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Euro and Pound bounce back up against the Dollar as traders understand that nothing has changed in the Dollar’s outlook
MORNING BRIEF
Dollar has baffled investors and traders the last two days with its erratic behavior after the US currency gave back most of its Wednesday’s gains against the Euro and the Pound yesterday. The European currency was lifted back up to 1.3480 while the Pound printed a new high at 1.6200. As we mentioned on our last newsletter, there was really no reason for the Dollar to gain that much after the FOMC minutes release and the way that the market reacted yesterday confirms our views. Moreover, the mixed data released from the US economy didn’t help the buck at all. Weekly jobless claims dropped but Producer Prices declined and the Philadelphia Manufacturing Index fell as well. On the Euro’s front, the currency was also supported by ECB President’s Draghi comments that negative deposit rates is not an option he’s considering at this point. He made clear that the reason behind the rate cut last week was the low inflation and the risk of it turning into deflation. Today’s IFO release could also prove beneficial to the currency as well as analysts expect a rise in business confidence in November and if this proves correct then the Euro could rises above 1.3500 once again. Lastly, the Pound still shows its resilience against the buck hitting 1.6200 after yesterday’s Dollar retreat. We had no news this week to support the UK currency and this make the currency’s performance against the Dollar even more amazing.
German GDP and IFO survey could provide extra fuel to the Euro today
Our Economic Calendar today features two important events for the European currency as the day starts with the release of the German GDP analysts are expecting a stable printing. This could prove beneficial to the Euro as it is making its way towards 1.3600. An hour later the IFO survey will also be released and an uptick in the business confidence index is expected. If both figures come out as expected then we’ll be very interested to see how much lift they will provide to the European currency. The rest of the day is empty of any significant events apart from Fed’s George speaking in Paris and as always we’d like to see where he stands on the tapering date’s debate.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
7.00 |
EUR |
German GDP (YoY) |
Medium |
0.6% |
0.6% |
|
9.00 |
EUR |
German IFO Climate |
Medium |
107.7 |
107.4 |
|
13.40 |
USD |
Fed’s George speaking in Paris |
Medium |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro has pulled back up after Wednesday’s decline and is now trading near the 1.3500 mark. We’d like to take advantage of the opportunity and try and ride this upwards swing and we favor a long entry just above the 1.3485 area with targets coming up at the 1.3510 and 1.3550 marks and a stop placed just below the 1.3435 support area. It’s Friday and this is a quick trade trying to gain some pips out of Euro’s pullback higher thus we suggest that you take the trade with half of your normal trading size.
GBP/USD
The Pound held strong yesterday and pulled back higher eventually to reach our first target at 1.6200. We now need to close out 50% of our trade and move our stops to the breakeven price. The UK currency seems to resume its uptrend higher and we feel that we could see even more gains the coming week.
*There has been a mistake on the Wednesday edition where we printed that the stops on the GBP/USD trade were supposed to be placed at the 1.6080 level while we intended to type 1.6050 as was also illustrated on the chart above our analysis. This has caused some of our subscribers to be stopped out at the 1.6080 level since not all of them noticed the levels shown on the chart. We’d like to formally apologize for this incident and hope to renew your confidence in our analysis with better yet suggestions.
FTSE 100
The FTSE 100 pulled back higher yesterday and the remaining 50% of our short trade was closed out on the breakeven point. At this time, the UK index seems to be in a sideways movement and we’d like to stand aside until we get a better idea of what’s next. The significant levels to keep an eye on are the 6,640 support area and the peak at the 6,725 points mark. We believe that either of them will be breached today and we will see more action from the FTSE when the next week begins.
Gold
Gold has settled near the $1,244 level and is trading peacefully around that area. We’re not sure what to suppose for Gold as its steep decline on Wednesday caused the commodity to become extremely oversold. The key level we need to watch is the $1,250 resistance and we feel that an upwards breach of this area will lead the yellow metal to retrace even further but since we’re uncertain of Gold’s intentions we’d like to stand aside and do nothing. Always keep in mind that in case you’re not sure about what’s going on in the market always choose to walk away.
Enjoy a pleasant 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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