Alpesh Patel's NEWSLETTERPRO – Dollar drops after Janet Yellen’s confirmation speech remarks get leaked, investors now focus on the actual hearing today

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Dollar drops after Janet Yellen’s confirmation speech remarks get leaked, investors now focus on the actual hearing today

© Alpesh Patel

MORNING BRIEF

Dollar fell against almost all of its counterparts yesterday as investors got their hands on what Janet Yellen prepared for her confirmation hearing with the US Senate tonight. The current Vice Chairwoman of the Fed was quoted saying that economy is performing “far short of potential” and this makes it almost crystal clear that Bernanke’s successor at the Fed’s helm will favor more QE. Markets reacted quickly with Dollar moving lower against the Euro at nearly 1.3500 and the Pound rising sharply above 1.6000 again. The British currency was lifted earlier in the day by the release of BoE’s Inflation Report that appeared more optimistic than anyone could suppose. The Bank of England updated their projections regarding the targeted 7% unemployment rate and are now expecting this to be reached in the first half of 2015. This is almost a year earlier than what policymakers were previously projecting and that surprise sent the Pound higher as optimism spread among Pound traders once more. For the day ahead, we would like to take note of the EZ and German GDP figures scheduled for release this morning and also focus our attention on the Initial Jobless Claims release around noon. Definitely the event to keep an eye on is the Confirmation Speech Yellen has to deliver in front of the Senate’s Banking Committee.

European GDP figures expected this morning, Yellen’s speech later on

As we mentioned above, the day starts with the release of the Euro-zone and German GDP numbers. The German GDP is scheduled for release at 7.00am and the EZ figures will come a few hours later at 10.00. These numbers could offer some support to the Euro and send it above the key 1.3500 mark as investors are selling Dollars due to Yellen’s dovish stance over early tapering. We will have the chance to hear more from Fed’s Vice Chairwoman herself later today as she delivers her speech in front of the Senate’s Banking Committee. The leaked comments make reference to a slower than expected recovery and an intention to provide stimulus to the economy as long as needed. However, we would like to see how she would handle herself in front of the Senators and what arguments will she offer to support her stance.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

7.00

EUR

German GDP

High

1.0%

0.9%

10.00

EUR

Euro-zone GDP

High

-0.3%

-0.5%

13.30

USD

Initial Jobless Claims

Medium

330K

336K

15.00

USD

Janel Yellen’s Confirmation Speech at the US Senate

High

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro breached above the 1.3450 resistance and triggered our long entry at that level. We’re now committed in this trade as the Single currency seems to gain versus the Dollar as investors are cutting their Dollar positions due to Yellen’s intentions for more QE. Our targets are set higher at the 1.3530 and 1.3660 levels and our stop is placed just below the 1.3315 low. We have the EZ and German GDP numbers coming in this morning and we could see momentum building up towards higher levels is these figures print better than expected.

GBP/USD

The Pound moved higher yesterday after the release of the Inflation Report from the BoE and the remaining 50% of our position was closed at the 1.5950 area of our first target. The Pound was lifted higher climbing above the 1.6000 mark and is now trading just above it. We’d prefer to leave it aside for today as the recent violent swings make it hard to suggest a trade at this point. We need to see whether the optimistic comments made by the policymakers are enough to refuel a rally higher for the British Pound or the outlook remains negative for the medium-term future.

FTSE 100

The FTSE 100 fell yesterday as expected and our entry at the 6,690 points was triggered and our first target at the 6,655 points area was also reached quite quickly. The UK index fell as low as the 6,610 points almost hitting our second target a few points lower. For the day ahead, we obviously need to move our stops at the breakeven level (as we should have already done from the moment our first target was reached) and wait for more losses from the British index. If for some reason the FTSE moves back down towards our second target but misses it again, please move your stops at the area of our first target in order to lock in these additional points.

Gold

Gold retraced higher finally following Dollar’s fall across the board yesterday. For the day ahead, we would like to place a long trade at the $1,279.50 level and target the $1,286 and $1,298 price levels with a stop placed below the $1,268 area. What we’re trying to do is to ride the swing higher in case it retests the $1,279 area which acts as a short term support level. However, please attempt this trade with a reduced trade size and what for a confirmation that the $1,279 support area holds prior to diving into the trade as the medium-term outlook for Gold remains negative until this time.

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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