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MORNING BRIEF
Currency markets have been a fierce battlefield for the past few days as debt talks in Washington spread optimism over finding a solution only to take it back a few hours later. Yesterday better than expected economic news from Europe were bound to propel Euro and Cable higher but at the same time comments by the Chinese Finance Minister over the minor progress made in deliberations led both pairs lower for the day. The ZEW survey printed mildly higher at 52.8 compared to the 49.2 forecast and the British CPI came a bit higher at 2.7% versus 2.5% eyed, however both pairs reacted violently to the criticism expressed from China’s FinMin. We need to be extra cautious these following days as the date that the US government runs out of cash draws near and this is causing market participants to behave irrationally. Thursday marks the time when the US will need to start prioritizing its payments to the country’s borrowers and this is an event that has never occurred in US history leading investors to protect themselves from the severe consequences of such an event.
British job data and Euro-zone CPI
The Economic Calendar holds some interesting news announcements. Coming at 9.30 UK time the UK Jobless Claims are expected to fall and the Unemployment Rate is expected to remain stable. Should we see a better than expected reading to these figures then it might just be what the Cable needs to clear the 1.6000 level and move higher. Half an hour later the Euro-zone Consumer Price Index is also expected to be released and we could also see some movement to the Euro pairs. However, in light of yesterday’s reaction in both pairs we would like to be very vigilant for news from the other side of the Atlantic that might affect them. Any indications that a deal is reached could propel Dollar higher and drive Euro and Cable as low as 1.3450 and 1.5900 respectively.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
9.30 |
GBP |
Jobless Claims Change |
High |
-25.0K |
-32.6K |
|
9.30 |
GBP |
ILO Unemployment Rate |
High |
7.7% |
7.7% |
|
10.00 |
EUR |
Euro-zone CPI |
High |
1.1% |
1.1% |
|
10.00 |
EUR |
Euro-zone CPI Core |
High |
1.0% |
1.0% |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro yesterday seemed poised to reach higher but it was hit by policymakers’ comments over the deadlock in debt ceiling discussions in Washington. As a result our stops were hit and the pair fell as low as the 1.3485 support area. For the day, I would like to stay clear from the Euro as the formation that has emerged is not a clear one and since the pair is being hit from either sides following the US uncertainty any positions or suggestions would be based on gut and that’s not a proper analysis. Important levels that we need to watch during the day are the 1.3485 support and the 1.3550 resistance, both of them are crucial and we would prefer the currency to clear either of them as to indicate a more clear bias.
GBP/USD
The Pound still finds it difficult to overcome the 1.6000 level and has settled in a range between 1.5920 and 1.6000. Our long position was nearly stopped out yesterday as the pair tested the previous lows but until this time our long entry holds. Given the fact that the Pound is in a range we need to clarify and update our scenarios: should the Pound clear the 1.6000 level then we will enter long (if you haven’t entered yet) and our targets will be at 1.6050 and 1.6130 with a stops placed below the 1.5920 area. In the opposite case that the Pound fails to overcome the 1.6000 level but instead breaks below the 1.5920 support then we will follow the decline with a short position with target 1.5860 and 1.5780, our stop should be placed above the 1.6000 mark. Important job data are expected today so we could see some momentum finally building up.
FTSE 100
The FTSE 100 hit the 6,570 resistance we discussed yesterday and retraced a bit lower the rest of the day. We are very keen to see whether the UK index will be able to clear above the 6,570 level and climb higher. In this case we will follow through, we will enter long just above the 6,575 level, place a stop just below the 6,520 level and target the 6,595 and 6,635 levels. However, should the index fail to clear above the 6,570 area then we could try and short the index around that area and target the 6,525 and 6,480 areas, with a stop just above the 6,575 points. It all comes down to whether the index will be able to overcome this important level of resistance at the 6,575 area so the trade could go either way.
Gold
Gold continues to move in a weird way, influenced by the situation in DC. We are committed to a short trade below the $1,261 area, with our targets being at $1,243 and $1,214. However, if the trade goes south and our stop is hit at the $1,290 area and the instrument moves higher we will join the move and enter long there, with a stop below the $1,274 level and targets coming at $1,300 and $1,316. Please don’t overleverage your accounts with large positions in Gold as it can be extremely volatile as the discussions in Washington continue.
All charts have been created using FXCM’s Trading Station platform.
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