Alpesh Patel's NEWSLETTERPRO - The Pound is the focus of the day as Q4 GDP is expected, mixed performance for the majors yesterday

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The Pound is the focus of the day as Q4 GDP is expected, mixed performance for the majors yesterday

© Alpesh Patel

MORNING BRIEF

A much calmer trading day for the currency markets yesterday with the major currency pairs performing in a less volatile manner than we have witnessed last week. The Euro attempted to climb back above 1.3700 after the strong IFO Survey release but it failed to do so and remained near the 1.3680 level. This can be attributed to two reasons: first, we had huge flows in the Euro/Turkish Lira pair because investors are waiting for a major announcement from the Turkish Central Bank and this has arrested the Lira’s fall as a lot of short positions on the EUR/TRY were closed for profit and second, the continued sell-off in stock markets is driving Dollar higher as investors are selling stocks and getting cash back. The Pound was on the rise yesterday as traders are preparing for today’s 4Q GDP release and with the figures expected to come out strong the British currency could climb to a fresh yearly high. We’ve said it many times in our reports: the British economy is growing at a steady pace with the housing, labor and production sectors showing signs of good progress. BoE’s Governor Carney warned investors about the issues an expensive Pound could cause but this is more of a long-term fear and today the British coin seems poised to continue higher. The Dollar was inconsistent in each performance rising against the Euro but falling versus the Pound. It seems that traders are preparing for another round of reduction in stimulus and we will have to wait until tomorrow to find that out. The housing data yesterday printed worse than expected but today we have the Durable Goods and Consumer Confidence releases expected and if they come out strong as expected then we could see some demand building up for the Dollar. The FTSE 100 declined yesterday for another day falling 1.7%. This is the fifth consecutive day of losses for the UK index and it’s the fear for the emerging markets’ outlook that is driving investors out of riskier investments as stocks. The index found some temporary support at the 6,500 points level and we need to see whether this will provide some cover and reverse the recent downtrend.

The British Q4 GDP is the event of the day

The Economic Calendar holds a few important economic releases starting with the most important one early in the morning. The Gross Domestic Product on Q4 2013 from the British economy will be released today and analysts are expecting a strong printing. If this happens then it’s very likely that the Pound will climb to fresh yearly highs. Later in the day the US Durable Goods Orders and the Consumer Confidence reports are also scheduled for release and a positive printing in the Durable Goods report should be beneficial to the Dollar.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

9.30

GBP

British GDP 4Q

High

2.8%

1.9%

13.30

USD

Durable Goods Orders

High

1.8%

3.4%

15.00

USD

Consumer Confidence

High

78.0

78.1

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

The Euro failed to break above 1.3700 again and technically its outlook seems like a move lower is in play. As such we’ll try to capitalize on that and we’d like to enter short just below the recent low. So the trade for today is: enter short at 1.3650, target the 1.3615 and 1.3550 levels for 50% each and place a stop at the 1.3720 mark.

GBP/USD

The Pound recovered much of the ground lost on Friday and is now threatening to print a new yearly high ahead of the Q4 GDP release. As much as we’d like to trade this opportunity and although all indications are that the release will come out strong we are reluctant to enter this trade. The reason is the excessive distance that our stop needs to be placed at. To adequately protect any long trades at this moment a stop needs to be placed at the 1.6550 area which would place it 120 pips away from the potential 1.6770 entry level. As such we do not suggest that you enter in this trade as the risk/reward ratio is outside our trading profile.

FTSE 100

The FTSE 100 continued falling yesterday as well and it seems that the 6,500 points level might have arrested its fall for now. We’re reluctant to approach the instrument at this time, it might look as a straight -forward short trade but the instrument is oversold which means that the recent fall is far to excessive to trade on it. As we mentioned yesterday we’d like to see a retracement first and then we can assess if there’s potential for any trades lower or higher.

Gold

Gold seems to have concluded its move higher and a potential short trade opportunity has emerged. We’d like to enter short at the $1,251 level, target the $1,247 and $1,238 level for 50% of the trade size each and place a stop at the $1,263 high. There’s good potential for Dollar to strengthen today and this could drive Gold lower within the day.

The above charts have been created using FXCM’s Trading Station platform.

STOCK MARKET FOCUS

[Restricted Content] PLC.

The Alpesh Patel Bullish Momentum 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 7 out 10 in our Value/Growth rating and gets an B Grade rating on our Bullish Momentum meter. The P/E ratio is medium suggesting that the stock might be fairly priced and Earnings are 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. We’re looking to buy this stock now and hold it until the 1,200GBP level. Any move below the 950GBP should cancel our scenario. The suggested holding period for a stock of this type is 1-3 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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