Alpesh Patel's NEWSLETTERPRO – Major currencies remain on hold on mixed data, important reports expected today

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MORNING BRIEF

Major currencies remained mostly unchanged yesterday as economic data released were mixed and didn’t offer any clear direction. The German and European PMIs showed a slight decline in economic conditions however the Euro managed to hold on to previous gains and actually printed a new high at 1.3825. The European currency is showing remarkable strength but another event risk event is upon us today as the IFO survey could either propel the currency even higher or cause a retracement towards lower levels. Data coming in from the US also offered mixed signals as the majority of the data appear distorted due to the recent shutdown in the US thus the figures are considered unreliable. Today’s Durable Goods report could shed some more light on US economic conditions but we don’t a expect a major reaction from the Dollar to this announcement.  Finally, a significant development to the UK economics was noted last night as BoE Governor Carney announced changes to the bank’s money market operations. Carney introduced changes to the lending requirements and terms in an effort to stimulate UK recovery even more and we believe that this would prove beneficial to the Pound in the long run. However, with Q3 GDP figures coming in today there’s a possibility for a surprise either on the upside or the downside.

Several news events scheduled for release today

The Economic Calendar for the day holds a few data releases that are worth taking note of. Early in the morning the German IFO survey is scheduled for release and investors will look for signs of improvement in the economic climate in the European region. Thirty minutes later the UK GDP for the third quarter will be released as well and a surprise printing here could spur a rally in the Pound. Finally, the US Durable Goods report is also scheduled for release later in the day and we are very interested to see how the recent US shutdown was reflected to consumers’ choices.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

9.00

EUR

German IFO Expectations

Medium

104.5

104.2

9.30

GBP

UK GDP Q3

High

1.5%

1.3%

13.30

USD

Durable Goods Orders

High

2.3%

0.1%

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro edged higher yesterday, triggered our long entry at the 1.3790 level and quickly reached our first target at 1.3820. Having closed out 50% of our trade there and having brought our stops at the breakeven price, the pair closed us out as it retraced near the 1.3790 area. For today, we will want to try to follow the trend higher so we will enter long if the pair prints a new high for the day. So our entry is a few pips above the 1.3825 area, preferably at the 1.3835 level, we will target the 1.3870 area where we will exit the whole trade and our stop will be placed below the 1.3780 level. This is a simple, 1/1 risk/reward trade with a single target, just to try and follow the existing trend higher.

GBP/USD

The Pound remained range-bound yesterday as expected so we need to wait and see when the UK currency will exit this sideways move. As said on our last report we need a clear signal from the Pound to see whether this uptrend will continue or a near-term peak has been reached. Our scenarios remain unchanged: if the Pound climbs above the 1.6255 area then we will enter long, targeting the 1.6340 and 1.6480 marks and place a stop below the 1.6110 area. If the pair drops below the 1.6110 support the a short trade is advised with targets at the 1.6030 and 1.5890 area, and a stop above the 1.6255 resistance.

FTSE 100

The FTSE 100 reached higher yesterday and triggered our long entry late in the afternoon. We are now committed to this trade but for future reference we don’t want to enter trades late in the afternoon on the UK index, the risk of conditions changing overnight is significant and we don’t want to be caught off guard. So in the future if the index doesn’t trigger our trade until early in the afternoon then we need to withdraw our entry order and wait for next day. Anyway, our first target is at the 6,758 points as the UK index seems to have enough steam to move higher, in the opposite case our stops have been placed at the 6,650 points level and we will wait and see whether this uptrend will continue.

Gold

Gold also moved higher yesterday and nearly reached our second target at $1,353, falling short for a couple of dollars. Since we reached so close to our second target we will now move our stop from the breakeven price and place it at our first target’s level at the $1,337 price tag. We don’t want to risk losing all these profits should the yellow metal retrace lower thus we lock in a significant portion of profit by moving our stops higher. We believe that Gold will make another attempt to reach our second target but since the $1,350 level is a significant resistance we suggest that you go ahead and close the trade there should Gold approach it again. So to sum up, stops at the $1,337 level and we try to exit the trade as close to the $1,350 area as possible.

All charts have been created using FXCM’s Trading Station platform.

This is the free, time-delayed version of NewsletterPro, a subscription-based product.

If you would like to receive it before 7:30am, please visit InvestingBetter.com.

 

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