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MORNING BRIEF
Dollar to remain under pressure as the US face a government shutdown
This could prove to be a very interesting week for the currency market as we are potentially facing a not so common phenomenon. The talks in the United States about raising the debt ceiling for federal spending seem to go nowhere at this point and only a day is left for the policymakers to make a late hour effort to avoid having several parts of the government shutting down tomorrow. The previous week has seen most major currency pairs remain on hold and moving sideways as everybody’s focus was on the talks in Washington, however the Dollar remains on the backseat as investors are selling Dollars in case that no deal is reached and the US economy is bound to face the consequences. According to Moody’s even a 3 or 4 week shutdown could cost the US economy as much as 1.4% of growth and as such Dollar will remain under pressure until a deal is reached on that front.
Consumer data from Europe might offer Euro direction
Early in the day the German Retail Sales are expected to come at 0.6% and it would be important to gauge how the German economy is fairing on the consumer spending front. A bit later, at 10am UK time the Euro-zone Consumer Price Index is to be announced and everyone’s attention will be on this important figure are we will look for hints on how the European economy is coping with recovery thus far. Investors will be looking at these two news events with the hope that they might provide some momentum to the EUR/USD to finally break out of the sideways formation it has been for some time and offer opportunities.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
07.00 |
EUR |
German Retail Sales |
Medium |
0.6% |
2.3% |
|
10.00 |
EUR |
Euro-zone CPI |
High |
1.1% |
1.1% |
|
13.30 |
CAD |
Gross Domestic Product |
High |
1.2% |
0.9% |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
Euro remain capped in a sideways movement on Friday after having reached our first targets at 1.3535 and moving back to hit our stops at the breakeven price eventually. The Single currency is clearly on hold and remains in a range between 1.3470 and 1.3560 and only an exit from this formation will show us the way. Upon breaching higher than 1.3560 we will enter long with our target being 1.3615 and our stops placed under 1.3470, otherwise a short trade is suggested below 1.3470 with the target being at 1.3415 and our stops above the 1.3560 area. These are trades that might take a few days to evolve when they trigger, for those of you who prefer a more intra-day scenario we would need to see how the currency will start its week.
GBP/USD
The Pound moved as we predicted on Friday as BoE Governor Carney’s comments have catapulted the currency at 1.6150 where our first target was. Now we want to bring our stops just below the 1.6100 area where our entry point was in order to avoid losses if for some reason the pair retracts violently. However, the bias on sterling is bullish, we would expect some retracement but the UK economic prospects are proving better and better and given that the Dollar will appear weak as discussions on the Hill appear pointless we feel that the Cable will reach higher. Our secondary target remains at 1.6240 and we would like to let the currency run for our profits.
FTSE 100
The FTSE 100 finally broke out of the range we witnessed the previous weeks on Friday and hit our first target at 6.507 before settling around that area. We remain confident of the index falling even lower within the day as the weekend passed and no real prospect of a solution to the US debt ceiling issue has appeared. We expect this to weight down on the UK stock market so our secondary target at 6.460 units might come in play, we have definitely moved our stops at the breakeven price of 6.537 already and we remain patient and bearish.
Gold
Gold triggered our entry above the $1.339 level on Friday and popped at our first target at $1.350 overnight when markets opened and digested the failure to find a solution to the US debt ceiling issue. We remain cautions with Gold as we know it’s a volatile commodity. For today I would prefer to move my stops just below the $1.330 price level for the rest of the position and hold it towards our secondary target at $1.370 as Dollar should remain weak and this would drive the yellow metal higher. For those of you looking for an effective way to be able to liquidate portions of positions overnight without needing to stay up all night you could do this: when a trade with a primary and a secondary target is suggested you could open 2 positions simultaneously at the same entry price for half of your intended trade size on each, one with a limit order at our first target and one with a limit order at our secondary target, both of them however should have the same stop order. If our first target is reached overnight then the first trade would be closed automatically by your limit order and all you need to do is move the stop of the second trade on the breakeven price.
All charts have been created using FXCM’s Trading Station platform.
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