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Euro and Cable gain versus the Dollar as Consumer Confidence drops in the US, pushing tapering into 2014
MORNING BRIEF
Dollar was in the backseat yesterday recording losses against the Euro and the Pound after the disappointing Consumer Confidence report was released. The US currency was affected by the weaker than expected printing in confidence which means that even though unemployment in US is falling people don’t feel confident enough to go out and spend. This proves to be a challenge for the domestic economy and in our view it reduces the chances for a 2013 tapering even more. The housing sector releases yesterday however showed a rise in the important sector’s activity but the consumer sentiment was the drive behind Dollar’s losses. Euro rose to reach 1.3600 over the weakening Dollar and the Pound hit 1.6230. Looking ahead, the UK GDP for the third quarter is expected this morning and US Durable Goods and Initial Jobless Claims are also scheduled for release later in the day. Given the fact that there are no other important events scheduled for today and with the Thanksgiving holiday coming tomorrow we expect a quiet trading day over the European and US sessions.
UK GDP for Q3 and US Durable Goods, Jobless Claims on the docket
Today we have a couple of significant events to tackle. Early in the morning the Q3 Gross Domestic Product for the UK economy will be released and we expect no revisions to the figure. Thus the Pound should remain calm and maybe record minor gains if the figure prints as expected. Later in the day, the US Durable Goods Orders are scheduled and although a decline is eyed here we could see a positive printing to reaffirm that the government shutdown last month didn’t stop people from buying essential long-lasting products. Finally, the Initial Jobless Claims are also set for release and we expect the recent uptick in employment data to continue. Dollar shouldn’t react that much to these releases except for the chance that figures come out a lot better than expected providing support to the US currency.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
9.30 |
GBP |
Gross Domestic Product (YoY) |
High |
1.5% |
1.5% |
|
13.30 |
USD |
Durable Goods Orders |
High |
-1.9% |
3.7% |
|
13.30 |
USD |
Initial Jobless Claims |
Medium |
330K |
323K |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro moved higher yesterday after the release of the Consumer Confidence report gaining over the Dollar’s weakness. Our long entry at the 1.3560 was triggered and our 1.3600 mark was hit, as the price recorded a high of 1.3597. Now as the day progresses we need to move our stops at the breakeven price since our first target was reached and hope for more gains for the European currency. We believe that Euro will reach again for 1.3600 offering the chance to those that haven’t already close 50% of the trade there to do so.
GBP/USD
The Pound followed Euro’s pattern yesterday as it triggered our long entry at the 1.6175 level, gave us a scare as it retreated lower but eventually gained momentum and hit our first target at the 1.6200 mark. Pound actually climbed higher until 1.6230 before settling around that area for the rest of the day. Now, having already closed out 50% of the trade at our first target, as we always do upon reaching target #1 and having placed our stops at the breakeven price at the same time, we’d like to adjust our stops even more to lock in additional pips. We’d like to move our stops higher at the level of our first target at the 1.6200 price tag and wait for our second target at the 1.6240 mark to be hit. The Pound has the Q3 GDP scheduled for release today so our second target could be hit very soon.
FTSE 100
The FTSE 100 fell yesterday to trigger our short entry below the 6,640 points level. Now, we’re committed into the trade, our stop is placed above the 6,710 mark and we’re targeting lower towards the 6,600 and 6,530 points areas as the FTSE has been on an extended downtrend and this could be a new swing lower. Actually, Citi’s proprietary Panic/Euphoria model is calling for extended losses down the road after two weeks of stock market euphoria.
“This week’s Panic/Euphoria reading was 0.52; versus last week’s revised number of 0.49, which points to two weeks in a row of euphoric signals, matched by increased money flows,” said Citi’s Tobias Levkovich in a note to clients on Friday. This is a contrarian indicator, which means euphoria is a bad sign for things to come. “Euphoria readings indicate the market may retreat with an 83% historical probability of losses in the next 12 months,” added Levkovich.
Gold
Gold moved exactly the way we predicted yesterday and fell below the $1,248 mark to trigger our short entry. Our first target at the $1,243 mark has already been hit and we’ve closed 50% of our trade there and moved our stops at the breakeven price. Now, Gold seems to retrace a bit higher and we need to remain patient and let the trade evolve. Our second target remains at the $1,234 mark and our stops at the breakeven price will prevent us from having any losses in case Gold climbs above $1,248 again.
The above charts have been created using FXCM’s Trading Station platform.
STOCK MARKET FOCUS
[Restricted Content] Plc.
The Alpesh Patel Value/Growth filter has indicated [Restricted Content] Plc as our stock of the day.
Company Information: [Restricted Content]
Created using Sharescope Pro
[Restricted Content] Plc 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 Earnings are also up supporting the growth potential. Finally, from a technical standpoint, the MACD indicator is still rising on the weekly chart above. 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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