Alpesh Patel's NEWSLETTERPRO – Dollar at risk from the delayed Retail Sales report, Euro to print new highs if the report misses estimates

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MORNING BRIEF

It has been a quiet session yesterday with little movement across major currency pairs as a number of US economic reports showed mixed data. Industrial production growth accelerated to 0.6% from 0.4% while manufacturing production growth slowed from 0.5% to 0.1%.  Pending home sales also dropped 5.6%, which was the largest decline in 3 years and although these figures are second tier we can assess that economic recovery in the US might be losing pace. However, the quiet nature of yesterday’s session might be followed by a volatile session ahead of us as the delayed Retail Sales  scheduled for release is a very important piece of data and a possible decline in this critical sector of the US economy will once again drive Dollar lower. As we mentioned yesterday, there are other piece of data coming in this week from the US like the Consumer Confidence report, the ADP Unemployment Change and the ISM Manufacturing Index and all these should show us how badly hurt is the economy from the recent government shutdown. Across other currencies, the Euro remained unchanged hovering near the critical 1.3800 level but the German unemployment and retail sales reports that are scheduled for release this week might change that. The Pound however was hit by signs of weaker consumer spending and is now battling to hold the 1.6100 level but even though the report showed a big decline in spending the British retailers are reported to be optimistic about a strong recovery over the next month.

US Retail Sales is the key today, Consumer Confidence also on the docket

Our attention will be focused on the US Retail Sales report scheduled for release at 12.30 UK time and this is a greatly delayed report coming from the US economy. Even though the data are as we said delayed due to the government shutdown in the US, the Retail Sales and consumer spending in general are the backbone of the US economy and it is very important for us to note down how the economy was fairing before the shutdown occurred. A few hours later, another piece of information is expected as the Consumer Confidence for October will demonstrate what the climate is in the US regarding consumer spending after the end of the aforementioned shutdown.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

12.30

USD

Advance Retail Sales

High

0.0%

0.2%

14.00

USD

Consumer Confidence (OCT)

High

75.0

79.7

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro still remains range-bound as yesterday was an eventless day of trading. We feel that the recent uptrend has stalled and now a new catalyst is required to renew demand for the single currency or to spur a sell-off in Dollars. Today’s Retail Sales report might act as a spark and we could see momentum building for the Euro so we need to remind you our scenarios for the day ahead: if 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. We know that waiting in the sidelines is not the best situation to be in as it tests one’s patience but we need to capitalize on opportunities as they arise and not trade just for the sake of trading.

GBP/USD

The Pound broke below the 1.6115 level overnight and is now retesting the 1.6100 mark. We had our entry order to go short triggered last night at the 1.6110 area and we are now targeting the 1.6030 mark as our first target. However, since the break below happened overnight it might prove to be a false one so we need to adjust our stops accordingly to avoid excess losses. We will place our stops at the 1.6170 area and wait for the overnight break to gain momentum as traders come to their desks for the European session.

FTSE 100

The FTSE 100 is dragging its feet higher unfazed by the weaker consumer data released yesterday and is now hovering near the 6,730 points area. We still feel there is no sign of concern for the British index thus we will let is drive us higher into profits. Our stop is placed at the 6,675 points but we would prefer to move it a bit higher at the 6,695 points to minimize potential losses.

Gold

Gold moved higher yesterday triggering our entry orders at the $1,356 level and is now hanging around that area. We feel that should today’s Retail Sales paint a glooming picture for the US economy then Gold might receive significant support from the Dollar sell-off that will occur. Our targets remain at the $1,367 and $1,386 marks, however we would like to move our stops just a bit higher at the $1,343 mark. Moving our stops higher/lower and following a trend is a technique we use that allows us to minimize potential losses from adverse markets moves and also lets us lock in partial profits.

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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