this development but it was quickly subdued. The thing we need to focus on however is the temporary nature of the proposed deal and the broader implications it will have to the US economy. If the deal proposed by the Republicans goes through then markets might see a Dollar relief rally for a couple of days but we are confident to assess that this rally won’t last long for a simple reason: postponing the decision to effectively raise the debt ceiling and give US government the necessary funding means that the problem doesn’t go away but is only pushed forward into the future leaving matters unsolved. This uncertainty will definitely not be beneficial to the US currency and undoubtedly erases any possibility for Fed tapering this year. With the shutdown continuing strong for 10 days, hurting US GDP, distorting data releases and with the dovish Janet Yellen being the frontrunner for the Fed job we see minor chances for any tapering this year which means that this uncertainty will continue and will hurt the Dollar in the coming period.
German CPI and US Advance Retail Sales
For the last day of the week we only have a couple of important news events to deal with today. Coming at 11.00 UK time the German Consumer Price Index is expected to remain stable at 1.6% and should this figure print better than expected it might push Euro higher for the day while a lower printing could refuel the sell-off we witnessed on Wednesday. Later in the day the US Advance Retail Sales are to be announced at 13.30 and this could also prove vital information on assessing the chances for a Fed tapering in the coming months. Finally at 14.55 the University of Michigan Confidence report is due but we expect minor reactions as the focus has been on the debt talks in Washington.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
11.00 |
EUR |
German CPI |
High |
1.6% |
1.6% |
|
13.30 |
USD |
Advance Retail Sales |
High |
0.2% |
0.2% |
|
14.55 |
USD |
UoM Confidence |
High |
75.6 |
77.5 |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro retraced higher and closed our trade at the stop we’ve moved at the price of 1.3520 giving us some good profit from the recent decline. The Single currency is now hovering around the 1.3550 area and this could prove a good opportunity to re-enter short. We favor a short entry around 1.3530-40 with a stop above the 1.3570 area and a target at 1.3485. This is a simple 1:1 risk/reward trade for the last day of the week, suggested with a smaller trade size, attempting to capture some intra-day movement that could be triggered by optimism over a US debt ceiling agreement. If the currency however clears above the 1.3550-60 area then we will stay clear and enjoy yesterday’s profits over the weekend.
GBP/USD
The Pound offers a similar opportunity today as it reaches near the important 1.6000 resistance level. We would like it to find difficulty to clear this area and we would enter short there, place a stop at 1.6070 and target 1.5950 and 1.5915 with a reduced trade size. The key here is to verify that the Pound finds downwards pressures around the 1.6000 area and we don’t suggest to enter this trade prior to verifying that pressure. This means that you as traders need to apply your judgment in this case and look for a reversal pattern forming there, possibly a double top or an inversed hammer candlestick. There’s some pressure on you with this trade as you need to step in our shoes for a day but we intend to take this pressure off your shoulders as we will launch our new trade signals service pretty soon, delivering our trade suggestions to your mobile phone via text messages or emails throughout the trading day.
FTSE 100
The FTSE 100 pulled back higher and hit our stops at the breakeven price, offering us only some profits for the first half of the trade. No matter, the index has pulled higher and re-entered the range it held earlier in the week and a short trade could be established on the higher end of this area. We would like to verify a reversal attempt near the 6,475 points area, maybe a reversal pattern or candlestick and enter short there, place a stop just above the 6,500 points and target the 6,450 and 6,400 areas for the day. Please beware that again a reversal verification is needed and since we haven’t launched our trading signals service yet the responsibility falls to you.
Gold
Gold once again proves hard to tackle for yet another day and we are reluctant to suggest a trade while the instrument remains volatile. Instead we will discuss the more medium-term prospects using a 4hr chart seen above. The yellow metal has been on a downtrend for some time now but it seems that has found a temporary bottom for now around the support area of $1,275. Now only a breach below that area will renew our conviction for lower levels but as long as this support holds then the area between $1,275 and $1,330 will be the playfield for the instrument for coming sessions. A medium-term trade could be a long entry around the level we are today, with a stop below the $1,270 area and targeting the upper limit of the formation at $1,330 but if you go down that road you will need to be prepared for a volatile ride for some days. For the shorter timeframes and intra-day suggestions we will update you as the next week progresses, always making sure that we suggest trades to you that we take for ourselves too and not just to write something in our morning newsletter report.
Enjoy a lovely weekend.
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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