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MORNING BRIEF
It has been a bumpy road the past week for the currency markets as the stalemate in discussions over the debt ceiling in Washington seems hard to overcome. This has hurt the Dollar over the week but the overall uncertainty has led investors to stay in the sidelines and wait for a clear sign of compromise from either side before committing into any serious trades. As this week begins, there are no new developments over the weekend as efforts to come to a solution have proven fruitless. However, major currency pairs seem to have formed technical reversal formations and we feel that even though the week ahead will be bumpy as well due to news coming in from the continued discussions there will be several trading opportunities to capitalize on as markets will start to move again. Our focus is fixed on the Euro and Cable pairs and you can read below on our tactics for today and the coming days.
No news on the Calendar make for a quiet ride today
The Economic Calendar today is almost empty as no major economic news are scheduled for release. The only thing that catches our eye is the Euro-zone Industrial Production that will released at 10.00 UK time and is expected to withdraw further. We don’t expect this figure to have a significant impact on the Euro but we would like to take the time and mention several statements from ECB officials discussion the option of more stimulus to the economy. We expect the Euro to be driven from US Dollar strength or weakness over the coming week but we need to keep in mind that the European officials have stated that the Central Bank is ready to commit to another round of stimulus should the recovery offer signs of weakness.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
10.00 |
EUR |
Euro-zone Industrial Production |
Medium |
-2.5% |
-2.1% |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro seems to have concluded the downwards move of last week and has formed a reversal pattern pointing to higher levels. We favor a long entry just above the 1.3580 level with targets at 1.3605 and 1.3650, placing a stop below the 1.3530 area. As we said above Euro is expected to be influenced by developments in Washington and the uncertainty in the US could provide the steam for this move upwards. However, even though this is a clear signal we still would like to be extra vigilant given the fact that any steps towards or away of a potential deal in the US will immediately reflect on the pair’s price.
GBP/USD
The Pound found some resistance on Friday at the 1.6000 area and retraced lower. For those of you that exercised your own judgment as we advised on Friday and took the short trade there, you should have already closed 50% of the trade at 1.5950 as advised and now your stops should be at the breakeven price of 1.6000. You can keep your stops firmly placed there but the outlook for the Pound has turned from bearish to bullish. For today we favor a long entry just above the 1.6000 level with targets coming at 1.6050 and 0.6120 as the Pound seems to have formed a reversal pattern: note the higher low at 1.5923 signaling that the downtrend seems exhausted.
FTSE 100
The FTSE 100 continued to move higher on Friday and didn’t find the downwards pressures we expected to appear near the 6,475 area. The index reached as 6,515 prior to closing but we expect it to open lower today as its counterparts are doing at the time of writing. We would like to test the support of 6,475 but we are hesitant to do so at this time since the index will be reacting to another disappointing weekend of discussions and deliberations in Washington. So we will wait to see how the day progresses for the UK index and see whether it retraces as low as 6,425, any retracement lower than that might prove too much for the instrument to continue higher.
Gold
Gold broke below the important $1,275 support on Friday and is now retesting that level. Gold seems to be resuming its downwards move and we will join the momentum lower if it picks up again as the day progresses. We favor a short entry just below the $1,260 level with targets coming at $1,252 and $1,1238 and a stop placed above the $1,278 level just to be sure. The outlook for the yellow metal seems bearish again and this might be attributed to the overall uncertainty that is caused by the US shutdown, keep in mind that when comparing the US Dollar with Gold the safer heaven is always the greenback.
All charts have been created using FXCM’s Trading Station platform.
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