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Majors on a volatile swing as investors are baffled by the mixed signals, ECB and US Jobless Claims to move the market today
MORNING BRIEF
Volatile trading conditions in the currency markets for the last 24 hours as yesterday’s events came out mixed. Investors learned that Euro-zone’s PMI numbers came our better than expected but the dip in Retail Sales cut their risk appetite early in the day, leaving the Euro hanging inside this broad range we’ve seen for the past couple of days. British Services’ PMI missed expectations leaving the Pound also hovering around 1.6400. But it was the mixed signs from the US-related data that baffled traders even more. The ADP Employment numbers came out strong but the Non-Manufacturing ISM took a moderate dive leaving everybody concerned on how Friday’s NFP report will come out. If you take a look at the unemployment component of the index you will see that it dropped to its lowest level since May which could mean that the Non-Farm Payrolls report could surprise to the downside. Today’s events could clear out the picture or distort it even more. The British Rate Decision expected early today seems to be the most straight-forward event of the day since we expect no change in Rates policy from the BoE and the short statement that follows the release will most likely add nothing new to what we know thus far. However, the markets will focus their attention on the ECB Rate Decision and most importantly on the press conference that will follow it. Everyone wants to hear what Mario Draghi has to say on the low inflation issue and whether negative interest rates is an option. If the ECB President sounds more dovish than usual and leaves room for more easing down the road then Euro will take a dive towards 1.3500. At the same time, the US GDP for the 3rd quarter will be released followed by the Personal Consumption and Initial Jobless Claims reports and all these combined could cause Dollar either to strengthen or give up more ground against the other majors. The day ahead calls for caution and patience as we draw closer to tomorrow’s NFP report that as we mentioned yesterday could make or break Dollar for the rest of the year.
Central Banks’ Rate Decisions and Initial Jobless claims pose risks
As we mentioned above, the day ahead holds a number of important economic reports. The Bank of England will open the day with its Rate Decision at 12.00 but we know that nothing new will come out of it. The short statement that follows it usually offers no information and investors will need to wait for the meeting’s minutes’ release in a couple of weeks to find out more. However, the ECB Rate Decision at 12.45 will be followed by a press conference 45 minutes later and we will have the chance to listen to the ECB President himself explaining his views on the European finances. We need to listen closely to what he has to say and how he will say it because any sign of extra dovishness will be quickly followed by losses in the Euro. The US-related GDP, Consumption and Initial Jobless Claims data will come out at the same time as Draghi delivers his remarks and this could be important because a combined effect of both these events at the same time could spur rallies in either direction. Yesterday’s employment component of the ISM index disappointed and we’d like to see how the Initial Jobless Claims come out to better assess what to expect from tomorrow’s NFP report.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
12.00 |
GBP |
BoE Rate Decision |
High |
0.50% |
0.50% |
|
12.45 |
EUR |
ECB Rate Decision |
High |
0.25% |
0.25% |
|
13.30 |
EUR |
ECB President Draghi holds Press conference |
High |
||
|
13.30 |
USD |
Gross Domestic Product (3Q) |
High |
3.0% |
2.8% |
|
13.30 |
USD |
Personal Consumption |
High |
1.5% |
1.5% |
|
13.30 |
USD |
Initial Jobless Claims |
Medium |
323K |
316K |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro remained trapped within this 100-pips range yesterday and just this morning popped above the 1.3620 mark to trigger our long entry there. We’re now targeting the 1.3675 and 1.3770 marks and our stop is placed just below the 1.3520 area. We expect volatility to increase today caused by the number of events that are expected within the day. We’d like to suggest patience, if you feel that the increased volatility is something you can’t easily handle you can do a simple trick and reduce your trade size to half since the Euro is still hovering around the entry price. We’d like to hear to what ECB Draghi has to say and how his remarks will be reflected on the Euro.
GBP/USD
The Pound yesterday hovered around the 1.6400 mark falling briefly below the 1.6340 area to trigger our short entry. We’re now committed to the trade, we are targeting the 1.6280 and 1.6180 marks and we have placed our stops just above the 1.6445 peak. Today’s BoE Rate Decision will most likely offer no new information and Cable’s movement will probably be influenced by Dollar flows.
FTSE 100
The FTSE 100 continues to fall lower offering us no tradable setup as it is still very much oversold. The MACD indicator hints for a retracement higher as it has bottomed out and seems to be pointing up. We need this retracement in order to rejoin the falling trend and until that comes we don’t want to risk a trade suggestion.
Gold
Gold climbed higher yesterday closing out our remaining 50% of our short trade at the $1,228 area offering us a nice profit for this trade. Gold retraced higher quite radically and this could potentially signal a change in direction for the yellow metal. At this point we’d like to stand on the sidelines and let Gold play out this reaction. The important level we need to focus on is the $1,255 resistance as an upwards breach will change Gold’s medium-term outlook.
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 an 8 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 underpriced, Turnover is up year on year suggesting good growth but Earnings are down year on year challenging the growth potential. From a technical standpoint, the MACD indicator has been pointing upwards on the weekly chart above pointing towards higher levels. 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.
This is the free, time-delayed version of NewsletterPro, a subscription-based product.
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