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It’s ‘NFP Friday’ and investors are eager to see how the major report will affect the existing trends, will it boost or end them?
MORNING BRIEF
Busy day for currency traders yesterday as volatile trading conditions in the markets sent major currency pairs on a rollercoaster ride. The coinciding European and US data releases were a tricky situation to handle and indeed investors preferred to focus more on the ECB President’s comments on the European outlook and his less dovish views on the Euro and less on the better than expected US results. Indeed Mario Draghi spoke in a positive tone about the recent developments in European economics and downplayed the chance for negative rates implying that the need for another LTRO program is not that urgent. The Euro was lifted by these remarks and reached as high as 1.3675. The US-related figures came out better than expected but as we mentioned above investors didn’t take much action based on that. The Q3 GDP was revised higher and Jobless Claims fell significantly but it seems that investors have turned their attention to today’s Non Farm-Payrolls report to be the potential game-changer. Yesterday’s release of fewer than 300k Jobless Claims and the ADP Employment rise point towards a stronger printing in NFPs but we’re still concerned by the weak ISM employment component so we believe there’s still room for a surprise to the downside. If the US economy adds more than 200k this time then tapering in December is back on the table while a printing of lower than 125K while erase any thoughts for an early reduction in stimulus. Most likely we’re bound to see a figure between 150k and 175 which will leave room for speculation.
The Non-Farm Payrolls report is the theme of the day
Our Economic Calendar for the day holds a couple of economic reports scheduled for release with the NFP report being the major one. However, prior to that release we’ll get information about the German industry as the German Factory Orders are expected to come out lower than last time. Not a market-moving event but it’s important to keep track on how the strongest county in the European region is doing regarding industrial production. After that report, everyone will be focused on the NFP figures that are expected to come in at 13.30 and consensus calls for a 185k increase in payrolls. As we explained above, we see room for a surprise lower and should this come to play then the Dollar will take a hit and lift the Euro and Cable pairs to new highs. The day will end with the University of Michigan Confidence survey but at the time of the release markets will probably be dancing to the after-NFP rhythm so we don’t expect any significant reaction to that report.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
11.00 |
EUR |
German Factory Orders |
Medium |
4.1% |
7.9% |
|
13.30 |
USD |
Change in Non Farm Payrolls |
High |
185K |
204K |
|
13.30 |
USD |
Unemployment Rate |
High |
7.2% |
7.3% |
|
14.55 |
USD |
UoM Confidence |
Medium |
76.0 |
75.1 |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro gained a lot yesterday as Mario Draghi’s positive comments on the developments in European finances attracted investors’ demand for the European currency. We’ve been long in the Euro since yesterday morning and our trade has paid out since our first target at 1.3675 was hit. We’ve closed half of it and brought our stops at the breakeven price of 1.3620 and are now waiting to see how the NFP report will come out. A weak reading will send Euro higher and our second target at the 1.3770 mark could come into play. If not, our stops will protect us from having any losses, an excellent position to be in.
GBP/USD
The Pound was influenced by strong demand for Euros on the EUR/GBP pair and fell to reach as low as 1.6300 yesterday printing a new low. We’re short on the Pound and our first target is near the current market price so we remain optimistic that it will soon be reached. We’ll close 50% of our trade there and bring our stops at the breakeven price as soon as this happens. A strong NFP printing could accelerate the Pound’s decline so anything can happen today. The Pound has been on a short term retracement lower and we’d like to ride it as much as possible while it lasts before the stronger medium-term uptrend comes back into play.
FTSE 100
The FTSE 100 remained oddly quiet yesterday hovering around the 6,500 points area. We believe that a retracement higher could come to play and the MACD indicator is calling for it as well, if you take note of the obvious divergence that has occurred. We’re still reluctant however to trade it as a reversal pattern hasn’t yet emerged and this would make our trade a risky endeavor. We understand that it might be frustrating to stay in the sidelines for a few days on an instrument but we’d rather stay away from it rather than risk money on a gamble.
Gold
Gold declined yesterday and seems to have formed a higher low near the $1,225 area which means that a broader retracement higher could occur. We mentioned yesterday that the level we’re looking at is the $1,255 resistance and if this gets broken the Gold will probably rally higher. We’re hesitating to suggest a trade today due to the increased volatility that Gold is showing during recent sessions making it hard to handle such wild swings. We’d like to see what the NFP report will bring to the table and take it from there next week.
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 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 underpriced, Turnover is up year on year suggesting good growth and Earnings are also up year on year boosting 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.
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