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Euro appears directionless while Pound retreats lower, all eyes are focused on Washington waiting for the FOMC decision
MORNING BRIEF
Volatile trading conditions across most major currency pairs were noticed yesterday as we draw near the important FOMC meeting. The Euro attempted to break below the range it has been holding for the last few days but fresh demand from the better than expected figures released provided upwards lift to the currency. Stronger than expected ZEW survey results led the Euro near 1.3770 again and it now comes down to the Fed’s tapering decision to either lift the currency to fresh yearly highs or drive it lower towards 1.3500. At the same time, prior to the FOMC meeting decision the German IFO survey will be released and it could provide some short-term volatility to the currency so caution should be employed today when trading the Euro. On the other hand, the British Pound had a bad day with Consumer Prices growing less than previously eyed driving the currency lower. The Cable reached as low as 1.6220 before pulling back higher over the US session to end the day near the 1.6280 mark. Today we have the release of the last MPC meeting’s minutes and we expect the committee members to express their optimism over the domestic economy’s prospects and this could temporarily spur a relief rally towards higher levels. Both the Euro and the Pound will be at risk however later in the afternoon as the time has come to finally find out what Ben Bernanke and his colleagues intend to do with the tapering issue. As we have mentioned again in our reports, it all comes down to timing and whether it’s appropriate to reduce stimulus a few days before Christmas. We will find out soon enough.
German IFO and British MPC minutes will provide temporary direction ahead of the FOMC meeting
The day ahead holds a number of important events and we’d like to suggest caution and patience as they could make for a pretty volatile trading environment. Early in the morning the German IFO survey is expected to come out strong and this could send the Euro near its yearly highs ahead of the FOMC meeting. Also early in the day, a host of UK-related releases could send the Pound possibly higher as the minutes from the last MPC meeting will be released along with job data from the UK economy. We expect the minutes to unveil the committee’s optimism over the recent developments in the domestic economy and this could drive the Pound sharply higher prior to the late afternoon FOMC meeting. Finally the day will close with the most important event of the month that is the Fed’s decision over tapering. We’ve discussed the various outcomes and how they could influence the various instruments that we monitor so you should already be ready to handle the release. We only wish to add that caution and patience needs to be employed today as the release could potentially spur extremely volatile swings.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
9.00 |
EUR |
German IFO Expectations |
Medium |
106.5 |
106.3 |
|
9.30 |
GBP |
MPC meeting minutes’ release |
Medium |
||
|
9.30 |
GBP |
Unemployment Rate |
Medium |
7.6% |
7.6% |
|
13.30 |
USD |
Building Permits |
Medium |
-4.7% |
6.2% |
|
19.00 |
USD |
FOMC Rate Decision |
High |
0.25% |
0.25% |
|
19.00 |
USD |
FOMC Rate of MBS/Treasury Purchases |
High |
$40B/45B |
$40B/45B |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro seems unwilling to move out of this range it has been trading in for the past sessions but today’s FOMC decision will leave it with no choice but to do so. We’ve been short on the Euro for a few days now and today we will finally find out how this trade will play out. Our targets remain unchanged and we’re still targeting the 1.3700 and 1.3640 marks and our stops have been placed just above the yearly 1.3800 highs. If the Fed tapers then we’ll have some nice gains to take off the table, if not then our stops will be hit and we’ll be looking to enter long over the coming sessions.
GBP/USD
Unlike the Euro, the Pound continued lower yesterday and our long entry never got triggered. The UK currency was pressured by the lower than expected CPI figures but today’s MPC minutes’ release might change the currently negative outlook. We will wait and see how today’s events will reflect on the Pound as no tradable pattern can be noticed at this point. The important level to focus on is the 1.6350 mark as if the currency climbs above it then we could pretty much assess that the current downtrend has been put on hold.
FTSE 100
The FTSE 100 pulled back a bit yesterday but our stops at the breakeven price have not been hit. We remain long on the UK index, we’re targeting the 6,555 points level with the remaining 50% of our trade and our stops are set on the breakeven price of 6,475.
Gold
Gold didn’t trigger our long entry yesterday and retreated lower for the day. At this time we’d like to stand aside for the day ahead as Gold appears directionless and the predicted volatility will make for unpredictable swings. We think that as soon as the whole tapering debate clears out Gold will finally draw a course and stay with it for the coming period.
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 B Grade rating on our Bullish Momentum meter. The P/E ratio is relatively low suggesting that the stock might be underpriced, the ratio of the price earnings is also low and Turnover is up year on year supporting the growth potential. From a technical standpoint, the MACD indicator has been turning lower on the weekly chart above so we suggest that you wait until the stock clears above the 60 pounds barrier before acquiring it. The suggested 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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