Alpesh Patel's NEWSLETTERPRO – Quiet trading conditions bring forth renewed discussions over Fed’s tapering, today’s CPI reports to build up new momentum?

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MORNING BRIEF

© Alpesh Patel

It has been a rather quiet trading session  yesterday with major currencies hovering around their previous levels as the US money markets were closed for Veterans Day. The Euro retraced a bit higher closing the day around 1.3400 while the Pound failed to hold 1.6000 and is now trading around 1.5960. With no major data released yesterday and only a couple of Consumer Prices Indices scheduled for release today investors are taking their time to digest Friday’s surprisingly high Non-Farm Payrolls report and how this piece of data will affect Fed’s timetable for tapering. Analysts discuss that the continued flow of better than expected results from the US the past month and the fact that the US government shutdown didn’t have any significant effects on the economy could bring the Fed to begin cutting back asset purchases as early as next month. We feel that this scenario might be a bit overly optimistic but the mere fact that investors are discussing it lifts the US Dollar higher. Today we will focus our attention to the German and British CPI reports as they could both act as catalysts for new swings. Both the Euro and the Pound are trading near critical support levels and a negative reading in the expected data could drive both currencies lower while demand for Dollars persists.

 

Consumer Price Indices reports threaten key support levels in the Euro and Cable pairs

As we mentioned above, today the German and the British CPI reports are scheduled for release and with Euro and Cable hovering about the 1.3300 and 1.5900 key support levels respectively we’re very keen to see how these figures come out. The German CPI report is scheduled for 7.00 GMT while the British one will be released at 9.30. Later in the day, two Fed policymakers, Kocherlakota and Lockhart are giving speeches and it will be very interesting to listen to what they have to say on the recent optimism over US’s outlook. Keep in mind that speeches like these are the perfect opportunities for policymakers to hint on their intentions in an effort to test how the market would react in case they act on their words.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

7.00

EUR

German CPI

Medium

1.3%

1.3%

9.30

GBP

British CPI

High

2.5%

2.7%

18.00

USD

Fed’s Kocherlakota speaks in St. Paul, MN

Low

18.50

USD

Fed’s Lockhart speaks in Montgomery, AL

Low

 

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TECHNICAL ANALYSIS & LEVELS

 

EUR/USD

Euro pulled up a bit higher yesterday and is now trading around the 1.3380 mark. We remain firm in our belief that the currency needs to break out from this sideways movement prior to taking any trades. The upper boundary we’re watching is the 1.3550 resistance and a possible break upwards will take us higher towards the 1.3525 and 1.3655 targets that we have marked on the chart above and such a trade will require a stop placed below the 1.3300 level. On the other hand, a possible break of the 1.3300 support will signal an attempt from the Euro to fall even lower and the key levels that come up as targets are the 1.3200 and 1.3050 marks. This trade should be protected with a stop placed above the 1.3550 price level. We know that it’s not nice waiting in the sidelines for the trade to trigger but patience is required prior to taking any trades as we need to confirm the pair’s intentions and not trade just for the sake of trading.

GBP/USD

The Pound hovered around the 1.5980 mark for a second day and is now trying to hit our first target at the 1.5945 area for a second time. If we have the chance, we will close out the first half of the trade at the 1.5950 level (5 pips above our first mark) as it would be a pity to miss out on some profits for just a couple of pips. What we also need to do is to move our stops down to the 1.6030 mark regardless of reaching the first target as the Pound has already made two attempts to hit our first mark and missed it for a few pips, now a retracement higher becomes possible as the pair seems to have a hard time to build up momentum.

FTSE 100

The FTSE 100 keeps hovering around the same area offering us no clues on what are its intentions. We’re monitoring they key areas of 6,800 and 6,650-55 and we are waiting for the UK index to offer us a tradable pattern. For the moment we can’t suggest a trade but today’s CPI report could provide a new catalyst for the index to build up some momentum.

Gold

Gold remains a difficult puzzle for us to solve as it continues to fall towards the $1,275 support. We still feel that a retracement higher is required prior to taking any trades as the instrument appears to be oversold and a short trade should not be taken in such occasions. We believe that a pullback higher will occur and that’s when we’ll be ready to suggest a trade, otherwise it would be like shooting in the dark.

 

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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