Alpesh Patel's NEWSLETTERPRO – Dollar to face critical tests in an eventful week ahead, a host of economic data scheduled for release

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MORNING BRIEF

Last week was a joy ride for major currencies against the US Dollar as almost all high-beta currencies gained ground over the Greenback. Investors continued selling Dollars as the delayed Non-Farm Payrolls report showed increased weakness in the US economy and lowered market’s expectations for tapering within 2013 even more. The week ahead is packed with important events that will shed even more light on economic conditions in the US as a host of delayed reports is scheduled for release. On Wednesday the FOMC Rate Decision and the statement following the release will attract traders’ attention as we will look for clues in the statement on whether the committee is concerned over the progress of US recovery. Apart from that, there are also other US reports during this week like the delayed Retail Sales, the Consumer Confidence and the ADP employment change that will provide critical insight on how the economy is fairing. If the recent weakness in economic data is reflected on these reports as well then the US Dollar will most definitely take a blow and send the Euro and the Cable to fresh highs. The European currency has been on an uptrend for the previous weeks and while the IFO report on Friday showed a mild deterioration in business confidence the single currency held strong. Over the coming sessions the German unemployment and the retail sales figures are scheduled for release and there is wide-spread optimism that if data come in strong then the pair will climb towards the 1.4000 mark. Finally, the Pound didn’t print new highs on Friday even though the Q3 GDP came in line with expectations at 0.8% showing a continued growth for the UK economy. The currency has stalled its uptrend ahead of the 1.6250 barrier and any moves during the coming days will mostly be attributed to Dollar momentum as the week holds no news events for the Sterling until Friday’s PMI release.

Second tier events on the Calendar today

Even though the week ahead is packed with significant events the Economic Calendar today only holds a handful of second tier reports. The US Industrial and Manufacturing Production reports are set for release around noon and they will be followed by the Pending Home Sales and Dallas Fed Manufacturing Activity releases later in the day. Even though each of these reports is not that significant on itself we’re very interested to see what this mix of data will offer as insight on American economic conditions.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

13.15

USD

Industrial Production

Medium

0.4%

0.4%

13.15

USD

Manufacturing Production

Medium

0.3%

0.7%

14.00

USD

Pending Home Sales

Medium

3.5%

2.9%

14.30

USD

Dallas Fed Manufacturing Activity

Medium

9.0

12.8

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro remained in a tight range on Friday on an eventless day. It’s a critical area for the Euro as it battling around the 1.3800 mark and over the coming sessions we will see whether the recent uptrend has more gas left in the tank or a retracement lower comes in play. We feel that should the Euro clears above the 1.3835 level then a long entry is advised with targets at 1.3885 and 1.3975 and a stop placed below the 1.3735 area. However, should the pair drop below the 1.3735 area of support then we will enter short, place a stop above the 1.3835 mark and target the 1.3690 and 1.3600 areas.

GBP/USD

The Pound remained range-bound on Friday as well and it seems that the UK currency is waiting for the next catalyst to spur a move on any direction. We must remain patient and not commit into any trades until the boundaries of this sideways move are breached. Our scenarios remain unchanged since last week: 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 remained unchanged on Friday settling around the 6,730 area. We are committed into a long position since last week and there is no sign for us to abandon our trade, however we will modify our stops. We will move our stops from the 6,650 area to the 6,675 mark, right below the EMA 55 to avoid any excessive losses if the index retraces lower. Our first target remains at the 6,758 points and we need to remain patient and let the trade evolve. European stock markets are opening higher for the day at the time of writing this report so be prepared to reap profits early in the morning.

Gold

Gold moved a bit higher on Friday reaching our second target at the $1,353 level before settling around that area for the rest of the day.  Now, Gold seems to have enough momentum to move even higher  if it manages to clear the $1,350 resistance and we would like to move on this opportunity should it arise. So, if Gold climbs above the $1,356 area and prints a new high we will enter long and target the $1,367 and $1,386 marks with a stop just below the $1,335 support.

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 to subscribe.

 

 

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