Alpesh Patel's NEWSLETTERPRO – Euro and Pound edge higher against the Dollar, what to expect from the major currencies this week

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Euro and Pound edge higher against the Dollar, what to expect from the major currencies this week

© Alpesh Patel

MORNING BRIEF

Major currency pairs gained against the Dollar at the end of last week with Euro and Pound reaching 1.3500 and 1.6100 respectively. The key factor behind this decline in Dollar was Janet Yellen’s Confirmation Speech in front of the Senate. The front-runner for the Fed job re-affirmed her view for a continued stimulus to the US economy pushing the possible date for tapering into 2014. Taking into consideration these views and in light of other US policymakers giving speeches this week he believe that the pro-stimulus chatter will continue and it will cause Dollar to retreat even more. The Euro is now trading near the 1.3500 mark riding an upwards trend that began near 1.3300 and the Single currency’s outlook is considered bullish. Several important news events are scheduled for this week with the PMI figures and ZEW and IFO reports being the most significant ones. Should these reports prove to be good for the Euro then the currency will reach for 1.3600 as demand for Euros combined with the predicted Dollar weakness will lift the pair towards higher levels. At the same time, the Pound also ended the week higher against the Greenback with the 1.6100 level breached. It was a good week for the UK currency that received massive support from the BoE’s Inflation Report and the recent demand for Pounds along with investors cutting short their pro-Dollar positions sent the Pound higher. This week we don’t have any Pound related events scheduled and the UK currency will be mostly influenced by the Dollar flows.

Housing market data and policymakers’ speeches from the US scheduled

The Economic Calendar for the day ahead is a light one with no major events scheduled for the European session. Later in the day, the NAHB Housing Market Index will be released and we will want to take note of the conditions in the housing market in the US. Keep in mind that apart from Retail Sales and Unemployment Rates, the housing market is the third important economy sector that the Fed keeps an eye on to determined whether it’s appropriate to begin cutting back its asset purchases program thus any development in this market needs to be noted. Moreover, Fed’s Dudley and Plosser are delivering speeches later in the evening and we’d like to hear them discussing the possibility of an earlier versus later tapering date.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

15.00

USD

NAHB Housing Market Index

Medium

55

55

17.15

USD

Fed’s Dudley to speak in Queens, NY

Medium

18.30

USD

Fed’s Plosser to speak in Philadelphia

Medium

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro moved higher yet again after testing the 1.3450 area of support and our first target at 1.3490 was hit. We have liquidated 50% of our trade there and we have moved our stops at the breakeven price of entry as we always do the moment our first target is hit and we’re now targeting higher towards our second target. The Euro’s outlook remains positive at this moment and we believe that our target at the 1.3550 mark could be reached quickly. If not, our stops at the breakeven price will prevent us from taking any losses.

GBP/USD

The Pound gained even more ground against the Dollar and the pair is now trading near the 1.6130 area. We would like to see a retracement lower towards the 1.6100 support area to enter long there, we’ll place our stops just below the 1.6040 support and we will target the 1.6130 and 1.6180 marks. The Pound has been on an uptrend during recent sessions and we believe that should Dollar continue to weaken the UK currency will reach for higher levels.

FTSE 100

The FTSE 100 remained generally unchanged on Friday as the index is now hovering around the 6,700 points level. We believe that this retracement higher will end soon as the index’s outlook remains negative for the foreseeable future but we’d like to see some momentum building up towards the downside prior to taking any positions. We’ll monitor how the UK index starts the week and we will plan accordingly.

Gold

Gold hovered near the $1,290 area on Friday being reluctant to edge higher. We remain on our long trade having a 50% size still open targeting the $1,298 mark, with our stops at the breakeven level of $1,279. We’d like to see whether the predicted Dollar weakness will lead the yellow metal higher and possibly fuel a retracement rally towards the $1,300 and $1,325 resistance levels.

All charts have been created using FXCM’s Trading Station platform.

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