Alpesh Patel's NEWSLETTERPRO – Dollar gains ground ahead of the FOMC meeting, key events during today’s session require our attention

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MORNING BRIEF

Dollar was on the forefront during yesterday’s session with the US currency gaining ground against the other majors across the board. Investors have been short towards Dollar for some time now and we think that some profit-taking led the currency higher ahead of the FOMC meeting later today. We don’t expect anything major from this meeting as we already know that there is no chance that the Fed will go ahead and start tapering its asset purchases program at this time but we are very interested to see what the statement that comes along with the announcement has to say. Latest economic data coming from the US were mixed and the Retail Sales report that was released yesterday showed a 0.1% decline which could have been worse. On the other fronts, the Euro had a bumpy ride over the late European session as comments from ECB governing council member Ewald Nowotny that investors and policymakers will have to live with a strong Euro sent the currency above 1.3800. However, the rally was quickly subdued as traders realized that this is no new information and there’s really no reason to lift the Euro even higher. Our view is that the ECB has no concerns about the Euro being too expensive at this time but we believe that should the Single currency reach 1.4000 their views might be a bit different. Lastly, the Pound was heavily hit by the aggressive pro-Dollar rally and the currency fell near the 1.6000 mark. This signals that for the moment the recent uptrend in the Pound has stalled and a broader sideways move is in play.

 

Several important announcements today coming from Europe and the US

Today our calendar seems packed with important events that require our attention. Coming early in the morning the German Unemployment Rate will provide us with important information about the largest economy in the European region and a surprise here will definitely be reflected on the Euro. Later in the day, the German Consumer Price Index will add to our knowledge about German economic conditions while the US Consumer Price Index will also illustrate how the consumer market in the US is fairing. Lastly, the most important event of the day comes later in the afternoon as the US FOMC will release its Rate Decision along with the all-important statement discussing US economic conditions.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

8.55

EUR

German Unemployment Rate

High

6.9%

6.9%

12.30

USD

US Consumer Price Index (Sep)

High

1.2%

1.5%

13.00

EUR

German Consumer Price Index

High

1.4%

1.4%

18.00

USD

FOMC Rate Decision

High

0.25%

0.25%

 

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TECHNICAL ANALYSIS & LEVELS

 

EUR/USD

Euro fell during yesterday’s session and found support near the 1.3740 support area where the EMA 200 lies as well. The European currency was hit by the aggressive Dollar rally across the board and nearly triggered our entry order just below that mark. We want to see how the Single currency will react to today’s events as we are ready to jump into a short position with a clear break below the 1.3735 support. Our targets are at the 1.3690 and 1.3600 areas and we will place a stop above the 1.3835 peak. However, even though it seems as a remote possibility at this moment, should the top of 1.3835 be breached and Euro climbs higher we remind you of our targets at the 1.3885 and 1.3975 levels with a stop placed below the 1.3735 area.

GBP/USD

The Pound fell hard during yesterday’s session and our short trade at 1.6115 has already reached the first target at 1.6030 for +85 pips of profit. Naturally we closed out half of our trade size at our first target and brought our stops at the breakeven price. We suggest that you place your stops just a few pips above the breakeven price however, preferably at the 1.6125 price tag as we could see a retracement from the UK currency after yesterday’s decline. Our second target remains at the 1.5890 mark as we expect further losses for the Pound during coming sessions.

FTSE 100

The FTSE 100 continued its uptrend yesterday and our first target at the 6,755 has already been hit as the index reached even higher to close near the 6,785 area. We will move our stops at the level of our first target, more specifically at the 6,753 price tag in order to lock in more profits as the index is climbing higher towards our second target at the 6,820 points area.

Gold

Gold hit our stops as it retraced lower yesterday and our long trade was closed out at the $1,343 mark for a small loss. The yellow metal seems to have stalled its uptrend and is now forming a sideways move near the $1,350 area.  We would like to stand aside for today and let the instrument clarify its intentions before we enter into a trade again. However, we must also be prepared in case of a sudden sell-off in Gold, even though this seems a remote possibility. Nonetheless, should Gold fall below the $1,325-8 area then a short trade is advised with targets at the $1,310 and $1,278 marks and a stop above the $1,363 area. We feel that the chances of this trade triggering today are slim but there’s no harm in being ready for it.

 

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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