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MORNING BRIEF
We’ve seen a mixed performance among the majors yesterday with the Euro gaining over the US Dollar while the Pound fell against the US currency. The Single European coin was lifted by data coming in early in the morning when the German CPI printed at par with expectations and the European currency reached the 1.3450 key resistance level before settling there for the rest of the day. On the other hand, the British Pound fell hard after disappointing CPI figures came in a few minutes after the German report and Cable dived below the 1.5900 before finding support ahead of the 1.5850 level. The Pound has been on a downtrend for a third day in a row but this could change today as the Monetary Policy Committee will release their Inflation Report. If policymakers assess that recovery in the region continues to be strong and hint on exiting their stimulus program ahead of schedule then the British currency will climb back above the 1.6000 mark again. But if the recent disappointing data from the CPI and Trade Balance releases affect their tone and the statement appears more dovish then the British currency will extend its losses below 1.5850. The rest of the day appears empty of events and Dollar traders will need to focus their attention on tomorrow’s Yellen Confirmation Hearing to look for hints on her intentions regarding tapering. Yesterday, FOMC members Lockhart and Kocherlakota offered mixed signals as Lockhart was quoted saying that “the FOMC could consider tapering in December” while his colleague expressed his concerns over the slow recovery of the US economy and stated that early tapering might be a drag on the economy.
Attention turns on the Cable as the Bank of England releases its Inflation report
Definitely the most important event of the day is the BoE’s Inflation Report that could make or break the Pound. As we explained above, the British currency fell yesterday after a disappointing CPI printing and found support ahead of the important 1.5850 level. Today’s Inflation Report could send the Pound either way as there are reasons for the MPC to appear dovish or hawkish. The recent improvements in the services and housing sectors could have spread a feeling of optimism among the voting members and this could be reflected on their comments today but with CPI and Trade Balances figures coming in lower than expected there’s room for a more dovish tone in the statement.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
10.00 |
EUR |
Euro-zone Industrial Production |
Medium |
0.1% |
-2.1% |
|
10.30 |
GBP |
BoE Inflation Report |
High |
||
|
19.00 |
USD |
Monthly Budget Statement |
Medium |
-$104.0B |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro remained trapped in the same range as yesterday and we would expect it to continue trading between these boundaries today as well. There are no significant events to spur a rally in the European currency today so we need to remain patient and wait for an exit from this formation. Our scenarios remain the same: a possible upwards break of the 1.3550 resistance will take us higher towards the 1.3525 and 1.3655 targets that we have marked on the chart above and such a trade will require a stop placed below the 1.3300 level. On the other hand, a possible break of the 1.3300 support will signal an attempt from the Euro to fall even lower and the key levels that come up as targets are the 1.3200 and 1.3050 marks. This trade should be protected with a stop placed above the 1.3550 price level.
GBP/USD
The Pound fell hard yesterday after the disappointing CPI printing and our first target at the 1.5950 mark was hit. The currency fell even lower and our second target at the 1.5840 area was nearly reached before the pair retraced higher. For the day ahead, since the currency reached near our second target, retraced back up to the level of the first target and then moved back down again we need to protect our profits by moving our stops closer to the current price. We will move our stops down to the level of our first target at the 1.5950 area and we will wait for today’s Inflation Report to propel us towards more gains.
FTSE 100
The FTSE 100 continues to drag its feet around the 6,700 points level. We’ve seen the UK index being in a downtrend recently and we would like to jump into this trend once again if we get the chance. We favor a short entry just below the 6,690 points level, with targets at the 6,655 and 6,600 levels and a stop just above the 6,745 points area. On the other hand, should the index edge above the 6,745 points level then we would like to place a long trade there with targets coming in at the 6,780 and 6,830 points and a stop just below the 6,685 points. These should be quick trades trying to capitalize on some momentum building up, possibly from today’s Inflation Report.
Gold
Gold keeps on falling without giving us a chance to jump into the trend again as the instrument continues to remain oversold for a third day in a row. We believe that the next level that we need to focus on to suggest a trade is the $1,250 area but we would be extremely surprised to see Gold hitting this level without even a slight retracement higher. We continue to sit on the sidelines for another day as this super-extended downtrend seems too much for us to risk a trade on either side.
All charts have been created using FXCM’s Trading Station platform.
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