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MORNING BRIEF
The US Dollar was heavily hit yesterday from some aggressive profit-taking across the board. The American currency fell against the Euro and Cable pairs as investors liquidated their positions and added on their pro-risk trades. As a result Euro has reached as high as 1.3675 and the Pound hit 1.6170 getting boosted by a better than expected Retail Sales report but from key policymakers’ comments as well. In an interview with the Guardian the BoE’s Chief Economist Spencer Dale was quoted saying that the central bank could possibly hike rates for the first time as early as 2014. Economists quickly interpreted his views as extremely optimistic but nevertheless the Cable got a massive lift, clearing the 1.6000 barrier and climbing a lot higher during the day.
At the same time, with the debt ceiling issue resolved – or rather pushed into the future- analysts turn their attention to the tapering debate and on when will the Fed decide to go ahead and start cutting back its asset purchases program. Sara Yates, global head of foreign-exchange strategy at JP Morgan commented that Fed is most likely bound to wait until after February to start cutting back as another round of political discussions over the debt ceiling issue is expected to start as January draws near. In her view, the Yellen nomination for the Fed job is also another important factor that leads to the conclusion that we should not expect tapering to begin within 2013. Our personal perspective on the issue is that the Fed will closely monitor key sectors in the US such as the labor and housing markets and their decision on when the economy is strong enough on its own will only depend on the data coming in from these sectors. Should we see significant improvements within 2013 then anything is possible.
No major economic announcements expected today
The Economic Calendar for the day is empty of major announcements. For those of you monitoring the Canadian Dollar, there’s the Canadian Consumer Price Index coming at 13.30 and later in the day Fed’s Evans will be giving a speech in Chicago. It would be very interesting to hear to what the central banker will have to say about the current state of the economy and possibly hint us on Fed’s next moves.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
13.30 |
CAD |
Consumer Price Index |
High |
1.0% |
1.1% |
|
19.00 |
USD |
Fed’s Evans Speaks in Chicago |
Low |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro was lifted higher yesterday from the massive Dollar sell-off and the Single currency reached as high as 1.3675 before settling there for the rest of the day. Euro surprised us with this radical rise but this development possibly signals a new bullish trend in the European currency. For today we would like to watch for any retracements lower as the currency might try to retest the former resistance of 1.3600 and we will definitely want to join the uptrend should we have the chance. Our technical studies show that the Euro could rise as high as 1.3800 in the coming sessions if this uptrend is confirmed and holds enough demand for risk-on appetite. To sum up, we remain vigilant and we wait for the currency to retract lower-possibly near 1.3600 to establish long positions.
GBP/USD
Euro might have caught us by surprise yesterday but that was definitely not the case with the Pound. The British currency was on cue to trigger our long entry just above the 1.6000 mark, lifted by policymakers’ optimistic comments and was kind enough to hit both our targets in an easy and swift manner, allowing us to capture 140 pips in one day. Not bad for a day’s work. For the day ahead, we would like to stay clear from the Pound as both our targets were hit and the currency seems bound to retrace a bit lower. We will want to let this retracement occur and plan our next trade higher as the UK currency has exited a sideways formation and seems poised to re-seek higher levels.
FTSE 100
The FTSE 100 was also lifted during the day and reached our first target at the 6,600 points area where we liquidated half of our trade. Now we must move our stops to the breakeven price of entry and wait for the UK index to reach higher and hit our second target as well. FTSE’s prospects seem bullish and we feel that we still have some gas in the tank to climb higher, if not then our stops at the breakeven price will protect us from any unwanted losses.
Gold
Gold was another success story from our yesterday’s edition as the commodity’s price jumped $50 in a matter of a few hours but we were there to capture $35 from it. As we discussed yesterday the commodity had formed a reversal pattern that signaled a change in momentum and yesterday the yellow metal exploded higher, triggering our entry just above the $1,290 mark and hitting both our targets very quickly. To be honest however, our previous short trade was also stopped out for some losses so overall it was a good day for Gold but a great day in general taking into account the profits from the other currency pairs we discuss each day. For today, Gold needs to clear the very important $1.325 level before we really believe in an extended bullish rally so we will wait to see how the yellow metal reacts to that test. We feel that there might be some retracement lower and we will want to see what kind of reaction Gold will have to investors taking their profits off the table. Medium term prospects seem bullish at the moment but we will want to verify that a bit further before committing to any more trades.
Have a nice 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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