Alpesh Patel's NEWSLETTERPRO – Dollar extends recent gains on a nearly optimistic FOMC statement, Euro and Cable reach for our targets at lower levels

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MORNING BRIEF

Yesterday was another good day for the US Dollar as investors kept adding to their Dollar-long positions. The Federal Reserve’s statement that came along with the Rate Decision announcement was the trigger that led investors towards favoring the American currency as the tone that came out of the statement wasn’t nearly as pessimistic as market participants were expecting. According to the FOMC statement, the Fed is not worried about the recent decline in the job market and their concern over fiscal conditions is limited. More importantly, the committee didn’t make a specific reference to pushing tapering into 2014, leaving a window open for a reduction in asset purchases with 2013. We are confident that the chance of tapering within this year is slim to none but their mere reference that they will “continue monitoring incoming data and adjust the level of asset purchases as needed” was enough to spur a rally in US Dollar. In other currencies, both the Euro and the Cable were hurt by the demand for Dollars and extended their losses. The European currency seems to be forming a reversal formation as the pair seems to have formed a near-term peak at the 1.3800 mark. The Cable on the other hand fell aggressively for a second day and threatens to break below the 1.6000 level. This confirms our views over the recent reports that the British currency has stalled its previous uptrend and is now retracing lower, should the pro-Dollar rally continue then the Pound could make a move for the 1.5900 support.

German Retail Sales and Euro-zone CPI threaten to send Euro lower

Early this morning the Single currency is at risk as the German Retail Sales figures are expected at 7.00am UK time and a possible surprise to the downside here might be enough to send the Euro tumbling lower. A couple of hours later, the Euro-zone Consumer Price Index is another piece of data that we would want to keep an eye on to better assess how the consumer market is fairing in Europe. Lastly, over the US session the Initial Jobless Claims is the only event that requires our attention and we will want to note down yet another clue on how the recovery in the job market in the US is progressing.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

07.00

EUR

German Retail Sales

Medium

1.1%

0.3%

10.00

EUR

Euro-Zone Unemployment Rate

Medium

12.0%

12.0%

10.00

EUR

Euro-Zone CPI

High

1.1%

1.1%

12.30

USD

Initial Jobless Claims

Medium

338K

350K

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro continued its decline yesterday and reached our first target at the 1.3690 area just a couple hours ago over the late Asian session. We need to close 50% of our trade there and move the stop on the rest of our trade at the breakeven price. Actually, we would want to place our stop just a few pips above the breakeven price, preferably at the 1.3745 level as a pullback is possible here. There are key events over the day that could send the Euro either way but we are happily placed in a position where we are targeting further on the downside towards our second target at 1.3600 while a possible retracement higher could only close us out at the breakeven price without any losses.

GBP/USD

The Pound retraced a bit yesterday before falling again and testing the 1.6000 mark and ended settling down near that level. The currency seems to have found some support at the 1.6000 barrier but we think that should the pro-Dollar rally continue the British currency will reach for lower levels and ultimately test the 1.5900 area. For today, we will move our stops a bit further down to lock-in additional profits in case the Pound retraces higher. We will place our stops at the 1.6085 price tag and wait for the currency to clear the 1.6000 barrier as it reaches for lower levels pushed by the recent demand for Dollars.

FTSE 100

The FTSE 100 reached our second target at the 6,820 points area yesterday before retracing lower for the rest of the day. Now that the UK index has completed its retracement lower we would want to rejoin the uptrend should it continue. We want to enter long just above the recent 6,820 peak and target the 6,865 and 6,938 points levels with a stop placed below the 6,740 area. The UK index has been kind to us and offered us consistent profits on its recent uptrend and we would want to see if there’s any gas left in the tank to move even higher.

Gold

Gold lost ground over yesterday’s session and closed the day near the $1,336 level battling the 200-hr EMA. As we mentioned yesterday, we would like to stand aside from the yellow metal at this time and only enter a trade below the $1,328 level. Should this level be broken downwards then a short trade will be taken with targets at the $1,310 and $1,278 marks and a stop above the $1,363 area. However, we feel that for today Gold will remain range-bound but we’re also prepared for the possibility that a potential catalyst spurs a rally towards lower levels.

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 subscribe by clicking here.

 

 

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