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British unemployment fell radically sending the Pound higher, Euro on the forefront today as Flash PMIs are expected
MORNING BRIEF
The Pound was again the best performing currency for yet another day as the British currency climbed even higher after the employment data released exceeded expectations. Unemployment rate fell to 7.1% which is mighty near the 7% target by the Bank of England showing that the economy is progressing well and easing fears that growth might have peaked near the end of last year. The MPC minutes’ release also showed that the committee is not focused on several sectors’ reduced pace of growth but they are more interested on the unemployment rate and how this would affect monetary policy. On other fronts, the Euro remained capped inside the sideways move it holds since the beginning of the week but this could all change today with the PMI reports that are scheduled for release. The recent ZEW survey revealed investors’ optimism about the current state of the Euro-zone and its outlook thus we think that the PMIs could print strong providing the Euro with the demand to reach above 1.3600 again. On Dollar news, today we finally have some economic releases coming from the US after 3 days without anything new. The Initial Jobless Claims and the Existing Home Sales reports might be second-tier reports but they are important nonetheless and after 3 days of no news on the US domestic economy their impact on the Dollar might be a bit heavier than usual. However, investors are mainly looking towards the FOMC meeting in less than a week from today to find out more about Dollar’s prospects. This meeting will be Bernanke’s last and we’re very interested to see whether the Fed President will move for another reduction in stimulus in his last meeting or prefer to leave matters to his successor to decide.
Euro-zone’s PMIs and US Initial Jobless Claims
The Economic Calendar today seems interesting enough with plenty of reports scheduled for release. Early in the morning the French, German and Euro-zone’s Purchasing Manager Indices are expected and there is a general feel that figures will print strong for the European economies. This development, should it happen, will send Euro towards and probably above the 1.3600 mark, having spent the previous days in a range just below that. Later in the day the Euro-zone Consumer Confidence will also be released but at the same time a number of reports will be coming out of the US. We haven’t had any reports from the US this whole week and we’re eager to see how data will print. The Initial Jobless Claims are expected to remain pretty much unchanged and Existing Home Sales are to improve slightly. We believe that even though first reactions to the reports might be strong due to the lack of any Dollar releases all week the overall effect won’t last long as investors are mainly focused on the FOMC meeting next week for more information on the Dollar’s outlook.
Economic Calendar
|
Time |
Currency |
Event |
Importance |
Forecast |
Previous |
|
8.30 |
EUR |
German PMI Manufacturing |
Medium |
54.6 |
54.3 |
|
8.30 |
EUR |
German PMI Services |
Medium |
54.0 |
53.5 |
|
9.00 |
EUR |
Euro-zone PMI Manufacturing |
Medium |
53.0 |
52.7 |
|
9.00 |
EUR |
Euro-zone PMI Services |
Medium |
51.4 |
51 |
|
13.30 |
USD |
Initial Jobless Claims |
Medium |
330K |
326K |
|
15.00 |
EUR |
Euro-zone Consumer Confidence |
Medium |
-13.0 |
-13.6 |
|
15.00 |
USD |
Existing Home Sales |
Medium |
0.5% |
-4.3% |
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TECHNICAL ANALYSIS & LEVELS
EUR/USD
The Euro remained capped below the 1.3570 level for yet another day but this could all change today in light of the PMI reports expected early in the morning. Expectations are that figures will print strong thus we remain confident that our long trade will be fruitful. We have enter long at the 1.3570 level, our targets are set at the 1.3600 and 1.3650 marks and our stop are placed at the 1.3505 mark.
GBP/USD
The Pound exploded higher again on the back of the employment data yesterday and has reached as high as 1.6580 before settling down around the 1.6560 area. The currency is pretty much overbought at this point and ahead of the 1.6600 yearly high we expect the Pound to retreat a bit lower. We need to stay alert and see if this retreat will occur and how deep it will be in order to assess whether the Pound has the potential to reach even higher or a medium-term top will be formed.
FTSE 100
The FTSE 100 seems to have formed a short-term top around the 6,860 points level and a retracement lower could be in play. We’d like to enter short at the 6,815 points level, target the 6,790 and 6,750 marks and place a stop at the 6,870 level. The FTSE 100 has been on an overextended rally upwards for some time now and it needs to come to a halt at some time.
Gold
Gold continued falling yesterday and it broke below the $1,240 support area. We now need to monitor the commodity and see whether this move lower has the potential to turn into a downtrend. We see no tradable patterns at this moment so we prefer to stay on the sidelines and wait for a more concrete opportunity to appear.
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 9 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 high 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 and the break above recent highs followed by increased volume suggests this is a good short-term opportunity. 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.
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