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Dollar picks up momentum as investors weight in the recent US results, all signs point to further gains
MORNING BRIEF
Dollar was the lead character in yesterday’s market action with the US currency continuing to regain the ground it had lost after the recent NFP miss. Encouraged by the strong Retail Sales Dollar bulls drove the high-beta currencies like the Euro and the Pound lower for the day near their recent lows. The Euro dropped below 1.3600 pressured by the worse than expected German GDP release and the Pound was also sold against the greenback to test the 1.6320 support. It seems that market participants are becoming more and more convinced that the recent NFP miss was more of a ‘blip on the radar’ and that the US continue on a strong path of recovery which will lead the Fed to stay on course with its tapering plans. Today’s Initial Jobless Claims and Consumer Price Index’s releases are expected to show that the domestic economy is moving forward and should this happen then the Dollar will be once again on its way higher. We’ve discussed this scenario in our recent reports and indeed if the Euro and the Pound retreat below the 1.3550 and 1.6250 levels respectively then we could see them diving lower and in a hurry. Tomorrow the day holds only a couple of US Production-related releases so we expect mild volatility until the end of the week without excluding of course the possibility that today’s releases spur a rally in the Dollar sending the rest of the major pairs below the critical levels we mentioned above. Both the Euro and the Pound are technically still in no-man’s land as we commented yesterday and until this picture clears we need to remain vigilant.
European and US inflation data on the docket today along with the Initial Jobless Claims
The Economic Calendar today is flooded with important and potentially market-moving events as the German and Euro-zone’s Consumer Price Indices are scheduled for release early in the morning. Inflation in Germany and the Euro area remains low and this is a headache for the ECB as money flows remain weak and it is hindering growth. On the other hand, the US CPI is expected to rise to 1.5% and as it nears the 2% target it can only by interpreted as good news for the Dollar. Initial Jobless Claims are also expected to remain on a low level and it seems that all signs point to a stronger Dollar if figures print out as expected.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
7.00 |
EUR |
German CPI |
Medium |
1.4% |
1.4% |
|
10.00 |
EUR |
Euro-zone CPI |
High |
0.8% |
0.8% |
|
13.30 |
USD |
Consumer Price Index |
High |
1.5% |
1.2% |
|
13.30 |
USD |
Initial Jobless Claims |
Medium |
328K |
330K |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro retreated down to 1.3580 yesterday after the low German GDP figures increased pressures to the European currency but it pulled back around the 1.3620 mark in overnight trading. Today’s events could send the Euro lower as the expected releases from the US point to a strong Dollar and if this proves correct we could see the Euro dropping below the 1.3580 low. If this happens we’d like to cautiously follow it lower with a short trade at the 1.3575 area, targeting the 1.3550 and 1.3510 levels with a stop placed at the 1.3635 mark. Please note two things: first, if the Euro climbs above 1.3650 before the trade is triggered then our suggestion should not be followed and second if the Euro climbs a few pips higher than current levels (1.3626) prior to triggering our short trade then our stop needs to be placed just a few pips higher to this supposed peak.
GBP/USD
The Pound printed a new low yesterday but lacked the momentum to push further. Technically the Pound is still in no-man’s land and the slow trading followed by large spikes signals exactly that. Traders are nervous regarding the Pound and these sluggish trading moves are indicative of this fact. We will remain patient and only trade in our own terms which means that we need a tradable pattern to emerge to allow us to move on the Pound. At this time we select to monitor the pair and see whether today’s Dollar related releases will clear the picture for us.
FTSE 100
The FTSE 100 continued higher yesterday mainly due to the rest of the global stock indices gaining back their lost ground. The UK index looks extremely resilient as it continues to climb higher and it managed to hold on its previous levels while the rest of the stock markets were in free-fall last week. We still believe that a correction lower must be expected but for the time being the short-term outlook looks positive and we will look for a retracement lower to allow us to ride this current uptrend. We’re looking for the FTSE to retreat near the 6,780 points area that would be ideal for us to enter long as the index looks largely overbought at this time.
Gold
Gold retreated lower yesterday only to pull back a bit during the overnight session. Gold points lower at this time and the current levels seem interesting for a short trade with a stop around the $1,246 levels and the $1,235 area as a target. Quick trade just to try to grasp a few dollars. Furthermore, if today’s events drive Gold below the $1,234 level then another short trade could be enter: short at the $1,233 mark, stop at the $1,246 level and targets set at the $1,229 and $1,219 marks.
The above charts have been created using FXCM’s Trading Station platform.
STOCK MARKET FOCUS
[Restricted Content] PLC.
The Alpesh Patel Momentum/Value 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 A Grade rating on our Bullish Momentum meter. The P/E ratio is low suggesting that the stock might be underpriced, the ratio of the price earnings growth is medium but 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 suggest that you confirm that the stock’s price has broken above recent highs prior to acquiring it. The suggested holding period for a stock of this type is 2-3 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.
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