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Dollar in the forefront as the week starts with a number of important events that could spur relief rallies
MORNING BRIEF
Last week ended with the US Dollar gaining again against the other majors, driving Euro and Cable lower. The two high-beta currency pairs had reached yearly highs over low liquidity and reduced participation in the markets during the Holidays’ season but it now seems that the demand for Dollars is intensifying. We’ve discussed this scenario in our recent reports and we believe that during the coming sessions this demand could drive the Euro and the Cable even lower. The ISM Non-Manufacturing Index is scheduled for release later today and an uptick is expected in the Services sector in the US and this could be the spark to spur a stronger demand for US Dollars. From a technical standpoint both the Euro and the Pound have fallen below important support levels as the European currency broke below the 1.3620 level on Friday and the Pound had fell below the 1.6460 area earlier last week. As investors and market participants are coming back to their desks and with economic released picking up pace again we’re very eager to see whether the data support Fed’s decision to taper the asset purchases last month and the ISM release today could be a good first indication. Also today several PMI and CPI reports are scheduled for release and they could make for some serious volatility and we need to focus our attention to these printings as they could very much dictate the tone for the rest of week until Friday’s NFP report.
Several PMI and CPI reports on the docket along with the ISM Non-Manufacturing Index
On the Economic Calendar today we have plenty of releases scheduled. Early in the morning Euro-zone’s, Germany’s and UK’s Purchasing Manager Indices for the Services’ sector are scheduled for release and these are important data that can shed some light on how growth is faring in these countries. We expect market participants to interpret these data into guidance for the coming sessions and an uptick on these printings could send the Euro and the Pound higher in a relief rally. Also today at 13:30 the German CPI is scheduled for release and this could also play its part today as the week starts. Later in the day however, the ISM Non-Manufacturing Index is expected to print higher and should this happen it could put a stop to any Dollar weakness that could appear due to the earlier releases. Attention is advised today since the host of data expected could make for some volatile swings.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
8.55 |
EUR |
German PMI Services |
Medium |
54.0 |
54.0 |
|
9.00 |
EUR |
Euro-zone PMI Services |
Medium |
51.0 |
51.0 |
|
9.30 |
GBP |
UK PMI Services |
Medium |
60.3 |
60.0 |
|
13.00 |
EUR |
German CPI (YoY) |
High |
1.4% |
1.3% |
|
15.00 |
USD |
ISM Non-Manufacturing Index |
High |
54.5 |
53.9 |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro fell below the 1.3620 support on Friday and it now seems that the outlook has turned to negative and further losses could be expected down the road. We have a number of important reports coming in today and we’d like to see how they could possibly alter the technical outlook before issuing a suggestion especially given the fact that all figures are expected higher. In our view, any rally higher could be interpreted as a retracement as we’re looking to short the pair at this time.
GBP/USD
The Pound also retreated on Friday triggering our short entry just below the 1.6409 low and our first target at the 1.6380 level has already been hit. Our stops have already been moved to the breakeven price and we’re now targeting the 1.6310 mark. Please note that the target levels have been altered a bit since our suggestion on Friday to take into account the recent high at 1.6375 so now our second target is set at the 1.6310 mark instead of the 1.6330 area. To sum up, we remain short from 1.6409, we have our stops set at the breakeven price and we’re targeting our second target at the 1.6310 area with the remaining 50% of our trade.
FTSE 100
The FTSE 100 hovered around the 6,730 area on Friday and it seems that a break lower could be expected. We’d like to short the UK index below the 6,695 points area and target the 6,665 and 6,615 marks with a stop just above the 6,750 high. As the new year begins it looks like the rally in the stock market might have come to a halt and a correction lower could be in play.
Gold
Gold continues on an uptrend and it seems unfazed by the apparent Dollar strength. If this trend continues we’d like to join it and we’re looking for an opportunity to do so. We will need a retracement lower in order to be able to join a swing higher and until this time this hasn’t occurred. We need to be very vigilant with Gold however since this trend is in direct contradiction with the rest of the market’s theme and this could mean that either something else is in play or a volatile correction must be expected.
The above charts have been created using FXCM’s Trading Station platform. Please note that due to FXCM’s servers issues a number of candlesticks is missing from the above charts. We’ve noticed this issue and our analysis has been planned on the actual market’s movement so rest assured.
STOCK MARKET FOCUS
[Restricted Content] PLC.
The Alpesh Patel Value/Growth filter has indicated [Restricted Content] PLC. as our stock of the day.
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, the ratio of the price earnings growth is also low and Turnover is up year on year supporting the growth potential. From a technical standpoint, the MACD indicator is pointing upwards in the weekly chart above suggesting further incline. 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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