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High-beta currency pairs end the week higher, will Dollar weakness continue during this week as well?
MORNING BRIEF
Currency markets worldwide had a rollercoaster ride last week with high volatility and changes in direction. Both the Euro and the Cable, the two major currency pairs we are tracking every day on our report, demonstrated wild swings as Dollar investors got excited on Wednesday after the last FOMC meeting minutes’ release only to understand the next day that nothing new came out of the report. Both Euro and the Cable closed the week higher versus the Dollar gaining back the ground they lost on Wednesday as the weakness in Dollar-long appetite becomes more obvious. As we’ve explained numerous times on this report, it’s the Fed’s hesitation over earlier tapering that is causing this uncertainty on the Dollar and as long as nothing spectacular comes out from US economic reports to justify stronger growth this uncertainty, also fueled by Janet Yellen’s dovish views, will continue. This week there are no major announcements expected from the US economy apart from a Consumer Confidence report tomorrow and the Durable Goods Orders on Wednesday so we expect a smoother ride for the buck. The first couple of days of the week also hold no significant news for the Euro and the Pound as both pairs are nearing short-term resistances: the Euro is trading at 1.3540 at this time near the recent 1.3580 peak and the Cable has retreated to 1.6200 after reaching as high as 1.6240 on Friday. Further down the week, the UK GDP figures and Euro-zone’s Unemployment data and CPI reports could provide some friction but we prefer to see how the week starts and then take it from there. Finally, we’d like to introduce to you our new section in our report, the Stock Market Focus where we will discuss stocks that draw our attention and pose interesting investment ideas. Please scroll down the report to find out more.
US Housing market and Manufacturing data on the docket today
There are not much on the Calendar this Monday and our focus will mostly be on the US session as the Pending Home Sales and Dallas Fed Manufacturing Activity reports are scheduled for release. Although both are second-tier reports they are pretty significant for our analysis as the housing market is a very important sector to keep an eye on for the US economy. As we always remind you, the housing market’s progress is very important to the Fed and is worth noting down any developments as they will weight on Fed’s decision to taper or not. Manufacturing also plays a vital role in the US domestic economy thus the Dallas Fed index also has its significance. We don’t expect any major reaction from the Dollar to these reports but they are worth keeping track of.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
15.00 |
USD |
Pending Home Sales |
Medium |
-1.0% |
1.1% |
|
15.30 |
USD |
Dallas Fed Manufacturing Activity |
Medium |
5.0 |
3.6 |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro has fulfilled our trade suggestion on Friday hitting both our targets at the 1.3510 and 1.3550 marks as it neared the short-term resistance area of 1.3580. Now the pair seems to be retreating lower and our attention is focused on the significant 1.3500 support area as illustrated on the 1h chart above. We’d like to stand on the sidelines for now as we need to see how the pair reacts as it approaches this support area and whether there is enough demand for Euros to launch an new swing higher.
GBP/USD
The Pound continues to move higher and on Friday it reached as high as 1.6240. Now the pair is testing the 1.6200 support area ahead of the 1.6260 resistance level shown on the chart above. We’ve got our stops placed on the breakeven price but we’d like to draw them a bit higher today to lock in some more pips in case of a pullback. Please move your stops just below the EMA 55 at the 1.6170 area to lock in some 20 pips more. The Pound seems to have no reason to withdraw lower thus we need to remain patient and let this trade move in our favor towards our second target at the 1.6290 area.
FTSE 100
The FTSE 100 has been on a downtrend for some time but is now hovering around the 6,680 mark during recent sessions. The UK index needs to fall below the 6,640 support area to renew our conviction for lower levels and should this downwards breach happen then we will enter short there with targets coming up at the 6,600 and 6,530 marks and a stop placed above the 6,710 area. For this scenario to work we need the FTSE to remain below the 6,725 resistance, any breach above it will signal a potential shift in the trend.
Gold
Gold continues to move on a trend of its own being influenced by the situation with Iran and we’d like to remind you of the recent past when Gold was also moving on a weird pattern during tensions in Syria. As we did then, we have no suggestions to offer to you at this point as the instrument appears oversold from a technical point of view and also when Gold gets influenced by political tensions it gets extra volatile. We’d like to see a retest of the $1,250 resistance before we make a suggestion, we believe the instrument to be exhausted on its downtrend and a correction higher needs to happen. Until this happens, please consider Gold a no-touch instrument.
The above charts have been created using FXCM’s Trading Station platform.
STOCK MARKET FOCUS
[Privileged Information] Ltd.
The Alpesh Patel Value/Growth filter has indicated [Privileged Information] Ltd as our stock of the day.
Company Information: [Privileged Information]
Created using Sharescope Pro
[Privileged Information] has been rated a 9 out 10 in our Value/Growth rating and gets an A Grade rating on our Bullish Momentum meter. The P/E ratio is relatively low suggesting that the stock might be undervalued. Turnover is up year on year suggesting good growth and the MACD indicator is still rising on the weekly chart below. The recommended holding period for a stock of this type is 6-12 months.
Important Information
The filters and settings in the Special Edition of the Sharescope software use Alpesh Patel’s proprietary criteria to generate suggestions of securities worthy of further investigation. They DO NOT CONSTITUTE INVESTMENT ADVICE.
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