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Daily Market & FX Commentary – Political uncertainty in Europe

2013-02-04T19:05:00.003+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro eased further, to nearly fully retrace 1.3540/1.3710 upleg, once 1.3600 handle was lost. Initial signals of basing are seen on hourly chart, as 1.3540/30 area is seen as ideal reversal point, between 50% and 61.8% of larger 1.3413/1.3710 ascend, to keep underlying bull-trend intact. To confirm this scenario and re-focus 1.3700 zone, regain of minimum 1.3650, 61.8% of 1.3710/1.3547 decline is required. Conversely, loss of 1.3540 handle, would risk extension towards 1.3500/1.3477, next support levels.

Res: 1.3585, 1.3617, 1.3648, 1.3674
Sup: 1.3540, 1.3528, 1.3500, 1.3477

GBP/USD

Cable enters near-term corrective phase sharp slide from last Friday peak at 1.5877, found footstep at 1.5684, just ahead of more important 1.5673, 28 Jan fresh 5-month low. Current bounce is seen as further consolidation ahead of fresh leg lower, as previous recovery attempt was rejected on approach to psychological / 200 day MA resistance that keeps the upside limited for now. Upside extension through 1.5700, sees strong barrier at 1.5760, Fib 38.2% of 1.5877/1.5684 and hourly 55 day EMA, with potential break higher to prolong the consolidation and allow for possible recovery towards Fibonacci resistances at 1.5780/1.5800, 50% and 61.8% retracement. On the downside, penetration of 1.5684/73, would open fresh bear-phase and expose 1.5600.

Res: 1.5760, 1.5773, 1.5800, 1.5845
Sup: 1.5707, 1.5684, 1.5673, 1.5634

USD/JPY

Fresh extension through psychological 93.00 barrier, show bulls firmly in play for possible test of our next upside targets at 93.75, Jan 2010 high and 94.00, round-figure barrier. Daily studies continue to point higher, despite overextended conditions that so far did not generate any reversal signal. On the other side, easing towards initial support and higher base at 92.50, was triggered by overbought 1/4h studies, with further corrective dips towards 92.00 zone, Fib 38.2% of 90.73/93.17 / 4h 20 day EMA, seen not harmful for near-term bulls.

Res: 92.95, 93.17, 93.50, 93.75
Sup: 92.50, 92.28, 92.00, 91.77

USD/CHF

Corrective action from last Friday’s fresh low at 0.9020, remains capped under initial barrier at 0.9120, 31 Jan highs / Fib 38.2% of 0.9291/0.9020 descend / 20 day EMA, keeping the downside at risk. As hourly studies are losing traction and 4h indicators remain in the negative territory, not much of recovery could be expected in the near-term, as long as market stays below psychological / 50% retracement barrier at 0.9200. This keeps the downside favored for now, as loss of 0.9020/00 support are would open 0.8930, Feb 2012 low and 0.8900, psychological support, next.

Res: 0.9120, 0.9156, 0.9187, 0.9200
Sup: 0.9074, 0.9020, 0.9000, 0.8930

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Daily Market Commentary: (Evening Report)

London Markets Report

London close: Footsie drops 100 points on political uncertainty in Europe

Market Movers

techMARK 2,273.92 -0.73%
FTSE 100 6,246.84 -1.58%
FTSE 250 13,177.02 -0.74%

Increased political risk in the Eurozone presented a good opportunity for traders to take profits on Monday, as investors made the most of the recent surge on stock markets worldwide.

The FTSE 100 dropped 100 points today, a fall of around 1.6%. This follows the impressive 6.4% gain seen last month, the index's best January performance since 1989.

"Last night's power failure at the US Super Bowl appears to have manifested itself into European equity markets today as the sentiment that had fed the strong rally of recent weeks appears to have come to a shuddering halt," said senior market analyst Michael Hewson from CMC Markets.

"Investors are once again being spooked by political uncertainty from both Spain and Italy as both countries deal with local political difficulties that could derail ongoing and future reform programmes."

Peripheral bond yields rise on political risk

Spanish 10-year bond yields were at their highest levels of 2013 today, up 22 basis points at 5.43%, as markets digest rumours over corruption scandals at Prime Minister (PM) Mariano Rajoy's governing People's Party.

"The fear for investors is that these allegations, though denied by PM Rajoy, will prompt bouts of civil unrest and the removal of the current government which would pave the way for general elections," explained Joe Rundle, head of trading at ETX Capital.

Over in Italy, the borrowing rate on the Italian benchmark note rose 14 basis points to 4.47% as the support gains for former PM Silvio Berlusconi in the public opinion polls. With just a few weeks to go before parliamentary elections, markets are fearing a political deadlock post-election.

Meanwhile, back in London, economic data was doing its bit to dampen sentiment. Markit's UK construction purchasing managers' index (PMI) was unchanged at a six-month low of 48.7 in January. Consensus forecasts were for a small up-tick to 49.

Europe Market Report

Europe midday: Spanish debt falls on higher political risk

- Periphery debt and equities seeing some selling pressure
- LCH Clearnet lowers margin requirements on Spanish and French debt
- Spanish 10 year bond yields rise on political risks

FTSE-100: -0.65%
Dax-30: -0.46%
Cac-40: -0.78%
FTSE Mibtel 30: -1.89%
Ibex 35: -1.45%
Stoxx 600: -0.31%

European equities are now all moving clearly lower, with periphery markets clearly under the most pressure.

The reason for the latter has to do with the somewhat increased election uncertainty in Italy, where the most recent polls show Mario Monti losing support against his political rivals, particularly former Premier Silvio Berlusconi.

In Spain, the centre-right People's Party has come under increasing pressure after the left-leaning El Pais newspaper accused at least a dozen government officials of receiving illicit payments, sometimes from the construction industry. The country´s Prime Minister has denied those allegations, saying that the evidence provided by the newspaper – purportedly from the party´s own Treasurer, Jose Luis Barcenas, who himself was already being investigated - had been tampered with.

The above comes against the backdrop of an increasing sense of weariness over the slow pace of the economic recovery in Spain.

Somewhat ironically, according to EPFR global equity funds attracted another $18.7bn during the final week of January, with flows into Italy reaching their best level since the financial crisis.

Similarly, just this morning LCH Clearnet has cut its margin requirements for trading in Spanish and French public debt.

Investor confidence recovers less than expected

Eurozone producer prices fell by 0.2% month-on-month in December, as expected.

The Sentix index of Eurozone investor confidence improved to -3.9 points for February (Consensus: -1.7) after a reading of -7.0 for the previous month.

Slight losses in other asset classes

The euro/dollar is now sitting at 1.3563, off by 0.57%.

Front month Brent crude futures are now down by 0.725 dollars to the 115.92 dollar level on the ICE.

US Market Report

US open: Inflows into equities surged in January

The main US equity averages have begun the day lower by roughly 0.7 per cent on average. That following some negative news-flow on the political front in the Eurozone periphery and Friday´s large move higher on Wall Street.

Likewise, speculation regarding the possibility that Chinese authorities may soon decide to move towards a more neutral stance may also be a factor weighing on investor sentiment.

That comes at a time when some strategists are critical of the very large (5%) gain seen in US equities during the month of January, as they believe they have outpacing growth by too large a margin.

Time will tell, in any case this past Saturday the President of the Federal Reserve of St.Louis, James Bullard, told Bloomberg that if data remained strong then he would favour moderating the pace of quantitative easing.

In a similar vein, it was today revealed that investors poured a record $77.4bn into US-listed mutual funds and exchange traded funds during January, smashing the previous record of $53.7bn in February 2000, which was just before the technology stock bubble burst. TrimTabs CEO David Santschi says the inflow should make 'contrarians' very nervous because inflows into funds have historically coincided with market tops.

10 year US Treasury yields are now down by 2 basis points, to 2.05%. That is a technical resistance levels which is being watched closely by some analysts.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - The Euro has continued to gain support from an easing structural risks

2013-02-02T22:53:00.000+00:00

Weekly Market analysis

The Euro has continued to gain support from an easing structural risks and an improvement in yield considerations with some return of capital. There has also been further speculation that the Euro would gain be default given the aggressive monetary policies in the US and Japan. There will still be important vulnerability surrounding the Euro-zone, especially given the political considerations and risk conditions are liable to deteriorate again over the next few weeks with Asian unease also likely to increase.

Key events for the forthcoming week

Date	Time (GMT)	Data release/event
Tuesday February 5th	03.30	Australia interest rate decision
Tuesday February 5th	09.30	UK PMI index services
Thursday February 7th	12.00	Bank of England interest rate decision
Thursday February 7th	12.45	ECB interest rate decision

Dollar:

The US GDP data has unsettled confidence given the unexpected contraction, but the economy overall is still likely to make solid progress. The PMI data has been generally favourable and there will be relief surrounding investment and housing trends. There will be some unease surrounding consumer spending trends. The Federal Reserve remains committed to aggressive quantitative easing in the short-term through monthly bond purchases, but there will be some pressure for the Fed to moderate policies later in the year. The Fed will also be subjected to international pressures given underlying currency tensions. The dollar will gain some defensive support if fears surrounding Asian growth increase again.

The dollar remained on the defensive against the Euro with losses to beyond 1.36, although the US currency was more resilient on a trade-weighted basis.

The headline US durable goods order data was stronger than expected with a 4.6% increase from 0.8% previously while there was a core 1.3% increase for underlying orders which triggered some boost in confidence surrounding investment levels despite the uncertainties surrounding future Boeing orders.

In contrast, the latest GDP data was weaker than expected with a contraction of 0.1% for the first quarter compared with expectations of around 1%. There was an increase in final demand and the data was undermined in part by a sharp drop in defence spending which suggested that the underlying data was stronger.

The Federal Reserve announced that it would continue its programme of bond purchases at US$85bn per month in the short-term. The Fed was slightly more confident surrounding the growth outlook with a modest labour-market improvement and the Fed also suggested that financial risks had declined. Kansas City President George dissented from the decision due to concerns that policy accommodation would increase longer-term inflation risks

The latest US ADP employment report was stronger than expected with a headline private-employment estimate of 192,000 from a downwardly revised 185,000 the previous month. There was an increase in US jobless claims to 368,000 in the latest week from 330,000 previously. Looking at the moving average, there were expectations of solid, but unspectacular employment growth in Friday’s payroll report. The Chicago PMI index was stronger than expected at 55.6 from 51.6.

Euro

Structural fears surrounding the Euro-zone will remain lower in the short-term and there has been a continuing decline in peripheral bond yields. The growth outlook in Germany has certainly improved, but conditions within the Euro-zone as a whole are still very difficult with peripheral recession continuing while the French economic conditions are continuing to deteriorate. There is also the threat of increasing political tensions within Spain and Italy. Overall confidence in the Euro could still falter quickly given the underlying growth vulnerability and there will be pressure for the ECB to relax policy conditions.

The Euro moved to 14-mnth highs against the dollar and advanced strongly for the week as a whole with a further shift in underlying positioning.

The latest Euro-zone money supply data recorded a slowdown in M3 growth to 3.3% from 3.8% the previous month while lending contracted for the eight successive month with a 0.7% annual decline. The data will reinforce unease surrounding monetary growth and the sharp drop in lending to non-financial institutions will be particularly alarming. There will be continuing fears that real economic damage be damaged and there will also be concerns over any further tightening of Euro-zone monetary policy through a stronger exchange rate or early LTRO loans repayments. The ECB data did not suggest that there had been a switch to shorter-term lending to replace the LTRO funds.

The troika will examine the Spanish banks to assess the burden of bad loans and there will be further unease surrounding the housing sector as transactions remain extremely low and prices continue to decline. There was also a very sharp decline in Spanish retail sales.

Following a much weaker than expected German retail sales report, underlying sentiment was boosted by the stronger than expected unemployment data with a seasonally-adjusted decline of 16,000 for December.

There were some fresh concerns surrounding the banking sector following weaker than expected Deutsche Bank earnings. There were also further concerns surrounding the Monte dei Paschi situation, especially given the potential impact on the Italian general election. There were also concerns that plans for monetary union, already facing hostility from within Germany, would suffer a further loss of support. There were also some concerns surrounding allegations of illegal payments surrounding Spain’s governing party, but financial flows still provided important net Euro support.

Yen

The Bank of Japan will maintain an aggressive monetary policy in the short-term with a 2% inflation target. The open-ended commitment to bond purchases is not due to come into effect until 2014 and there will be further concerns whether the central bank will actually deliver on the more aggressive policies. The appointment of new Bank of Japan governor will be watched extremely closely over the next few weeks and a dovish appointment would fuel expectations of a substantially weaker yen, although internal tensions would increase. The yen could still gain some support if global risk appetite deteriorates.

The US currency continued to gain significant underlying support from rising US Treasury bond yields with benchmark yields testing the 2% area. Underlying yen sentiment remained weak with solid interest in selling any significant rallies. Asian currency policies will also remain an important focus with countries such as South Korea likely to be increasingly uneasy over the implications of yen weakness.

There was underlying speculation over a dovish Bank of Japan Governor to replace Shirakawa in April which reinforced negative underlying yen sentiment. Current Deputy Governor Yamaguchi stated that it was not directly aiming to weaken the yen

The yen continued to be undermined by expectations of fresh easing by the Bank of Japan and a government commitment to drive the yen down in order to combat deflation even if a weaker exchange rate is not an official policy. There were major concerns surrounding the appointment of the next Bank of Japan governor. Extremely negative sentiment and a flow of funds back into the Euro pushed the yen sharply weaker again late in US trading with the dollar moving to fresh 30-month highs above 92.20 as the Euro rose above 125.50. The yen also failed to gain any respite following the weaker than expected Chinese PMI data.

Sterling

There will be further concerns surrounding the UK growth outlook which will reinforce fears surrounding government finances. The PMI data will be watched very closely and another set of weak readings would reinforce growth-related fears. Markets will remain on alert for signs of further quantitative easing and will also be monitoring any possible switch to nominal GDP targeting as this could trigger an even more aggressive monetary policy. Defensive capital inflows are liable to weaken in the short-term which will maintain underlying Sterling vulnerability and the currency is liable to lose ground.

Underlying Sterling sentiment remained negative following Friday’s weaker than expected GDP report with fears over a triple-dip recession. The currency was also undermined further by comments from incoming Bank of England Governor Carney who hinted that monetary policy would remain extremely accommodative.

There were rumours of an imminent downgrading of the AAA credit rating and widespread expectations that it was only a matter of time before a downgrade was delivered which maintained the potential for further net capital outflows. There was also be further speculation that the Bank of England andgovernment might consider a change in mandate to nominal GDP targeting.

The latest consumer lending data was stronger than expected with overall lending rising to GBP1.7bn from GBP0.1bn previously. There was also a stronger reading for mortgage approvals and money supply growth which triggered some relief over underlying consumer spending trends. There was also a small improvement in the latest consumer confidence data.

Swiss franc:

There will be unease surrounding the growth outlook, especially in view of the KOF index deterioration. Given that the Swiss franc was a key beneficiary of defensive inflows during the Euro-zone crisis, there will be further speculation of a reversal in flows now that tensions have eased. There will be further debate over the merit of lifting the Euro minimum level, although the National Bank will continue to be very reluctant to engage in a policy of fine tuning through a small move in the minimum level.

The franc found support near 1.25 against the Euro as volatility remained higher. The dollar remained on the defensive and dipped to lows below the 0.91 level.

The latest KOF business confidence index was weaker than expected at 1.05 from a revised 1.29 previously which will tend to increase concerns surrounding the growth outlook and maintain pressure for franc gains to be resisted.

There was further speculation that the National Bank would covertly aim to push the currency weaker. There was no significant change in the latest central bank reserves data and there will be some expectations that the bank will look to lower the Euro proportion from close to 50%.

Australian dollar

The Australian dollar was confined to relatively narrow ranges during the week with resistance on any move to the 1.05 area and it retreated to below1.04. There was evidence of selling against the Eurowhich tended to undermine the currency and there were some longer-term doubts surrounding the Australian and Asian economy.

The domestic economic data provided some support with gains in business confidence and housing sales which provided some degree of relief following a string of weak releases, but the manufacturing PMI data was weak.

The Australian dollar is likely to remain generally vulnerable on cross-related selling together with concerns surrounding the regional and domestic growth outlook.

Canadian dollar:

The US dollar was unable to break above the 1.01 level against the Canadian dollar during the week and moved back to lows below the parity level late in the week with some degree of month-end Canadian dollar support.

The latest GDP data was stronger than expected with a 0.3% increase while there was a decline in producer prices.

The US currency should be broadly resilient on valuation grounds, especially with some increase in concerns surrounding the underlying Canadian fundamentals.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary: Focus turns to Friday's US jobs report

2013-01-31T19:52:00.001+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The pair continues to trend higher and approaches the next target at 1.3600, following break above very strong 1.3500 resistance zone. Positive technical were supported by fundamentals that gave the single currency an additional boost. Corrective easing on overbought hourly / 4h conditions faces support at 1.3520, Fib 38.2% of 1.3413/1.3587, reinforced by hourly 55 day EMA and strong one at 1.3500 zone, previous resistance. Yesterday’s close above 1.3500 and 1.3526, 200 day MA is seen supportive, with clearance of psychological 1.3600, seeing no significant barriers until 1.3700, round figure and 1.3726, Fib 76.4% of 1.4246/1.2042 descend.

Res: 1.3547, 1.3567, 1.3600, 1.3650
Sup: 1.3532, 1.3520, 1.3500, 1.3477

GBP/USD

Cable holds positive near-term sentiment, extending recovery from 1.5700 support zone. Regain of initial 1.5800 barrier and test of more significant 1.5825 breakpoint, sees scope for fresh extension higher and possible full retracement of 1.5891/1.5673 downleg, above which to open way for stronger recovery. Break above 4h 55 day EMA and 4h indicators entering positive territory, supports the notion. Previous barriers at 1.5800/ 1.5780 zone, now act as initial supports.

Res: 1.5840, 1.5850, 1.5891, 1.5925
Sup: 1.5800, 1.5780, 1.5764, 1.5724

USD/JPY

Near-term price action moves in a consolidative mode, following yesterday’s stretch to a fresh high at 91.40. While immediate support higher platform base at 90.40 zone stays intact, near-term structure will remain aligned towards the upside. Extension of broader uptrend through 91.40, to focus next barrier at 92.00. Hourly studies hold neutral tone, however, reversing 4h chart indicators do not rule out further easing that would harm immediate bulls if psychological / Fibonacci support at 90.00 contains any stronger dips.

Res: 91.00, 91.25, 91.40, 92.00
Sup: 90.73, 90.55, 90.31, 90.23

USD/CHF

The pair accelerated losses after repeated attempt lower finally broke below 0.9200 support and fresh slide dipped through 0.9100, to test very strong support and near-term base at 0.9080. Dominating negative tone on lower and larger timeframes studies, keeps bears firmly in play, however, corrective action on oversold conditions and attempt at strong support, is seen preceding fresh leg lower. Minor resistance lies at 0.9120 zone, with more significant barrier seen at 0.9165, Fib 38.2% of 0.9291/0.9086 downleg, reinforced by descending hourly 55 day EMA, while 0.9200 zone is seen capping for now. On the downside, break below 0.9080 to open psychological 0.9000, also March 2012 low, next.

Res: 0.9125, 0.9140, 0.9165, 0.9188
Sup: 0.9086, 0.9080, 0.9050, 0.9000

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks fall as focus turns to Friday's US jobs report

Equities were extending losses on Thursday after yesterday’s shock contraction in the States, as markets braced for another busy day on the economic calendar tomorrow.

“Traders were unwinding positions earlier on January's phenomenal rally which sees major share markets at multi-year highs,” said market strategist Ishaq Siddiqi from ETX Capital.

Market analyst Craig Erlam from Alpari said this afternoon that markets were nervous ahead of the crucial jobs report in the US due out tomorrow afternoon. He said: “The jobs report tomorrow is always one of the most keenly watched items on the economic calendar, with the potential to cause significant movements in a number of markets. The figures over the last couple of months have been pretty uninspiring, as the private sector held off on hiring due to the uncertainty surrounding the fiscal cliff.

“All of the political infighting did little to ease these concerns, but now a lot of this has been dealt with, especially in respect to taxes, I expect to see the numbers pick up in the first few months of the year. We could even see the first quarter numbers come in much higher than expected, with a backlog of new hires over the past few months being carried out at the start of 2013.”

Stocks fell yesterday after the US Commerce Department revealed that the world's largest economy shrank by 0.1% in the last three months of last year, a stark contrast to the 3.1% growth seen in the third quarter. Forecasts were for a 1.1% expansion.

Meanwhile, economic data from the US today came in mixed: initial jobless claims rose by more than expected last week; personal incomes surpassed forecasts; while the Chicago NAPM purchasing managers’ index came in well ahead of estimates.

Europe Market Report

European Markets Declined On Mixed Economic Data & Earnings

The European markets finished in negative territory on Thursday, after some mixed earnings results and some mixed European economic reports. However, the markets pared their losses in the afternoon, following the release of some positive economic data from the United States. Thursday was the first opportunity Europe had to react to Wednesday's FOMC announcement. Investors will now turn their attention to the U.S. jobs report for January, which will be released on Friday.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.81 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.21 percent.

The DAX of Germany dropped by 0.24 percent and the CAC 40 of France fell by 0.87 percent. The FTSE 100 of the U.K. decreased by 0.55 percent, but the SMI of Switzerland gained 0.38 percent.

Euro area house prices decreased at a faster pace in the third quarter, European Union statistical office Eurostat said Thursday.

The House Price Index dropped 0.7 percent from the second quarter, when prices fell 0.1 percent, Eurostat said in its first ever publication on the evolution of house prices in the 17-nation currency bloc. In the first quarter of 2012, prices fell 0.7 percent.

Germany's unemployment fell unexpectedly in January as the labor market turned healthier in the face of rising prospects of moderate economic growth.

Unemployment declined sharply by a seasonally adjusted 16,000 in January, following December's revised decrease of 2,000, figures from the Federal Labor Agency revealed Thursday. The latest decline contrasted with an expected increase of 8,000.

Germany's retail sales decreased more than expected in December reflecting weak domestic demand. Sales declined 1.7 percent in December from a month ago, when it was up 0.6 percent, Destatis reported Thursday. Sales were forecast to fall just 0.1 percent.

Germany's inflation unexpectedly slowed in January, preliminary data from the Federal Statistical Office showed on Thursday.

The harmonized index of consumer prices (HICP), which is meant for EU comparison purposes, rose 1.9 percent annually, which was a tad slower than the 2 percent increase in December. Economists had forecast the figure to hold steady at 2 percent.

France's producer price inflation slowed unexpectedly in December, data released by the statistical office INSEE showed Thursday. Producer prices on the French market rose 1.6 percent year-on-year, following a 1.9 percent gain in November. Economists had forecast the figure to climb to 2 percent.

French household spending remained flat in December, following a 0.2 percent increase in November, the statistical office Insee showed Thursday. Economists had forecast spending to grow 0.2 percent.

Confidence among British consumers improved more than expected in January as they turned optimistic about the economy's prospects, a survey by GfK NOP revealed Thursday. Also, consumers were upbeat on making major purchases at present.

The headline consumer confidence index rose to -26 in January from -29 in December. Economists expected only a modest increase to -28.

House prices in the UK increased in January after recording no change in the past two months, as recent employment gains and easier access to bank loans, thanks to central bank's credit program, lifted housing market activity.

House prices increased 0.5 percent month-on-month in January, a report from the Nationwide Building Society showed Thursday. The rate of increase was faster than the 0.2 percent increase expected by economists.

US Market Report

Mixed Batch Of Data Leads To Choppy Trading On Wall Stree

With traders digesting a mixed batch of economic data, stocks are turning in a lackluster performance during trading on Thursday. Uncertainty ahead of tomorrow's monthly jobs report is also contributing to the lack of conviction among traders.

The major averages are currently posting modest losses, although the Nasdaq is down only 0.83 points or less than a tenth of a percent at 3,141.48. The Dow is down 31.59 points or 0.2 percent at 13,878.83 and the S&P 500 is down 3.63 points or 0.2 percent at 1,498.33.

The choppy trading on Wall Street comes as traders express uncertainty about whether the recent batch of economic data supports any further upside for the markets.

Following yesterday's disappointing fourth quarter GDP report, the Labor Department released a report before the start of trading showing a bigger than expected rebound by weekly jobless claims.

The Labor Department said initial jobless claims rose to 368,000 in the week ended January 26th, an increase of 38,000 from the previous week's unrevised figure of 330,000. Economists had been expecting jobless claims to climb to 350,000 after hitting a five-year low in the previous week.

While bigger than expected, Jennifer Lee, senior economist at BMO Capital, said the rebound was not too shocking, adding, "And it was encouraging that the bounceback did not completely erase the two weekly improvements."

Helping to offset the negative sentiment generated by the report was a separate report from the Institute for Supply Management - Chicago showing a notable improvement in business activity in the Chicago-area in the month of January.

The ISM Chicago said its Chicago business barometer climbed to 55.6 in January from a revised 50.0 in December, with a reading above 50 indicating growth.

The Commerce Department also released a report showed a substantial increase in personal income in December, although the jump was due in large part to accelerated dividend and bonus payments ahead of the year-end tax increases.

On the other hand, gold stocks have come under pressure, with a notable decrease by the price of gold weighing on the sector. With gold for April delivery sliding $21.40 to $1,660.20 an ounce, the NYSE Arca Gold Bugs Index is down by 1.3 percent.

Housing stocks have also shown a notable move to the downside, dragging the Philadelphia Housing Sector Index down by 1 percent. M/I Homes (MHO) is leading the housing sector lower after reporting its fourth quarter results.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. Japan's Nikkei 225 Index edged up by 0.2 percent, while Hong Kong's Hang SengIndex fell by 0.4 percent.

In the bond market, treasuries are seeing modest strength after coming under pressure in recent sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.8 basis points at 1.988 percent.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary US contracts in the fourth quarter

2013-01-30T19:07:00.000+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro eventually attacks strong 1.3500 barrier, after yesterday’s break and close above previous high at 1.3477. Positive sentiment that drives the pair is supported by positive technicals and strong bullish momentum for clear break above 1.3500, 50% retracement of 1.4938/1.2042 and weekly inverted H&S neckline that is seen as a trigger for extension of broader uptrend from July 2012 annual low at 1.2042. Immediate targets lie at 1.3547/67, 02 Dec / 18 Nov 2011 highs, ahead of psychological 1.3600 barrier. On the downside, previous peaks at 1.3477 offer initial support, while any stronger retracement is expected to hold above 1.3420/00, 28/29 Jan range floor / previous highs.

Res: 1.3547, 1.3567, 1.3600, 1.3650
Sup: 1.3495, 1.3477, 1.3460, 1.3420

GBP/USD

Near-term structure remains positive, as the pair recovers from the recent lows under 1.5700 handle, where temporary support was found. With over 61.8% of 1.5825/1.5673 being retraced so far, focus remains at 1.5800/20 breakpoint, reinforced by descending 55 day EMA, clearance of which is required to confirm near-term base and allow for stronger recovery. However, studies on 4h chart are still below their midlines and unless 1.5820 is cleared, risk of lower top and fresh weakness, as a part of larger downmove from 1.6380, still exists.

Res: 1.57721.5784, 1.5800, 1.5823
Sup: 1.5740, 1.5708, 1.5694, 1.5673

USD/JPY

The pair regains strength, as corrective easing from 91.24 peak was contained by 20 day EMA at 90.31, just above strong 90.23/00 support zone. With 91.00 handle being regained and hourly studies turning positive, attack at 91.24 and fresh extension towards 92.00, is seen as likely near-term scenario. Any retracement should not exceed 90.00, in order to keep immediate bulls intact.

Res: 91.08, 91.24, 91.50, 92.00
Sup: 90.83, 90.31, 90.23, 90.00

USD/CHF

Near-term bears remain in play, as the price consolidates above 0.9200 handle, following break below that spiked to 0.9191, Fib 138.2% extension of 0.9220/0.9291 upleg. With negative structure dominating on the lower timeframes studies, the downside remains favored, with sustained break below 0.9200, expected to open 0.9100/0.9080 base. The upside is seen protected at 0.9240/50 zone, Fib 50% / 61.8% of 0.9291/0.9191 / 55 day EMA, where rallies should be capped.

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Daily Market Commentary: (Evening Report)

London Market Report

Market Movers

techMARK 2,266.83 +0.30%
FTSE 100 6,323.11 -0.25%
FTSE 250 13,046.54 -0.47%

After a decent start, London's FTSE 100 index slipped into the red in the afternoon session, as disappointing gross domestic product (GDP) figures from the US dampened risk appetite.

Mining stocks bore the brunt of the selling today, pulling the resource-heavy Footsie down from the four-and-a-half-year high reached the day before.

US contracts in the fourth quarter

The world's largest economy saw GDP shrink 0.1% in the fourth quarter of 2012, surprising analysts who had expected 1.1% growth. This was a sharp contrast to the 3.1% expansion seen in the third quarter.

While the headline figure does not look good, analyst Peter Newland from Barclays Research gave reasons why it's "not all doom and gloom". He said that the downside surprise was mainly due to two components – inventory accumulation and government defence spending – so when excluding these, "the tone of the report was positive".

He said that the relative strength of consumption and business investment "suggests that household and corporate sector demand was resilient in the face of uncertainty over the outcome of the fiscal cliff and in a solid position heading into the new year."

That would probably suggest why the negative market reaction (on the FTSE 100 at least) to the report was only modest, especially when you consider the recent rally seen in stock markets worldwide since the start of the month.

All eyes now on the FOMC

The focus now turns to tonight's announcement (at 19:15) by the Federal Open Market Committee after its two-day meeting in Washington.

"There was some unrest at the last meeting according to the minutes that were released, with some members suggesting that the programme be wrapped up either in June or at the end of the year," said market analyst Craig Erlam from Alpari.

"That is unlikely to happen now, with unemployment remaining stubbornly high and growth far from the levels needed to bring it down," he said.

Europe Market Report

Europe midday: Stocks edge lower

- Investors eye US monetary policy decision
- Italy's benchmark falls on confidence index
- Europe's economic confidence improves
- Spain reveals worse-than-expected contraction

FTSE-100: 0.03%
Dax-30: -0.13%
Cac-40: -0.12%
FTSE Mibtel 30: -2.04%
Ibex 35: -0.20%
Stoxx 600: -0.34%

European equities were trading lower at the midday mark Wednesday as investors awaited a monetary policy decision from the US.

The Federal Open Market Committee is due to reveal its plans at 19:15 after a two-day meeting in Washington. While the decision will be closely watched, analysts have labelled it as the most anticipated "non-event" of the week.

Meawhile, Italy's FSE MIB benchmark plunged as the Italian Statistics office ISTAT's business confidence index for the month of January fell to 88.2 (consensus: 89.5) after a reading of 88.9 in the previous month.

Elsewhere in the country a shock profit warning came from oil services firm Saipem. Shares were suspended as the Italian group forecast an 80% fall in earnings.

The announcement hit the oil services sector which was expected to grow 35.3% year-on-year in the coming quarter, according to Thomas Reuters data.

More promising news for the Eurozone came from data revealing a rise in economic confidence.

An index of executive and consumer sentiment climbed to 89.2 from a revised 87.8 in December, the European Commission in Brussels said Wednesday.

The results pointed to signs the 17-nation currency bloc may be emerging from a recession.

Spain reveals worse-than-expected contraction

Spain reported worse-than-expected contraction of its economy during the fourth quarter of 2012.

According to the preliminary data from the INE (government statistics office), Spain's economy fell 0.7% during the quarter, compared to the prior drop of 0.3%. Consensus had expected a contraction of 0.6%.

It comes as the Spanish government grapples with the implementation of austerity measures required as part of its Eurozone bailout.

In a separate report, the country's autonomous community Catalonia has asked for more bailout funds from the central government.

The Catalan regional government requested €9.1bn for 2013, compared with the €5.37bn it asked for last year.

Euro strengthens

The euro topped $1.35 for the first time since December 2011, while the Eurozone single currency reached its highest level since April 2010.

Brent crude features ascended 0.453 dollars to the 114.880 dollar mark on the ICE following a flat start.

US Market Report

US open: Equity investors keep the faith

US markets shook off a disappointing fourth quarter GDP figure to open just slightly down on Wednesday.

The Standard & Poor's 500 Index fell just 0.1% to 1,507 in New York, while the Dow Jones Industrial Average was also down 0.1 percent, to 13,942.

Amazon, the world's biggest online retailer, rose 4.5% after it reported a rise in both sales and North American operating margin.

One person probably not happy about Chesapeake Energy's 7.2% rise was Chief Executive Officer Aubrey McClendon, coming, as it did, on the back of the announcement of his retirement.

Economists had predicted GDP growth to the tune of around 1.1% but the number came in at -0.1% as huge defence cuts began to bite.

It was the first fall in US GDP in three-and-a-half years - the last drop was in the second quarter of 2009 when the country was in recession.

The latest figures showed government spending fell 6.6% in the fourth quarter, while companies cut back on inventories to the tune of 1.3%.

Trade also held the economy back, as exports fell 5.7% during the quarter.

One market commentator remarked that "the bulls are immortal".

However, another said the headline figure was misleading and the US economy was in better shape than it suggested.

In fact, Peter Newland at Barclays pointed out the tone of the report was positive when inventories and defence were excluded.

Private consumption growth picked up to 2.2% in Q4 from 1.6% in Q3.

Fixed investment saw growth jump from 0.9% to to 9.7% , reflecting gains in equipment and software (12.4%) and residential (15.3%), which more than offset a small decline in structures (-1.1%).

The ongoing bullish tone was supported by separate figures which showed a healthy rise in employment in the US.

Private-sector jobs in the country increased by 192,000 in January, according to a national employment report calculated by payroll processor Automatic Data Processing.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary: Weaker than forecast consumer confidence number

2013-01-29T19:05:00.001+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The single currency remains in a near-term consolidative mode, following repeated failure at 1.3477 that keeps key 1.3500 zone intact for now. With the lower boundary of near-term range and 55 day EMA, coming under pressure, further easing is seen likely, as hourly studies are negatively aligned. From the other side, positive tone on 4h chart, keeps the upside in focus, with possible extension into 1.3400/1.3370, Fib 38.2% / 50% of 1.3264/1.3477, seen preceding fresh rally. Only slide below 1.3300, psychological support at Fib 38.2% of larger 1.2996/1.3477, would be harmful for near-term bulls.

Res: 1.3459, 1.3477, 1.3485, 1.3490
Sup: 1.3425, 1.3400, 1.3370, 1.3345

GBP/USD

Cable maintains negative near-term tone, with steady descent from 02 Jan’s peak at 1.6380, losing another support at 1.5700. Yesterday’s close below the latter, suggests further easing towards next targets at 1.5634 and 1.5600. Corrective bounce on oversold hourly conditions faces good resistance at 1.5745, previous low and 50% of 1.5825/1.5673 downleg, with 1.5800 zone expected to cap recovery attempts, as 4h studies remain in red. However, appearance of bullish divergence on 4h chart RSI and MACD, cannot rule out stronger rally that requires break above 1.5800/25 to confirm near-term base and put immediate bears on hold.

Res: 1.5745, 1.5784, 1.5800, 1.5823
Sup: 1.5673, 1.5660, 1.5634, 1.5600

USD/JPY

Hourly structure is neutral, as the pair moves within 90.40/91.00 range, following repeated failure at 91.00 yesterday. More downside risk is seen on 4h chart studies that are in descending mode, from overbought zone, with immediate risk seen on a break below 90.40/23, overnight’s low / 20 day EMA / previous high, as well as psychological 90.00 level, loss of which would trigger stronger corrective action. Conversely, regain of 91.00 would open 91.24 and possible resumption of larger uptrend.

Res: 91.00, 91.08, 91.24, 91.50
Sup: 90.58, 90.40, 90.23, 90.00

USD/CHF

Near-term bears remain in play, as the price slides after yesterday’s recovery failure on approach to psychological 0.9300 barrier, on recovery attempt from 0.9220, last Friday’s fresh low. With 61.8% of 0.9220/91 rally being retraced so far, immediate focus comes at 0.9220/00 support zone, loss of which to signal further retracement of the larger 0.9109/0.9387 rally that so far reversed 61.8%. Negative 1 and 4h chart studies support the notion and only sustained break above 0.9300 barrier, reinforced by daily Ichimoku cloud top, would ease immediate bear-pressure.

Res: 0.9266, 0.9291, 0.9300, 0.9323
Sup: 0.9245, 0.9220, 0.9200, 0.9175

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Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets at five-year high after US earnings

Market Movers

techMARK 2,259.98 +0.13%
FTSE 100 6,339.19 +0.71%
FTSE 250 13,107.56 -0.19%

After a subdued morning session, the FTSE 100 rallied in afternoon trade to finish at its highest level since early 2008, helped by upbeat earnings from corporate heavyweights in the US.

The Dow Jones Industrial Average in New York was also trading at a five-year high today after pharmaceutical group Pfizer, refiner Valero Energy and home-builder DR Horton all topped analysts' estimates.

The FTSE 100 has extended gains seen since the start of 2013 and has now risen around 7.5% in January alone.

According to technical analyst Bill McNamara from Charles Stanley this afternoon: "the UK index isoverbought (its 14-day relative strength index is now above 80%) but that in itself does not represent a sell signal in a strong bull phase and it now looks pretty likely that we will see a test of the May 2008 peak, at 6,376, before this move reaches any kind of conclusion."

However, he warned that a correction – "when it comes" – will probably be "fairly sharp" after the Footsie's recent strong run.

The markets' focus is now starting to turn to tomorrow's economic growth data and a policy rate decision in the US. The world's biggest economy is expected to have grown at an annualised rate of 1.1% in the fourth quarter of 2012, according to preliminary estimates, well below the 3.1% growth in the third quarter.

Meanwhile, while the Federal Open Market Committee (FOMC) meeting is expected to be a "complete non-event", according to Jefferies, traders will keep an eye on any comments regarding the length of the current asset purchase programme.

Europe Market Report

Europe midday: Spain must continue consolidation efforts, Minister says

- Spain´s tax revenues rose by 4 per cent in 2012
- Southern European countries have yet to regain competitiveness -IFO
- EU could soften Spain´s budget consolidation timeline

FTSE-100: 0.11%
Dax-30: -0.18%
Cac-40: -0.21%
FTSE Mibtel 30: -0.66%
Ibex 35: -0.56%
Stoxx 600: 0.00%

European equities are trading 'mixed' ahead of tomorrow´s US Federal Reserve policy meeting and a barrage of economic data due out in the rest of the week. Not least is the US monthly employment, which is scheduled for release this next Friday.

Of great interest, the European Union´s Economic Affairs Commissioner Olli Rehn yesterday signaled that the possibility exists that the EU might tolerate modifying the timeline for Spain to consolidate its budget.

Speaking today in Madrid however Spain´s Finance Minister, Cristobal Montoro, indicated that for now the above remains to be seen and efforts must be maintained to meet Brussels´s targets. In that same vein, Montoro added that Spanish tax revenues actually grew by 4.2% in 2012, reaching €168.67bn thanks to the new Budget consolidation measures put in place.

Also worth pointing out are the remarks to be heard this morning out of the German IFO Institute´s Chief Economist, Hans Werner Sinn, according to whom most southern European nations hit by the crisis have not yet undertaken sufficient measures so as to regain lost competitiveness.

Swedish tool and equipment maker Sandvik has reported fourth quarter profit of 728m kronor, missing the market's average forecast.

Software AG has reported fourth-quarter profit of €50.7m, missing analysts' estimates moderately. Revenue in the fourth quarter, however, came in at €276m, well below forecasts.

Spain's Telefonica has asked its banks to extend the maturity of €1.25bn ($1.7bn) of an existing €2bn loan that expires in July 2016, according to Reuters.

Still on the equity front, but from a sector stand-point, the best performing industrial groups are: Basic resources (0.89%), Oil (0.48%) and Telecommunications (0.43%).

Eurozone money supply below forecasts

The Gfk survey of German consumer sentiment improved slightly in February, to 5.8 after 5.7 in the month before.

Spanish retail sales fell by 10.7% year-on-year in December.

INSEE´s French consumer confidence index remained on an even keel in January, unchanged at 86 points, as expected.

Other asset clases steady

The euro/dollar is now falling by 0.01% to the 1.3450 dollar mark.

Front month Brent crude futures are now lower by 0.071 dollars to the 113.40 dollar mark on the ICE.

US Market Report

Weaker than forecast consumer confidence numbers
- Ford leads fallers on prediction of losses in Europe
- Oil stocks lead gains

Dow Jones Industrials: 0.43%
Nasdaq Comp.: -0.01%
S&P 500: 0.32%

The main US equity averages are trading in a mixed fashion following a similarly mixed string of corporate quarterly results.

Amongst the heavyweights whose earnings pleased investors were those from Valero, Peabody and US Steel.

Drugmaker Pfizer was also moving higher after forecasting a 2013 profit of up to $2.30 a share, higher than analyst estimates.

Poor guidance from the likes of International Paper and Lexmark, on the other hand, were weighing on stocks.

Ford plummeted after saying that it expects to lose about $2bn in Europe in 2013 as due to the recession afflicting the region.

From a sector stand-point the worst performers were: Automobiles (-3.72%), Recreational products (-2.63%) and Electronic Office Equipment (-2.06%).

House prices rose by 5.5% year-on-year in November according to the latest Case Shiller 20 city price index (Consensus: 5.6%).

The US Conference Board´s consumer confidence index for the month of January came in at 58.6 points, after an upwardly revised reading of 66.7 for the month before (Consensus: 64).

Front month West Texas crude futures rose by 1.18% to the 97.58 dollar per barrel mark on NYMEX.

10 year US Treasury yields gained 1 basis point, with yields at 1.97%.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary: US Durable goods orders ahead of forecasts

2013-01-28T19:01:00.000+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

Corrective easing off fresh high at 1.3477, found support at 1.3425 today, also Fib 23.6% of 1.3264/1.3477 upleg, ahead of fresh strength that retested 1.3477 barrier. Lack of momentum is keeps 1.3500, 50% of 1.4938/1.2042 intact for now, However, overall positive tone keeps the upside favored. Break higher to face 1.3525/32, weekly 200 day MA / Fib 76.4% expansion of the wave c that commenced from 1.2660, 11 Nov 2012 low. However, 4h RSI at 70 and Stochastic reversing see risk of further congestion under 1.3500 barrier. The downside is for now protected at 1.3425/00, with any dip below here, to delay bulls and extend corrective / consolidative phase.

Res: 1.3477, 1.3485, 1.3490, 1.3525
Sup: 1.3450, 1.3425, 1.3400, 1.3370

GBP/USD

The pair extended weakness to our initial target at 1.5700, as overall negative structure and day’s gap-lower opening, keep the downside in focus. Today’s steady descend, interrupted by brief corrective bounces, sees risk of penetration through 1.5700, also Fib 61.8% of 1.5267/1.6380, to trigger fresh extension towards 1.5634 and 1.5600. Initial resistance lies at 1.5745, last Friday’s low and keeps the upside capped for now, while any rally above here, would required clearance of 1.5800/23, to ease immediate bear-pressure.

Res: 1.5745, 1.5784, 1.5800, 1.5823
Sup: 1.5700, 1.5660, 1.5634, 1.5600

USD/JPY

Near-term price action moves in a consolidative mode, holding between 91.24, today’s fresh high and 90.50, 55 day EMA, for now. With hourly studies attempting at centrelines and 4h indicators emerging from overbought territory, further corrective action is not ruled out. Further easing would face 90.23/00, previous high / 20 day EMA and Fib 38.2% of 88.05/91.24 upleg, ahead of 89.65, 50% retracement / ascending 55 day EMA, where any stronger pullbacks should find footstep. Overall bulls remain in play despite extended daily conditions, however, RSI / MACD bearish divergence, would be initial signal for stronger corrective action that requires confirmation on a break below 88.00 base.

Res: 91.08, 91.24, 91.50, 92.00
Sup: 90.55, 90.23, 90.00, 89.65

USD/CHF

Positive tone off 0.9220, last Friday’s fresh low is fading, as the price action remains capped under psychological / daily Ichimoku cloud top 0.9300 barrier, where 20/55 day EMA’s limit near-term recovery. With 4h indicators still in the negative territory and hourlies hovering around the midlines, risk of stall becomes more evident. Failure to clear 0.9300/23 resistance zone that is required to signal basing attempt and shift near-term focus higher, would risk return to 0.9220 and possible further retracement of 0.9109/0.9387 rally.

Res: 0.9291, 0.9300, 0.9323, 0.9345
Sup: 0.9255, 0.9220, 0.9200, 0.9175

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Daily Market Commentary: (Evening Report)

London Market Report

London close: FTSE 100 edges closer to 6,300 after recent strong run

Market Movers

techMARK 2,257.04 -0.03%
FTSE 100 6,294.41 +0.16%
FTSE 250 13,132.49 -0.03%

Improving newsflow in China and some better-than-expected economic data from the US helped the FTSE 100 come close to the 6,300 barrier on Monday, a level not seen since mid-2008.

"What seems to be an unrelenting grind higher has continued today, with fund manager's chatter of the big rotation being matched by positive data points and the market's appetite for risk," said David White, a financial trader from Spreadex.

The impressive 6.8% rise for the Footsie so far this month puts it on course to record its best January in 13 years, according to the Financial Times. However, there are some concerns that this rally may be short-lived, with the index's relative strength indicator already at technically 'overbought' levels.

Nevertheless, markets were able to hold on to recent gains with confidence about China's industrial profit potential providing some support. Stephen Green, the head of research for Greater China at Standard Chartered, said that Chinese industrial profits should rise by 30% in 2013 on average as a result of investment in infrastructure and real estate, improvements in export demand and looser monetary conditions. Meanwhile, economist Lu Ting from Bank of America Merrill Lynch expects profits to grow by 25% in the first half of this year.

Meanwhile, US durable goods orders increased by 4.6% in December, above the 0.7% gain the month before and well ahead of the 2.0% consensus forecast.

Markets rallied on the back of the release, as traders shrugged off disappointing US pending home sales figures this afternoon. Earnings figures from Wall Street heavyweight Caterpillar also came in below estimates, though a bullish outlook for the second half saw the shares edge higher after the US opening bell.

Europe Market Report

Europe midday: Nomura goes neutral on equities, although still bullish

- Nomura goes tactical neutral on equities
- Eurozone money supply data distorted by Spanish figures
- Italian long-term bonds slightly lower after debt auctions
- Deposits at Greek Banks rose by 4 per cent in December

FTSE-100: 0.01%
Dax-30: -0.11%
Cac-40: 0.02%
FTSE Mibtel 30: 0.45%
Ibex 35: -0.13%
Stoxx 600: -0.07%

The main European equity indices were still trading slightly lower at the midday point of the session despite the latest gains seen in equities on Wall Street and in Asia. That ahead of this afternoon´s economic data releases Stateside.

Of interest, inflows into equity funds – mostly into emerging markets, admittedly - sustained a seventh consecutive rise ahead of bond oriented ones last week although the rate of flows moderated, according to the latest data from EPFR.

The currently high levels of 'bullishness' reached by equity investors has prompted Nomura´s Global Quantitative Strategy Team to issue a short-term tactical neutral position on the market, although they remain fundamentally bullish on equities.

Just released Eurozone money supply data revealed an unexpected contraction, but they appear to have been distorted by the financial system restructuring in Spain.

Eurozone money supply below forecasts

The growth rate of Eurozone money supply, as measured by its three month moving average, accelerated to 3.7% from 3.4% a year ago (Consensus: 3.8%). However, the monthly data for December actually slowed notably, falling to a 3.3% year-on-year pace after 3.8% in the previous month.

However, the ECB notes that the December 2012 figures were partly affected by the Spanish banking sector restructuring that that had a sizeable downward impact even on loan flows corrected for sales and securitisation, Barclays Research points out.

ISAE´s Italian business confidence index for the month of January slipped to 84.6 from 85.7 a month before (Consensus: 86.1).

Other asset classes lower

The euro/dollar is now falling by 0.12% to the 1.3440 dollar mark.

Front month Brent crude futures are now lower by 0.053% to the 113.22 dollar mark on the ICE.

US Market Report

US open: Yield curve steepening continues

- Durable goods orders ahead of forecasts
- Pending home sales figures misleading, NAR says
- Interest rate curve continues steepening, 10 year above 2 per cent

Dow Jones Industrials: -0.02%
Nasdaq Comp.: 0.33%
S&P 500: -0.16%

US equity benchmarks are now trading in a 'mixed' fashion. That follows the release of what at first glance might be taken – erroneously apparently – for similarly mixed economic indicators.

Also worth highlighting are the positive comments from ratings agency Fitch as regards the very short-term outlook for the United States´ AAA credit rating. The temporary suspension of the US federal government's debt limit removes the near-term risk to the AAA rating, Fitch said.

Of interest as well, the Financial Times reported today on how shale 'boom' is firing up opposition from environmental groups, but also investors, with US gas flaring nowadays clearly visible from outer space and with a luminosity rivalling that of cities such as Chicago.

Earth moving machinery giant Caterpillar said Monday it expects 2013 earnings per share of between $7 to $9, compared to the consensus estimate of $8.54 a share.

Goldman Sachs has lowered its recommendation on AK Steel to 'sell' from `neutral'.

Goldman Sachs is expected to raise $1bn from the sale of a stake in Chinese lender ICBC.

Durable goods orders ahead of expectations

US durable goods orders spiked higher in December, rising at a 4.6% month-on-month clip, versus the 2.0% increase which was forecast.

The critical 'core' series for durable goods, which excludes both Defense and civil aircraft, came in comfortably ahead of economists´ expectations, when revisions to November´s data are taken into account (although they are weak when compared with levels from a year ago).

US pending home sales fell by 4.3 per cent month-on-month in December, coming in far below the 0.0 per cent reading expected.

Lawrence Yun, the National Association of Realtors´s (NAR) Chief Economist, said there is an uneven uptrend. "The supply limitation appears to be the main factor holding back contract signings in the past month. Still, contract activity has risen for 20 straight months on a year-over-year basis," he said. "Buyer interest remains solid, as evidenced by a separate survey which shows that buyer foot traffic is easily outpacing seller traffic," Yun added.

"The broad trend in pending home sales mirrors that of the broader housing market and does not alter our view that the recovery in US housing has sustained momentum," commented analysts at Barclays Research chipped in.

Yield curve continues 'bull steepening'

10 year US Treasury yields are now rising by 4 basis points, to the 1.97% mark.

Front month West Texas crude futures were moving higher by 0.27% to the 96,14 dollar per barrel mark on the NYMEX.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - Immediate fears surrounding the Euro-zone as financial risks have eased

2013-01-25T16:58:00.000+00:00

Weekly Market analysis

There has continued to be an important easing of immediate fears surrounding the Euro-zone as financial risks have eased, at least for now. This has triggered an exodus of defensive capital flows from currencies such as Sterling and the Swiss franc. Confidence may remain stronger in the very short term, but there are still very important policy risks surrounding the Euro-zone.

Key events for the forthcoming week

Date	Time (GMT)	Data release/event
Wednesday January30th	13.30	US GDP (Q4 advance)
Wednesday January 30th	19.15	US Federal Reserve policy decision
Friday February 1st	09.30	UK PMI index manufacturing

Dollar:

The US labour-market data has remained generally encouraging and there should be solid growth in the short term, although sharp downward revisions to some regional indices will cause concern. The Federal Reserve will maintain a very loose monetary policy in the short term with bond purchases continuing. The Fed will, however, be under pressure to moderate quantitative easing slightly or take a firmer verbal stance if growth conditions improve further. There are still important battles surrounding automatic spending cuts with congressional tensions liable to increase again. The dollar will gain some defensive support if fears surrounding the Asian growth outlook increase again.

The dollar was generally firm on a trade-weighted basis, but the US currency was weaker against the Euro which tended to over-shadow the impact to some extent.

There was further discussion of the debt ceiling with House Republicans holding a vote on whether to suspend the debt ceiling issue until the end of May. Approval lessened the immediate default threat which had some impact on underpinning risk appetite. There was a downward revision to the Chicago PMI index, matching a sharp downward revision to the Philadelphia Fed index which caused some unease surrounding the US outlook.

The latest US jobless claims registered another decline to 330,000 in the latest week from 335,000 the previous week. The decline to a fresh 5-year low may have been influenced to some extent by seasonal considerations, but here will still be optimism over growth trends. The Markit PMI manufacturing index also increased to 56.1 from 54.0. The BIS stated that quantitative easing would risk being increasingly ineffective and any comments from Fed officials will be watched closely.

Euro

Structural fears surrounding the Euro-zone will remain lower in the short term. There has been a continuing decline in peripheral bond yields with a series of strong bond auctions. There will be some uncertainties over the impact of an early repayment of LTRO funds. The growth outlook in Germany has certainly improved, but conditions within the Euro-zone as a whole are still very difficult with peripheral recession continuing while the French economy is continuing to deteriorate. Overall confidence in the Euro could still falter quickly given the underlying growth vulnerability.

The Euro pushed higher during the week with further support from gains on the crosses and it broke above the 1.34 level in early Europe on Friday.

The Euro-zone data release offered important support with the German ZEW index rising sharply to 31.5 from 6.9 previously and this was the highest reading since May 2010. There was also a decline in yields for the latest Spanish bill auction and the government secured demand in excess of EUR20bn for the latest syndicated bond sale. There was, however, a further decline in Spanish house prices for the fourth quarter, maintaining fears over further losses in the banking sector.

The Euro-zone data as a whole recorded an improvement in manufacturing and service-sector conditions according to the flash PMI data. There was a significant improvement in the German economy notably for services and there is likely to have been an improvement in peripheral economies, although still below the expansion threshold. In contrast, there was a further deterioration in the French readings, increasing fears surrounding the French outlook and competitiveness.

There was also a rise in Spanish unemployment to 26% for the fourth quarter from 25% which will maintain unease over the Spanish outlook and potential social consequences. The Bank of Spain stated that there was a fourth-quarter GDP decline on 0.6%, confirming an annual decline of around 1.2%.

There are likely to be some LTRO repayments over the next few weeks as banks look to repay funds that can now be accessed more cheaply in markets. There could be some positive impact on the Euro, although there will also be concerns that banks in peripheral economies will not be able to repay funds.

Yen:

The Bank of Japan has introduced a 2% inflation target and will maintain an aggressive monetary easing. The open-ended commitment to bond purchases is not due to come into effect until 2014 and there will be further concerns whether the central bank will actually deliver on the more aggressive policies. The appointment of new Bank of Japan governor will be watched very closely over the next few weeks. The underlying economic fundamentals remain weak with a substantial trade deficit undermining the yen directly and triggering demands for a more competitive currency as political pressures continue.

The Bank of Japan confirmed another raft of measures to combat deflation. The bank will switch to an open-ended commitment to buying assets next year and will also increase the inflation target to 2% with a commitment to reaching the inflation goal at the earliest possible time. The dollar found support just above the 88 level and rallied steadily as there was solid yen selling on rallies with vulnerability on the crosses.

There were further expectations that there would be aggressive capital flows out of Japan, especially into emerging markets through Toshin funds. The overall evidence, however, was still mixed with no evidence of substantial capital outflows at this stage.

There was a further Japanese trade deficit for December which took the 2012 deficit to a record JPY6.9trn as exports remained under pressure. The data tended to maintain negative underlying yen sentiment and Deputy Economy Minister Nishimura sated that the yen correction was not yet over.

There were some cautious comments from German Chancellor Merkel who was uneasy over the Bank of Japan becoming so engaged in currency issues and there was some criticism of the government stance to promote a weaker currency.

Japan’s core consumer inflation reading was in line with expectations at -0.2% which will reinforce pressure for more aggressive policy action to meet the 2% inflation target and the dollar held above 90.

Sterling

There will be further concerns surrounding the UK growth outlook which will reinforce fears surrounding the government finances. There have been calls from the IMF for a change in policy and overall confidence in economic policies is liable to deteriorate sharply, especially after the GDP contraction for Q4. There will be expectations of much-reduced defensive Sterling support in the short term, especially with Euro-zone fears easing and this could have an important impact in undermining Sterling.

Sterling was on the defensive during the week with further losses against the dollar and Euro with four-month lows near 1.5750 against the US dollar.

The headline UK government borrowing data was broadly in line with expectations. There was an underlying increase of over GBP7bn for the first eight months of the year with generally weak tax receipts. The substantial structural deficit will maintain fears over the UK AAA credit rating. There was also a weak reading for the CBI industrial survey with orders at -20.

Bank of England Governor King stated that the Monetary Policy Committee could consider further quantitative easing. There were comments surrounding the bank’s remit with King stating that it was time to review the situation. He was particularly concerned as to how the MPC should balance short-term inflation and growth risks.

The latest labour-market data was stronger than expected as the headline claimant count fell by 12,100 for December to an 18-month low following a revised drop of 8,900 the previous month while the unemployment rate declined to 7.7% from 7.8%.

The Bank of England MPC minutes were broadly in line with expectations with a 9-0 vote for unchanged rates and an 8-1 vote not to adopt further quantitative easing. Some members expressed doubts whether any further quantitative easing would be justified. In contrast, there were further concerns surrounding Sterling’s level.

Prime Minister Cameron’s European speech did not have a major impact, although there were some underlying concerns over potential negative implications for the economy if there is a prolonged period of uncertainty.

There were further underlying concerns surrounding economy as the IMF called for a shift in fiscal policies and there was also unease surrounding the fourth-quarter GDP release with expectations of a further contraction. Chancellor Osborne was generally very cautious over the outlook, but pledged no change in policies. GDP fell a provisional 0.3% for the fourth quarter.

Swiss franc:

Given that the Swiss franc was a key beneficiary of defensive inflows during the Euro-zone crisis, there will be further speculation of a reversal in flows now that Euro-zone tensions have eased. There will be further debate over the merit of lifting the Euro minimum level, although the National Bank is certainly very reluctant to engage in a policy of fine tuning.

The Euro was able to secure net gains against the Swiss franc despite seeing a sharp corrective decline from highs above 1.25 and the US currency was broadly resilient.

National Bank member Danthine stated that there was no scope to fine-tune the Euro minimum level which continued to dampen speculation over a short-term move to a 1.25 minimum level. There was still expectations that there would be a decline in defensive inflows, especially after the Danish central bank increased interest rates.

Australian dollar

The Australian dollar was unable to make any impression on resistance levels towards the 1.06 area and dipped significantly weaker later in the week. There was further evidence of position adjustment and an unwinding of long Australian dollar positions

Domestically, the consumer inflation data was weaker than expected with a headline 0.2% increase and a core reading of 0.6% which fuelled expectations of further Reserve Bank interest rates.

The Australian dollar is unlikely to make much headway, especially with further rate-cut expectations and the risk of fresh concerns surrounding the Chinese outlook.

Canadian dollar:

The US dollar was able to find support at lower levels and rallied strongly during the week. There was some further unwinding of long positions and the core retail sales data was weaker than expected.

As expected, the Bank of Canada held interest rates on hold at 1.00%. In the statement, there was a more dovish tone with Governor Carney stating that, although there was still a case for an eventual policy tightening, the bank was not expecting to reach full capacity until the middle of 2014 which triggered a scaling back of rate expectations which undermined the Canadian dollar.

With a more dovish Bank of Canada stance, the US currency broadly resilient on valuation grounds despite optimism surrounding Canadian fundamentals.

Daily FX & Market Commentary: Strength On Wall Street Lifts S&P 500 Above 1,500

2013-01-24T19:33:00.000+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

No changes in the near-term price action seen in past couple of sessions, as the pair remains in a sideways mode, entrenched within narrowed 1.3264/1.3370 range. Studies on 1 and 4h charts hold neutral mode, with break of either side to signal fresh direction, however, clearance of the wider range boundaries at 1.3255 and 1.3400, is required to confirm.

Res: 1.3350, 1.3370, 1.3386, 1.3400
Sup: 1.3300, 1.3280, 1.3264, 1.3255

GBP/USD

Cable holds 1.5800/1.5900 in past three-days, after finding temporary ground at psychological 1.5800 level. However, near-term tone remains aligned to the downside, as recovery attempts were capped under initial 1.5900 resistance, by descending hourly 20 day EMA and Fib 38.2% of 1.6038/1.5801 descend. Improvement of the near-term structure required break above minimum 1.5950, Fib 61.8% and 55 day EMA, to avert immediate downside risk of losing 1.5800 handle that may accelerate bears towards 1.5750 and 1.5700.

Res: 1.5851, 1.5882, 1.5891, 1.5900
Sup: 1.5811, 1.5801, 1.5753, 1.5700

USD/JPY

Bounce from 88.00, where the price find support, reduces downside pressure, as gains through psychological 89.00 barrier, retraced over 61.8% of 90.23/88.05 fall at 89.44. Improved hourly structure sees potential for stronger recovery, however, still weak studies on 4h chart, require regain of 90.00, to confirm recovery and re-focus 90.23 peak. Psychological 89.00 level now offers support and is reinforced by 4h Ichimoku cloud top and 20/55 day EMA’s bullish crossover, with break here to weaken the structure.

Res: 89.44, 89.72, 90.00, 90.10
Sup: 89.00, 88.87, 88.63, 88.40

USD/CHF

Recovery attempt off 0.9270 zone, where the pair found support, cracks 0.9300 barrier and 0.9317, Fib 38.2% of 0.9387/0.9274 decline, signaling possible further extension higher, as hourly studies turned positive. With 4h structure gaining momentum,. Scope is seen for attempt towards 0.9350 breakpoint, previous highs and Fib 61.8%, to confirm base at 0.9280/70 zone and re-focus 0.9387 and 0.9400.

Res: 0.9319, 0.9330, 0.9350, 0.9387
Sup: 0.9300, 0.9283, 0.9273, 0.9248

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Daily Market Commentary: (Evening Report)

London Market Report

Footsie jumps one per cent as economic data impresses

    Market Movers
    techMARK 2,246.01 +0.71%
    FTSE 100 6,264.91 +1.09%
    FTSE 250 13,066.44 +1.02%

Better-than-expected economic data lifted the FTSE 100 over one per cent higher on Thursday afternoon, as markets shrugged off disappointing results from the world’s largest technology company,Apple.

American jobless claims and a US manufacturing survey from Markit came in better than forecasts today, sending London’s benchmark index surge in afternoon trade. Meanwhile, the Conference Board’s composite index of leading indicators increased by 0.5% in December, better than the +0.4% expected.

“All three releases have fuelled hopes for a strong recovery in the US allied with growing optimism that US lawmakers do have the will to agree on spending cuts and raise the debt ceiling without playing the same game of brinkmanship they participated in before the end of 2012,” said market strategist Ishaq Siddiqi from ETX Capital.

The S&P 500 in New York topped 1,500 following the news, the first time it has reached that level since 2007. The Dow also rose strongly, though the tech-heavy Nasdaq was being weighed down by a 10% drop from iPhone maker Apple after both revenues and profits missed forecasts.

Better-than-expected economic figures from Europe and China also lifted the mood today: the Chinese HSBC flash manufacturing purchasing managers' index (PMI) rose from 51.5 to a two-year high of 51.9 in January (consensus: 51.7); meanwhile, the Eurozone composite PMI increased from 47.2 to 48.2 in December (consensus: 47.5).

ETX Capital’s Siddiqi highlighted this afternoon that the FTSE 100 was outperforming other European indices today. He said: “Traders are citing rumours around tomorrow's Q4 GDP figures but it must be noted that the FTSE100 did underperform its European peers in 2012 so technically, there is plenty of room for upside. We are likely to see the index catch up with European peers through this year, especially if we continue to see more encouraging signs from China, the world's biggest consumer of commodities.”

Consensus forecasts are for a 0.1% quarter-on-quarter contraction in the UK economy in the fourth quarter of 2012, compared with the 0.9% growth seen in the third.

Europe Market Report

European Markets Climbed On Economic Data

The European markets finished Thursday's session in positive territory. Positive Chinese manufacturing data helped to overshadow some of the weakness caused by the disappointing earnings report from Apple in the United States. The Euro area private sector activity result also lifted hopes for a modest recovery in the region.

China's manufacturing sector activity rose to its highest level in two years in January as factory production picked up momentum, preliminary results of a survey by Markit Economics showed Thursday. The headline HSBC/Markit purchasing managers' index rose to 51.9 in January from 51.5 in December.

The marked improvement in Eurozone consumer confidence, as latest data showed, adds to hopes that the region's economy could at least stabilize in the first quarter, following an almost certain third successive quarter of contraction in the fourth quarter, IHS Global Insight Chief European and UK Economist Howard Archer said Thursday.

IHS Global Insight noted that the appreciable improvement in sentiment shows that Eurozone consumers are starting to become more upbeat about the economic outlook, although they still clearly have serious concerns over jobs.

The upturn adds to the evidence that the economic environment in the single-currency bloc has improved, and growth prospects are brightening following recent policy initiatives that have resulted in a substantial easing in sovereign debt tensions, the firm noted.

Bank of Canada Governor Mark Carney, next chief of the Bank of England said the governor should not overshadow the decisions of the central bank. At a press conference, Carney said he aims to ensure that the policy decisions do not rely too much on any particular individual.

"Part of my responsibility when I am there is that as the Bank of England gets additional responsibilities on the micro and macro prudential side, to ensure that the committee structure, the new governance structure, the other aspects, work to their full effect," he said.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.49 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.17 percent.

The DAX of Germany climbed by 0.53 percent and the CAC 40 of France advanced by 0.70 percent. TheFTSE 100 of the U.K. rose by 1.09 percent and the SMI of Switzerland gained 0.89 percent.

In Frankfurt, Commerzbank rose by 1.41 percent. The lender said it plans to slash 4000 to 6000 jobs at the Group level until 2016, with the exact amount of the reduction to be known after talks with the employee representatives.

US Market Report

Strength On Wall Street Lifts S&P 500 Above 1,500

Stocks are extending a recent upward move during trading on Thursday, with the S&P 500 climbing above 1,500 for the first time in over five years. However, a sharp drop by shares of Apple (AAPL) has helped to keep the tech-heavy Nasdaq in the red.

The major averages currently continue to turn in a mixed performance, with the Nasdaq posting a modest loss. While the Nasdaq is down 2.69 points or 0.1 percent at 3,150.98, the Dow is up 85.43 points or 0.6 percent at 13,864.76 and the S&P 500 is up 5.68 points or 0.4 percent at 1,500.49.

The modest loss being posted by the Nasdaq is due in large part to the steep loss being posted by Apple, with the iPad and iPhone maker down by 10.4 percent after reporting disappointing quarterly results.

After the close of trading on Wednesday, Apple reported better than expected first quarter earnings but on weaker than expected sales. The company also reported iPhone sales that missed expectations and provided disappointing second quarter revenue guidance.

Meanwhile, most stocks have moved to the upside on the heels of the release of a report from the Labor Department showing that initial jobless claims unexpectedly fell to a new five-year low in the week ended January 19th.

The report showed that initial jobless claims dipped to 330,000, a decrease of 5,000 from the previous week's unrevised figure of 335,000. The drop surprised economists, who had expected jobless claims to climb to 355,000.

With the unexpected decrease, jobless claims fell to their lowest level since hitting 318,000 in the week ended January 19, 2008.

While the Labor Department said seasonal distortions are likely still in effect, Jennifer Lee, senior economist at BMO Capital, said the news on the job front is encouraging "even when you remove all of the noise."

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in yet another mixed performance during trading on Thursday. While Japan's Nikkei 225 Index surged up by 1.3 percent, China's Shanghai Composite Index fell by 0.8 percent.

In the bond market, treasuries have slid firmly into the red on the heels of the upbeat jobs data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.8 basis points at 1.861 percent.

====================================================================

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary: European Markets Finished Mixed As Investors Await U.S. Vote

2013-01-23T18:41:00.001+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The single currency remains in a sideways mode after yesterday’s bumpy ride, with price hovering around 1.3300. Hourly structure, however, is still aligned towards the downside, as the price holds below MA’s and indicators are in the negative zone. While range floor t 1.3280 that proved to be solid support, stays intact, range-trading will remain in play, while break lower would signal a fresh direction and expose 1.3250 and 1.3200. On the upside, regain of yesterday’s spike high at 1.3370, would improve the near-term structure, but only clear break above 1.3400 to signal resumption of an uptrend from 1.2660, 2012 low.

Res: 1.3331, 1.3370, 1.3400, 1.3485
Sup: 1.3280, 1.3255, 1.3200, 1.3151

GBP/USD

Near-term structure maintains negative tone, as the pair, unable to regain initial barrier at 1.5900, returns to near-term base at 1.5800. Bears remain favored, with near-term studies in the negative territory, being supportive for possible slide below 1.5800 handle that will confirm break below 4-month range and open way for fresh leg lower, with 1.5750 and 1.5700 seen as next targets. Any bounce would be of corrective nature and facing strong resistance at 1.5900, 200 day MA, ahead of 1.6000, also 50% of 1.6380/1.5800, break of which is required to provide relief.

Res: 1.5840, 1.5900, 1.5947, 1.6000
Sup: 1.5805, 1.5753, 1.5700, 1.5675

USD/JPY

Yen continues to strengthen against the dollar, on a reversal from 90.23 peak, with initial targets at 88.00 zone being tested so far, just ahead of key near-term support at 87.78, 16 Jan low. As 87.78/90.23 rally has been nearly fully retraced, break lower remains favored for now, with notion being supported by negative near-term studies. However, corrective action may precede fresh bears, as hourly indicators reached oversold zone. Bounces are going to face good resistance at 88.90/89.00 area, where previous highs and Fib 38.2% lie, reinforced by descending 55 day EMA. Only break above 89.50 would delay immediate bears.

Res: 88.36, 88.56, 88.78, 89.00
Sup: 88.05, 87.78, 87.35, 87.00

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks lifted by upbeat US earnings

    Market Movers
    techMARK 2,230.24 +0.32%
    FTSE 100 6,197.64 +0.30%
    FTSE 250 12,934.40 -0.18%

London’s FTSE 100 finished with moderate gains on Wednesday afternoon ahead of a key vote over the potential extension of the debt ceiling Stateside, as some decent results from US bellwethers Google, McDonald’s and IBM lifted sentiment across stock markets worldwide.

The US House of Representatives is to vote this evening on whether to extend the government's debt ceiling until May 19th. A White House spokesman said that President Barack Obama "won't stand in the way" of this short-term fix.

For the time being, traders will likely focus on tech giant Apple’s results after the closing bell this evening. Earnings are widely expected to fall year-on-year due to a drop in the gross margin, however the market’s attention will undoubtedly be on the company’s outlook for 2013 amid concerns over disappointing smartphone sales as of late.

In other news, the International Monetary Fund (IMF) has slashed its growth forecasts for the global economy, saying that the upturn is expected to be ‘more gradual’ than previously thought. The IMF expects world output in 2013 and 2014 to expand by 3.5% and 4.1%, respectively, down 0.1 percentage point from earlier forecasts.

Markets shrug off Cameron speech

UK Prime Minister David Cameron's much-anticipated 'in-or-out-case' speech on Britain's membership in the European Union didn't really move markets this morning.

He committed his party to holding a referendum on whether the UK should remain in the EU in the first half of the next parliament (by the end of 2017 at the latest). "It is time for the British people to have their say; it is time to settle this question over Britain and Europe," Cameron said.

Financial trader Shavaz Dhalla from Spreadex said this morning that Cameron's speech "proved futile". He said: "European markets took the speech in their stride and digested enough information to gauge that the speech was probably designed to build momentum for Cameron’s next campaign rather than mount a serious economic backing for whether remaining in the EU is worthwhile."

BoE in wait-and-see mode

Minutes from the latest Bank of England policy meeting showed that members voted eight-to-one in favour of leaving the asset purchase programme unchanged at £375bn. The Monetary Policy Committee (MPC) voted unanimously to keep the Bank Rate at 0.5%.

Analyst Chris Crowe from Barclays Research said that the MPC is "still content to wait and see" with the committee "likely to resist expanding QE as long as the economy shows signs of stabilisation and improvement."

Meanwhile, the UK jobless rate fell from 7.8% to 7.7% in the three months to November, better than the consensus estimate for no change. The UK claimant count fell by 12,100 in December to 1.56m, the lowest since June 2011.

Europe Market Report

European Markets Finished Mixed As Investors Await U.S. Vote

The European markets ended Wednesday's session with mixed results. The markets received a boost from positive earnings results from European giants such as Unilever and Novartis, as well as results from Google and IBM in the United States. However, many investors were hesitant to take a position ahead of the vote to pass a short-term debt ceiling increase in the U.S. House of Representatives. President Barack Obama has stated that he would sign the bill if it clears Congress. Investors will also be watching for the earnings report from Apple later today.

European Central Bank President Mario Draghi observed Tuesday that the 'darkest clouds' over the euro area have subsided while countries reinforced their commitment to reforms. In a speech in Frankfurt, he said resolute actions by euro area governments and European institutions have made the year 2012 quite different than predicted.

Bank of England Governor Mervyn King said it would be sensible to review the arrangements for setting monetary policy. The inflation target was introduced in the U.K. almost 21 years ago, and it has now 'come of age', he noted.

In a speech in Belfast, King said late Tuesday that the economy needs more fundamental reforms to underpin a "gentle recovery." There are certainly aspects of the inflation targeting regime to consider, King added.

British Prime Minister David Cameron on Wednesday said that he is in favor of a referendum on the UK's membership of the European Union, but insisted that he does not want the country to drift towards an EU exit.

In a much-awaited speech in London, he promised to hold an in/out referendum on EU membership by the end of 2017, if re-elected. Cameron said the next Conservative manifesto in 2015 will ask for a mandate from the British people for a Conservative Government to negotiate a new settlement with the European partners in the next Parliament.

With a majority of 8, the Bank of England's policymakers voted to maintain quantitative easing unchanged at the start of the year, as they saw limited stimulus to the economy from further easing. Policymakers led by Governor Mervyn King unanimously decided to retain the record low 0.50 percent interest rate. The meeting was held on January 9 and 10.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.25 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.46 percent.

The DAX of Germany rose by 0.19 percent, but the CAC 40 of France fell by 0.40 percent. The SMI of Switzerland increased by 1.35 percent and the FTSE 100 of the U.K. climbed by 0.34 percent.

French business confidence deteriorated unexpectedly in January as manufacturers assessed sharp contraction in past production and forecast a deterioration on own production outlook. The business sentiment index came in at 86 in January, survey data from the statistical office Insee showed Wednesday. It was forecast to rise to 90 from 89 in December.

Spain's recession likely deepened during the three months ended December, with gross domestic product falling for the fifth consecutive quarter, the quarterly bulletin from the Bank of Spain said Wednesday.

Gross domestic product (GDP) is estimated to have dropped at a faster rate of 0.6 percent sequentially in the fourth quarter than 0.3 percent in the third quarter, signaling that the economy has slipped deeper into recession. GDP contracted for the fifth successive quarter.

Government debt in the Eurozone stayed broadly unchanged in the third quarter, data released by statistical office Eurostat showed Wednesday.

Total public debt in the single-currency bloc came in at 90 percent of gross domestic product at the end of the third quarter, little changed from 89.9 percent recorded in the second quarter. The latest figure was, however, higher than 86.8 percent recorded in the third quarter of 2011.

U.K. employment total increased to a record high during three months ended November after people out of work decreased, data from the Office for National Statistics revealed Wednesday.

There were 2.49 million unemployed people in the country during the three-month period, down by 37,000 from June-August. At the same time, the number of people in work increased by 90,000 to 29.7 million for three months to November, the highest since records began in 1971.

The employment rate edged up to 71.4 percent from 71.3 percent during June to August. But it was lower than the pre-recession peak of 73 percent logged for March to May 2008.

US Market Report

Stocks Give Back Ground But Remain Mostly Positive

After showing a strong move to the upside in early trading on Wednesday, stocks have given back some ground over the course of the trading day but remain mostly positive. The markets are benefiting from a positive reaction to the latest batch of earnings news.

The major averages have pulled back off their highs for the session but are currently all in positive territory. The Dow is up 59.85 points or 0.4 percent at 13,772.06, the Nasdaq is up 10.08 points or 0.3 percent at 3,153.26 and the S&P 500 is up 0.36 points or less than a tenth of a percent at 1,492.92.

The modest strength on Wall Street extends a recent upward move by stocks, with the Dow and the S&P 500 reaching new five-year highs earlier in the session.

Traders have largely reacted positively to the latest earnings news, with upbeat quarterly results from some big-name companies inspiring confidence that the markets can sustain some further upside.

Tech giants IBM Corp. (IBM) and Google (GOOG) are both posting notable gains after reporting fourth quarter earnings that exceeded analyst estimates.

McDonald's (MCD) is posting a more modest gain after the fast food giant reported fourth quarter earnings that rose year-over-year and came in above analyst estimates. The company also reported stronger than expected revenue growth.

Fellow Dow component United Technologies (UTX) reported fourth quarter earnings that fell compared to the year-ago quarter but still came in slightly above expectations. The diversified conglomerate also reaffirmed its guidance for 2013.

Shares of iPad and iPhone maker Apple (AAPL) are up by 0.8 percent ahead of the release of its fiscal first quarter results after the close of trading.

Nonetheless, buying interest has waned from earlier in the session, as traders remain somewhat reluctant to continue buying stocks following the recent strength.

Traders are also keeping an eye on developments in Washington, where the House is preparing to vote on a three-month extension of the U.S. debt limit.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.1 percent, while China's Shanghai Composite Index rose by 0.3 percent.

In the bond market, treasuries are seeing modest strength, adding to the slim gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.1 basis points at 1.824 percent.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - Markets very choppy

2013-01-22T19:11:00.002+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

Overall range-trading picture remains intact, despite today’s hectic trading and spikes to 1.3370 on the upside and 1.3265 on the downside. The price is back to the opening levels, with 1.3300 again acting as initial support. Studies on 4h chart are still in neutral mode, however, more negative tone is seen on hourly chart, as indicators are at the midlines, with 1.3300 being under pressure. Negative scenario requires break of initial 1.3300 support, while trigger for stronger pullback is seen on a break below 1.3255, range floor. Initial resistance lies at 1.3330, while any bounce above here requires clearance of today’s high at 1.3370, to possibly re-attract 1.3400 barrier.

Res: 1.3370, 1.3400, 1.3418, 1.3485
Sup: 1.3350, 1.3330, 1.3300, 1.3280

GBP/USD

Cable trades in near-term consolidative mode, following repeated failure at 1.5800 support. Recovery is so far limited under initial 1.5900 barrier and 200 day MA, however, bullish hourly RSI and MACD divergence and 4h indicators turning higher, indicates that possible stronger recovery cannot be ruled out. This requires break and close above minimum 1.5900, to open way towards more significant 1.6000 barrier, near 50% of 1.6177/1.5802, to confirm near-term base. Otherwise, risk of lower top and fresh weakness below 1.5800, would be likely, as the price already cracked previous range low at 1.5826.

Res: 1.5879, 1.5900, 1.5947, 1.6000
Sup: 1.5852, 1.5826, 1.5805, 1.5753

USD/JPY

The pair remains under pressure, as reversal from 90.23, fresh 2 ½ year high, extends to our next target at 88.36 that marks 76.4% of 87.78/90.23 rally. Dominating negative on hourly and indicators attempting at midlines on 4h chart, signal that further weakness may extend to 88.12, 17 Jan low / Fib 61.8% of 86.81/90.23 upleg, possibly to key near-term support and 16 Jan higher low at 87.78, loss of which is seen as a trigger for stronger corrective action. Today’s upside rejection a initial 89.00 barrier, keeps negative tone intact, as barrier is reinforced by 38.2% 90.10/88.35 / 20 day EMA. Only break here would avert immediate downside pressure, however, extension through 89.50, would shift near-term focus higher.

Res: 89.00, 89.32, 89.50, 89.70
Sup: 88.53, 88.36, 88.12, 87.78

USD/CHF

Near-term structure weakened further, as the price broke below psychological support and platform at 0.9300/9280, cracking also sideways moving 4h 55 day EMA. Hourly studies are negative, while 4h indicators are about to break into negative territory. This requires close below 0.9280 that would prompt further reversal and open initial targets at 0.9250 and 0.9200. Alternative scenario sees break and close above 0.9300 that would keep downside protected on the near-term, however, regain of minimum 0.9350 is required to revive bulls.

Res: 0.9327, 0.9350, 0.9387, 0.9400
Sup: 0.9300, 0.9273, 0.9248, 0.9215

====================================================================

Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets flat after choppy session

Market Movers

techMARK 2,223.18 +0.01%
FTSE 100 6,179.17 -0.03%
FTSE 250 12,958.14 -0.28%

Stock markets finished more or less flat on Tuesday afternoon after a volatile session, in which investors digested policy announcements in Japan and mixed newsflow in Germany.

"A rather choppy morning session in Europe gave way to a rather more sedate afternoon session as US traders returned to their desks after their long weekend break," said Michael Hewson, a senior market analyst at CMC Markets.

After a two-day meeting, the Bank of Japan set a 2.0% inflation target and pledged to embark on a Fed-style unlimited asset purchase programme. Meanwhile, the central bank left its benchmark rate unchanged at the prior range of zero to 0.1%.

However, the promised increase in asset repurchases will not come into place until January 2014, later than at least some had hoped. This disappointment prompted a tentative start on the FTSE 100.

German newsflow shakes markets

By mid-morning though, rumours that Bundesbank President Jens Weidmann had resigned swept through the markets, sending London's benchmark index firmly into the red. This speculation was later denied by the German central bank.

Meanwhile, there were reports that the German regulator Bafin had asked lenders (including Deutsche Bank) to estimate what the cost of a hypothetical break-up of their different business segments would be.

CMC's Hewson said: "The nature of this morning's move can also be attributed to the multi-year lows in the VIX [a volatility index] which suggests that investors are under protected against sharp market falls, trading at its lowest levels since 2006, and pre crisis. These lows suggest some complacency amongst market participants about the likelihood of further stock market gains."

Nevertheless, stocks quickly recovered after a better-than-expected reading from the German ZEW survey. The economic sentiment index (which canvasses financial market experts) increased by 24.6 points in January to 31.5 points, thereby reaching its highest level since May 2010. This beat the consensus estimate, which had forecast only a 5.1 point increase to 12.

Europe Market Report

Europe midday: Strong data props up stocks

- German economic confidence rises to May 2010 highs
- German financials hit by report on possible regulatory moves
- Spanish bond yields drop

FTSE-100: -0.09%
Dax-30: -0.74%
Cac-40: -0.48%
FTSE Mibtel 30: 0.35%
Ibex 35: -0.38%
Stoxx 600: -0.17%

The main European equity benchmarks are now trading mixed on what has turned out to be a rather volatile day. Perhaps worth taking note of, a handful of strategists seem to have cooled slightly about the market.

Also worth pointing out, the Bundesbank this morning saw the need to deny rumours regarding the impending exit of its President, Jens Weidmann.

In turn, those reports came on the back of a rather lacklustre reaction to the Bank of Japan's latest decision, overnight. Some traders nevertheless described the selling which ensued as simply some 'profit taking,' following the last few months' advances in equity markets.

Also weighing on stocks early on, particularly in Germany, was a report on BorsenZeitung that the country's financial market regulator, BaFin, has asked lenders to run simulations on what the cost of a hypothetical break-up of their different business segments would be.

Compensating for the above was the release of a much better than expected reading on German economic confidence, courtesy of the ZEW Institute.

Very strong reading on German economic sentiment

The ZEW Institute's economic sentiment index for the month of January has come in at 31.5 points, up by 24.6, to its highest level since May 2010.

Single currency flat

The euro/dollar is now trading 0.02% lower at 1.3310.

Front month Brent crude futures are rising by 0.357 dollars, to the 111.60 dollar per barrel mark on the NYMEX.

US Market Report

US mid-morning: Weak housing data weighs on stocks

- Headline existing home sales miss expectations
- Mixed results from corporate heavyweights

Dow Jones Industrials: -0.01%
Nasdaq Comp.: -0.31%
S&P 500: -0.27%

The main Wall Street indices have begun the day on a slightly mixed footing following the release of similarly contradictory quarterly results from a batch of corporate heavyweights.

Thus, Johnson&Johnson and Verizon Communications are falling following the release of their latest financials.

Caterpillar is off after the world's largest maker of construction and mining equipment said it will take a $580m write-down in relation to accounting "misconduct" at Zhengzhou Siwei Mechanical & Electrical Manufacturing Co., a Chinese subsidiary acquired last year.

Travelers and chemical maker Dupont, on the other hand, are moving up. The latter has guided higher than expected on its 2013 revenues.

Results out from Regions Financial handily beat expectations.

Shares of Morgan Stanley were downgraded by analysts at Susquehanna.

UBS has cut its target on Apple to 650 dollars from 700 dollars before.

Important data ahead

The Federal Reserve's national activity index for the month of December has moderated to 0.02 from 02.7 in the previous month.

Existing home sales fell by 1% in December to an annualised rate of 4.94m (Consensus: 5.1m).

Crude futures edge up

West Texas crude futures have begun the day rising by 0.36% to the $95.83 per barrel mark on NYMEX.

10 year US Treasury yields are now rising by 1 basis point to the 1.85%.

====================================================================

Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Forex Holy Grail

2013-01-21T16:44:00.000+00:00

A trading system can also be know as an edge. An edge allows us to trade without fear and uncertainty because it has a higher probability of a decision taken actually happening over the other but within a series of trades. The question now is what happens when you have found your edge like price action trading and you still unable to profit from trading? This article hopefully will give you some insight in how to fine tune your edge.

Over trading could be causing you to fail. Normally over trading can be linked to trading in lower time frames due to the fact we have more entry signals appearing. However trading lower time frames has much more noise and randomness in the market and sometimes may be difficult to identify key support and resistance levels. By changing to a daily time frame is smooths out the noise, giving you a more accurate picture of the market. Another benefit in trading the daily time frame is due to the fact your edge will appear when the daily candlestick pattern closes and this is when most traders are watching charts planing their next trading day. It's true that you will find less signals on a daily time frame but when they appear it will become a higher probability trade.

As mentioned above I stated that when we identify our edge we should execute our edge without fear and uncertainty. So what are the reasons causing you to doubt your edge? It comes down to how much success you had in executing it. The more we continually execute our edge successfully the more confidence we gain in it, therefor by mastering your edge such as price action trading on a daily timeframe it will help you eliminate confusion and limiting the number of variables in making that essential trading decision.

Another key area is to keep your trading simple by avoiding hours in analyzing fundamental data, technical data on the erroneously belief it will give you more insight into the future track of the markets. The problem with this thinking is that ALL variables are ultimately reflected via the simple and natural price movement of a price chart.

A good risk / reward ratio is of the utmost importance and should be part of your trading plan. Having this in place allows you to survive and saving you the heart ache of blowing your trading account. One way in achieving this is by making sure your winners are larger than your losers, therefor when your edge appears always try aim for a risk reward of 1:2. In the following diagram we can see that there were 14 trades placed where 8 trades failed and only 6 were winners, however if you add the winners it will be larger than your losers.

Patience and discipline are other tools which must be added to your trading plan. Wait for your edge to appear, dont be in a trade just to be in one. Once again if you trade the daily charts it will allow you to train this mind set due to the fact you will see less signals appearing in comparison to the lower time frames. Please note that I'm not saying that you shouldn't trade lower time frames but you should only look at these once you have the experience and reading the market. I currently trade daily, 4H and H1.

Apologies for using the heading Forex Holy Grail because there are none, but I believe if you use some of my suggestions it can contribute toward your trading success. The internet has made the FX community a lot smaller giving us access to many resources and trading ideas and by learning from one another it may just help your edge to be a little more effective than before.

Happy Pippping!!

Weekly Market analysis - Fears Surrounding Euro-zone as financial risks have eased

2013-01-18T15:45:00.002+00:00

Weekly Market analysis

There has been an important easing of immediate fears surrounding the Euro-zone as financial risks have eased, at least for now. There will be some optimism surrounding risk appetite, although confidence could still prove to be very fragile, especially given important structural vulnerability. There will also be further concerns surrounding the US debt-limit negotiations over the next few weeks.

Key events for the forthcoming week

Date	Time (GMT)	Data release/event
Tuesday January 22nd		Bank of Japan interest rate decision
Wednesday January23rd	09.30	Bank of England MPC minutes
Friday January 25th	09.30	UK GDP (Q4 first estimate)

Dollar:

The US economic indicators have been mixed, but have generally indicated solid growth, especially with a further decline in jobless claims. The Federal Reserve has continued to emphasise the importance of unemployment to its policy decisions and will continue bond purchases in the short-term. If growth continues to improve, there will be pressure for at least a modest slowdown in quantitative easing and rising bond yields would also provide some net dollar support. The US currency could gain on defensive demand if debt-ceiling talks create renewed animosity, although there would also be potentially important implications for the US credit rating.

The dollar was resilient against most currencies during the week, although it did decline to lows around 1.34 against the Euro.

The US retail sales data was slightly stronger than expected with a 0.5% headline increase for December and a core increase of 0.3% while there was also a generally optimistic tone surrounding the housing sector. The New York PMI index was much weaker than expected at -7.8, although this is an erratic data series. Regional Fed Governor Rosengren stated that there could be policy tightening if the unemployment rate fell to 6.5%.

Ratings agency Fitch stated that the US would be subjected to a formal ratings view for a potential downgrade if there was no agreement to raise the debt ceiling and political comments will remain under close scrutiny.

The inflation data was marginally lower than expected with a headline decline in prices of -0.1% which will maintain the scope for the Federal Reserve to maintain an expansionary policy. The Beige Book release was also broadly in line with recent reports with growth described as modest or moderate in all the Fed districts.

Housing starts increased to a fresh four-year high of 954,000 for December. There was also a sharp decline in jobless claims in the latest week with a reading of 335,000 the lowest for five years. In contrast, the Philadelphia Fed index was sharply weaker than expected at -5.8 from +5.8 the previous month.

The data overall helped maintain a confident tone surrounding the economy and there was a rise in US Treasury bond yields. The dollar failed to secure much in the way of support, especially with German yields also increasing during the day which prevented an improvement in yield spreads.

Fed Chairman Bernanke’s comments surrounding the economy were broadly neutral as he insisted that the Fed was not out of policy options even with interest rates close to zero. He stated that growth was showing some signs of improvement with quantitative easing having a positive impact, although it was described as early days. He promised that the bond-purchase programme would be reviewed on a regular basis while he did not expect inflation to be a significant issue as he kept all options open.

Euro

Structural fears surrounding the Euro-zone will remain lower in the short-term. There has been a continuing easing of peripheral bond yields with investor sentiment also improving which could trigger renewed capital inflows. The ECB is much less willing to consider a further cut in interest rates which will provide some Euro support. Growth concerns will, however, remain a very important focus and the drop in financing costs will also deter political action on structural reform. In this environment, confidence could quickly deteriorate again, especially if political tensions intensify.

The Euro maintained a strong tone during the week, although the bulk of the gains were on the main crosses as the US currency was relatively resilient. The currency was cushioned buy a sharp decline in bond yields at the latest Spanish Treasury bill auction. Prime Minister Rajoy stated that Spain would not need a bailout and was confident that the banking sector would not need additional funds.

Outgoing Eurogroup head Juncker stated that the Euro was dangerously high. Euro-zone officials have generally stayed quiet on currency issues over the past few months and the Juncker comments will be taken as indicating that there is now greater concern surrounding the exchange rate. There will also be some unease that this signals a new phase in potential global currency wars.

ECB council member Nowotny stated that there was no cause for concern surrounding the Euro, contradicting Juncker’s comments. Nowotny also stated that he didn’t expect to see a long-term rise in the Euro against the dollar. The ECB remains reluctant to get involved in exchange rates and will certainly not want to get in the business of targeting exchange rates. There will, however, be some speculation that the ECB will be more willing to consider a cut in interest rates if there are significant currency gains, especially as there will be a further deflationary impact.

Yen:

There will be intense pressure for the Bank of Japan to engage in further aggressive policy easing with widespread expectations that the central bank will introduce a revised 2% inflation target at the forthcoming meeting. There will also be scope for a further monetary easing. Comments from government officials will be watched very closely, but the net stance is likely to be to back further yen losses. Markets have priced in substantial policy easing and there will be scope for a sharp correction, especially if risk appetite deteriorates.

The yen briefly corrected strongly during the week before being subjected to renewed heavy selling pressure. There were significant comments from Finance Minister Amari who stated that excessive yen weakness could have a negative impact on the economy by pushing up import prices which suggested that the government would not push for further aggressive yen losses. Later in the week, Finance Minister Amari back-tracked from earlier comments warning against excessive yen depreciation and there will also be market confusion over government intent.

There were still widespread expectations of further aggressive Bank of Japan monetary action next week as underlying sentiment remained extremely weak. There were some media reports that the central bank could consider dropping paying interest on excess reserves and would consider an open-ended commitment to bond purchases.

The government and Bank of Japan are working on a joint statement and there were also comments from government officials that a rate of 100-110 would be appropriate which triggered a test of yen support beyond the 90 level with fresh 29-month lows.

Sterling

There will be further uncertainty surrounding the UK growth outlook with speculation that there will be a fourth-quarter contraction which will reinforce fears surrounding the government finances. There will also be persistent unease surrounding the threat of a credit-rating downgrade. Sterling has been an important beneficiary of defensive support during the Euro-zone crisis and there will be further suspicions that there will be sustained capital outflows given that Euro-zone fears have eased. Given the underlying lack of confidence in the fundamentals, the UK currency is likely to be subjected to underlying selling.

Sterling was firmly on the defensive against the Euro during the week as it retreated to nine-month lows beyond 0.8370. Sterling also retreated to six-week lows below 1.60 against the dollar. There were further concerns surrounding the AAA credit rating with Fitch warning that the downgrade risks were increasing.

The headline UK consumer inflation rate was in line with expectations at 2.7% while the core rate edged down to 2.4% from 2.6% and the overall impact was limited with no implications for monetary policy. There was a slightly more optimistic tone surrounding the housing market as the official index recorded a 2.1% increase in the year to November. The latest RICS housing data was stronger than expected with a reading of zero for December from -8% previously which was the first time a negative figure had not been reported since July 2010.

The other economic data was generally weaker than expected. There was only a small recovery in industrial production for November as a recovery in energy-sector output was offset by another decline in manufacturing production which reinforced unease surrounding the outlook.

The NIESR estimated a 0.3% decline in GDP for the three months to December and there was another weak reading for construction output which reinforced fears surrounding a fourth-quarter GDP contraction.

Swiss franc:

The Swiss franc was a key beneficiary of defensive inflows during the Euro-zone crisis and there will be further speculation that there will be a sharp reduction in defensive inflows. There will be scope for a reversal in speculative capital inflows which could trigger fresh selling on the Swiss currency. There will, however, be the potential for a reversal in trends if Euro-zone fears intensify again. The Swiss currencycould also still gain support as an alternative save-haven asset, especially with the Japanese yen weakening sharply.

The Swiss franc weakened sharply during the week with very sharp losses to beyond 1.25 against the Euro. The dollar was able to take advantage of the franc vulnerability and pushed to a peak near the 0.94 level.

There was a decline in defensive demand for the franc given reduced fears surrounding the Euro-zone structural vulnerability. There was a rise in yields on the latest Swiss Treasury bill auction which suggested that defensive franc support had eased and there was also a shift in risk reversals which indicated that underlying Swiss currency demand had fallen.

The latest retail sales data recorded a 2.9% annual increase in the year to December which did not have a significant impact. There was a 0.2% decline in consumer prices for December to give a 0.4% annual decline which will reinforce potential deflation fears and a determination to prevent franc gains

Australian dollar

The Australian dollar was unable to break above the 1.06 area and weakened to lows just below the 1.05 level before consolidating in the middle of the range. The currency was unsettled by a weaker than expected labour-market report as there was a decline in employment fell by over 5,000 while the unemployment rate rose to 5.4%. The other data also provided little in the way of support

The currency was still cushioned by a generally solid tone towards risk appetite and a lack of interest in the US currency.

Despite some support from greater optimism surrounding China, the Australian dollar is unlikely to make much headway, especially with further rate-cut expectations.

Canadian dollar:

The US dollar was unable to push above the 0.99 level against the Canadian currency during the week before re-testing support below 0.9850, although the main feature was generally very narrow ranges. There was a recovery in gold and oil prices which provided some degree of support for the Canadian currency.

Relatively narrow ranges are liable to continue for now with the US currency broadly resilient on valuation grounds despite optimism surrounding Canadian fundamentals.

Daily FX & Market Commentary - Markets Climbed On U.S. Economic Data

2013-01-17T18:34:00.000+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro holds near-term positive tone, as recovery from 1.3255, retraces over 76.4% of corrective 1.3400/1.3255 pullback. Despite gains being interrupted by 1.3376/1.3332 pullback, where 10 day EMA contained dips, hourly structure remains positive and keeps focus at near-term key barrier at 1.3400. However, lack of bullish momentum on 4h chart requires caution, as failure to extend to 1.3400, would risk further hesitation and return to initial 1.3332 support and more significant 1.3300 level.

Res: 1.3376, 1.3386, 1.3401, 1.3485
Sup: 1.3332, 1.3316, 1.3300, 1.3284

GBP/USD

The pair breaks again below strong 1.6000 support, also daily Ichimoku cloud base and yesterday’s fresh low at 1.5974, after recovery attempt was capped by initial resistance at 1.6030 zone. This confirms negative near-term structure, as fresh weakness next target at 1.5960, Fib 76.4% of 1.5826/1.6380 rally and increases risk of test of psychological / 200 day MA support at 1.5900. On the upside, day’s high at 1.6038, also Fib 38.2%, offers good barrier and only clear break here would delay immediate bears.

Res: 1.5985, 1.6000, 1.6016, 1.6038
Sup:1.5954, 1.5900, 1.5882, 1.5826

USD/JPY

Recovery rally from 87.78, yesterday’s low, nearly fully retraced corrective 89.66/87.78 descend, as gains extended to 89.55 so far. Near-term price action hesitates ahead of previous high, as hourly studies reach overbought zone, however, improved 4h chart situation, see the upside favored for now. Any dips should be ideally contained above 89.00 zone and 20 day EMA, to keeps bullish bias intact.

Res: 89.55, 89.68, 90.00, 90.39
Sup: 89.21, 89.00, 88.66, 88.40

USD/CHF

The pair remains congested within 0.9300/50 range, following repeated failure to sustain break above 0.9345, Fib 61.8% of 0.9511/0.9109 descend. Rather neutral tone is seen on hourly chart, while 4h structure remains bullish, however, approaching overbought zone requires caution. Clearance of 0.9355 to open next targets at 0.9381/0.9400, possibly 0.9430, 200 day MA, while slide below near-term range floor and 55 day EMA at 0.9290 zone, would be an initial signal for stronger corrective action of 0.9109/0.9353 rally and would expose 0.9260, Fibonacci 38.2% retracement level.

Res: 0.9353, 0.9381, 0.9400, 0.9430
Sup: 0.9317, 0.9300, 0.9284, 0.9260

====================================================================

Daily Market Commentary: (Evening Report)

London Market Report

Stocks boosted by upbeat US data

    Market Movers
    techMARK 2,201.42 +0.76%
    FTSE 100 6,132.36 +0.46%
    FTSE 250 12,847.61 +0.66%

Following a subdued morning session, stocks across Europe raced into positive territory on Thursday afternoon on the back of some decent economic data Stateside.

Better-than-expected US housing starts and jobless claims figures lifted the mood this afternoon, prompting a strong start on Wall Street, as investors shrugged off some disappointing fourth-quarter earnings from banking heavyweights Bank of America and Citigroup.

However, as market strategist Ishaq Siddiqi from ETX Capital explained: “Markets on both sides of the Atlantic leapt higher with market participants moving out of the sidelines to build positions, latching on the positives; solid Spanish auction which propelled the euro and eased peripheral bond yields;expectations of strong China data due in the early hours of tomorrow morning which is supporting commodity prices at the moment and the fact that we have had some relatively upbeat earnings from Europe, particularly out of the UK retailers.”

Europe Market Report

European Markets Climbed On U.S. Economic Data

The European markets finished in the green on Thursday, after the release of some better than expected economic data in the United States. The surge in U.S. housing starts and the larger than expected decrease in weekly jobless claims provided a boost to the markets in the afternoon. Investors will be watching for the Chinese fourth-quarter GDP data, which is scheduled to be released tomorrow.

The ECB said in its monthly bulletin that the Euro-area economy will begin a gradual recovery later in 2013 because of the accommodative monetary policy, together with significantly improved financial market confidence and reduced fragmentation.

The International Monetary Fund on Wednesday decided to release the next slice of bailout money to Greece after the euro member successfully carried out a bond buyback and passed further budget measures to ease the country's debt load.

After announcing the Executive Board's decision to disburse EUR 3.24 billion to Greece, IMF Managing Director Christine Lagarde said "the program is moving in the right direction" though it encountered a delay in implementation due to political crisis initially.

Lagarde said Wednesday that Greece has made progress with structural reforms, which is reflected in recent actions to reduce non-wage labor costs and reform the product market. "However, much more remains to be done to achieve the critical mass of reforms needed to boost productivity and lower prices."

Separately, the IMF granted EUR 838.8 million loan disbursement to Portugal, under a EUR 78 billion bailout package approved in 2011. IMF Deputy Managing Director and Acting Chair Nemat Shafik said that Portugal has made "considerable progress in fiscal and external adjustment."

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.51 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.19 percent.

The DAX of Germany climbed by 0.58 percent and the CAC 40 of France rose by 0.96 percent. TheFTSE 100 of the U.K. advanced by 0.41 percent and the SMI of Switzerland gained 1.64 percent.

Euro area construction fell further in November, data released by Eurostat, the statistical office of the European Union, showed on Thursday.

Construction output declined a seasonally adjusted 4.7 percent year-on-year in November, after falling a revised 3.3 percent in October. Building construction fell 5.3 percent, while civil engineering output declined by 3.3 percent.

A leading indicator of the Spanish economy increased for the third successive month in November, indicating that the pace of contraction in the Spanish economy may ease in the near term, data from a survey by the Conference Board showed Thursday.

The leading economic index increased 0.5 percent month-on-month to 103.7 in November, marking the third monthly growth in a row. The largest contributions to the index came from the order books survey and Spanish contribution to Euro M2.

US Market Report

Stocks Mostly Higher On Upbeat Economic Data

Stocks have moved mostly higher over the course of the trading day on Thursday after moving roughly sideways in recent sessions. The markets have benefited from a positive reaction to upbeat employment and housing reports.

The major averages are currently posting notable gains, near their highs for the session. The Dow is up 67.62 points or 0.5 percent at 13,578.85, the Nasdaq is up 16.08 points or 0.5 percent at 3,133.62 and the S&P 500 is up 6.92 points or 0.5 percent at 1,479.55.

With the gains on the day, the Dow and the Nasdaq have reached three-month highs, while the S&P 500has risen to its best intraday level in five years.

The strength on Wall Street is partly due to the release of a report from the Labor Department showing that initial jobless claims fell to a five-year low last week.

The report showed that jobless claims fell to 335,000 in the week ended January 12th from the previous week's revised figure of 372,000. Economists had been expecting jobless claims to show a much more modest decrease to 368,000.

With the much bigger than expected drop, jobless claims fell to their lowest level since the week ended January 19, 2008.

Buying interest was also generated by a separate report from the Commerce Department showing a much bigger than expected increase in housing starts in the month of December.

The Commerce Department said housing starts jumped 12.1 percent to an annual rate of 954,000 in December from the revised November estimate of 851,000. The increase lifted housing starts to their highest annual rate since June of 2008.

However, a negative reaction to quarterly results from Bank of America (BAC) and Citigroup (C) has helped to limit the upside for the markets, with the financial giants down by 3.7 percent and 2.9 percent, respectively.

Bank of America reported fourth quarter earnings that fell year-over-year but exceeded analyst estimates, while Citigroup reported much weaker than expected fourth quarter earnings.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. While Japan's Nikkei 225 Index inched up by 0.1 percent, Hong Kong's Hang SengIndex edged down by 0.1 percent.

Meanwhile, the major European markets all moved to the upside on the day. The French CAC 40 Index jumped 1 percent, while the German DAX Index and the U.K.'s FTSE 100 Index advanced by 0.6 percent and 0.5 percent, respectively.

In the bond market, treasuries have come under pressure on the heels of the upbeat economic data. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 4.7 basis points at 1.871 percent.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - tocks Turning In Mixed Performance

2013-01-16T18:34:00.000+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The euro remains at the back foot after repeated attempts at 1.3400 failed and subsequent easing broke below important 1.3300 support, previous resistance and 4h 20 day EMA. This opens prospect for further correction, as hourly structure is negative and 4h indicators continue to slide. The reversal so far retraced 38.2% of 1.3037/1.3401 upleg, bringing immediate risk at 1.3247 higher platform, reinforced by 4h 55 day EMA, loss of which would prompt extension towards psychological 1.3200 support. Hourly 20/55 EMA’s bearish crossover at 1.3325, pressures the price and offers solid resistance, along with 1.3335, previous range floor.

Res: 1.3300, 1.3325, 1.3335, 1.3356
Sup: 1.3262, 1.3247, 1.3220, 1.3200

GBP/USD

Cable lost ground again, following repeated attempt at 1.6100 barrier failure, to return back to 1.6030 support and risk test of more significant 1.6000/1.5990 near-term base, reinforced by daily Ichimoku cloud base.. Studies on 4h chart turned negative and see potential for further weakness, as the price holds below 20/55 day EMA’s, with break below 1.5990 to expose 1.5960, Fib 76.4% of 1.5826/1.6380 and 1.5900, 200 day MA. Only lift above 1.6100 would provide near-term relief.

Res: 1.6044, 1.6079, 1.6100, 1.6121
Sup: 1.6006, 1.5991, 1.5960, 1.5900

USD/JPY

The pair continues to move lower for the third day, on corrective pullback from 89.66. Loss of strong support at 88.40 is seen as a trigger, as the price dents next one at 88.00, retracing 61.8% of 86.81/89.66 upleg at 87.90. Dominating negative tone on hourly chart and 4h studies breaking into negative territory, keep the downside favored, with daily indicators starting to point lower, of overbought zone that additionally supports near-term bears. Holding below 88.00 handle, would likely open way towards 87.00 and more significant 86.81, 09 Jan low. Any bounce higher is seen capped at 89.00 zone for now.

Res: 88.28, 88.74, 88.90, 89.08
Sup: 87.90, 87.48, 87.00, 86.81

USD/CHF

The pair extends recovery rally, clearing key near-term barrier at 0.9300, 04 Jan high that confirm near-term base at 0.9100 and opens way for stronger gains. With gains reaching 0.9330 so far, immediate focus lies at 0.9345, Fib 61.8% of 0.9511/0.9077 descend and 0.9381, 07 Dec 2012 high, to possibly look for test of psychological 0.9400 barrier. Overbought near-term studies, however, see pause in recent gains, with corrective easing facing support at 0.9272 and dips expected to hold at/above 0.9250, Fib 38.2% / 55 day EMA, to keep the bullish bias.

Res: 0.9330, 0.9345, 0.9381, 0.9400
Sup: 0.9293, 0.9372, 0.9246, 0.9220

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Daily Market Commentary: (Evening Report)

London Market Report

Markets finish lower, but TUI Travel surges late on

The FTSE 100 ended moderately lower on Wednesday as markets trimmed losses by the close, though the mood was still cautious after both the World Bank and Germany government downgraded growth forecasts.

Concerns about ongoing conflicts in North Africa were also likely to be on investors’ minds today. As the French military intervention in Mali intensifies, there was news of an Islamist militant attack at a BPgas field in neighbouring Algeria which has resulted in a number of deaths and a hostage situation.

Markets are becoming increasingly concerned about the wider implications that these conflicts could have, as a number of neighbouring countries are large suppliers of key petrochemicals and minerals.

The World Bank has cut its global growth forecast for 2013 due to the difficult recovery that economies worldwide are currently undergoing despite the improvement in financial markets. It now expects growth of 2.4% this year, down from its prior forecast of 3%.

Meanwhile, Germany expects its economy to grow by a mere 0.4% this year, well below the 1% growth forecast in October and the 0.7% expansion in 2012.

“Given the news flow today it’s hard to fathom why markets aren’t lower than they are, given the continued stream of bad news from the retail sector,” said market analyst Michael Hewson from CMC Markets.

Nevertheless, markets picked up from their intraday lows in afternoon trade after US banking heavyweights JPMorgan Chase and Goldman Sachs beat consensus estimates with fourth-quarter profits. The latter reported earnings per share of $5.60 for the last three months of 2012, smashing the $3.64 consensus estimate. This was Goldman’s most profitable quarter since the first three months of 2010.

"We’re used to seeing Goldman Sachs beating earnings forecasts, but today’s results caught everyone off-guard," said market analyst Craig Erlam from Alpari.

Europe Market Report

European Markets Finished Mostly Higher On Positive U.S. Earnings

The majority of the European markets ended Wednesday's trading session in positive territory. Several better than expected earnings reports from U.S. banks provided a boost to investor sentiment. Economic data from the U.S. was mixed and investors are awaiting a slew of Chinese economic reports. Automakers were weak after the decline in new auto sales and banks also turned in a negative performance.

The euro's exchange rate is "alarmingly high" and is likely to affect the Eurozone economy which is showing signs of stability, Eurogroup President Jean-Claude Juncker said Tuesday.

While speaking at the annual gathering of business leaders in Luxemberg, Junker warned that an overvalued euro is likely to threaten the economy that is reemerging from financial crisis.

Junker's comments came just few days after European Central Bank President Mario Draghi'sstatement that the euro area may see a gradual recovery later in the year as there are some modest signs of stabilization.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.05 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.01 percent.

The DAX of Germany climbed by 0.20 percent and the CAC 40 of France advanced by 0.30 percent. The SMI of Switzerland gained 0.45 percent, but the FTSE 100 of the U.K. fell by 0.22 percent.

In Frankfurt, Metro dipped by 0.17 percent. The department store operator reported a marginal rise in fourth-quarter sales despite challenging market conditions, especially in Southern Europe. The company also reaffirmed its full-year profit forecast.

Deutsche Wohnen increased by 0.15 percent, after it resolved on a capital increase against cash contributions and under exclusion of shareholders' subscription rights.

Automakers were weak after data released by the European Automobile Manufacturers' Association showed Europe's new car sales declined sharply in December, continuing a downward trend started fifteen months ago. Sales plunged 16.3 percent from a year ago, while demand for new cars reached the lowest level recorded since 1995. Daimler declined by 0.16 percent and Porsche decreased by 0.68 percent. BMW finished up by 0.80 percent and Volkswagen gained 0.80 percent.

Eurozone inflation remained unchanged at 2.2 percent in December as initially estimated, final data released by Eurostat showed Wednesday. The latest figure is the lowest since November 2010. Inflation has been hovering above the central bank's threshold limit of 2 percent for many months.

The number of people worked in local manufacturing units in Germany rose by about 79,000 or 1.5 percent in November from a year ago, Destatis reported Wednesday. Around 5.2 million people were employed in manufacturing.

Germany's general government debt increased from last year in the third quarter, data released by the Federal Statistical Office showed Wednesday. Total federal debt, including those of governments, states, and municipalities/associations, increased 1.6 percent from last year to EUR 2064.1 billion at the end to the third quarter.

Consumer prices in the U.S. came in unchanged in the month of December, according to a report released by the Labor Department on Wednesday, with a sharp drop in gasoline prices offsetting higher prices for food and shelter.

The Labor Department said its consumer price index was unchanged in December after falling by 0.3 percent in November. The unchanged reading matched economist estimates.

Industrial production in the U.S. increased by slightly more than expected in the month of December, the Federal Reserve revealed in a report on Wednesday, with increased manufacturing and mining output more than offsetting a sharp drop in utilities output.

The report showed that industrial production increased by 0.3 percent in December following a revised 1.0 percent jump in November. Economists had expected production to edge up by 0.2 percent compared to the 1.1 percent growth originally reported for the previous month.

Following eight consecutive monthly gains, homebuilder confidence in the U.S. held steady in January, according to a report released by the National Association of Home Builders on Wednesday. The report showed that the NAHB/Wells Fargo Housing Market Index came in at 47 in January, unchanged from December. Economist had expected the index to inch up to 48.

US Market Report

Stocks Turning In Mixed Performance In Mid-Day Trading

After moving mostly lower in early trading on Wednesday, stocks have turned mixed over the course of the trading day as traders digest a slew of economic data as well as the release of earnings news from some big-name companies.

The major averages are currently turning in a mixed performance, with the Nasdaq posting a modest gain. While the Nasdaq is up 6.50 points or 0.2 percent at 3,117.28, the Dow is down 26.24 points or 0.2 percent at 13,508.65 and the S&P 500 is down 0.47 points or less than a tenth of a percent at 1,471.87.

The early weakness on Wall Street was partly due to renewed concerns about the outlook for the global economy after the World Bank cut its forecast for global economic growth in 2013.

The World Bank said it now expects the global economy to expand by 2.4 percent in 2013 compared to its June forecast for 3 percent growth. Estimates suggest the global economy grew 2.3 in 2012.

However, selling pressure was somewhat subdued following the release of a report from the Federal Reserve showing a slightly bigger than expected increase in U.S. industrial production in the month of December.

The report showed that industrial production increased by 0.3 percent in December following a revised 1.0 percent jump in November. Economists had expected production to edge up by 0.2 percent.

The increase in production came as increased manufacturing and mining output more than offset a sharp drop in utilities output.

A separate report from the National Association of Home Builders showed that homebuilder confidence held steady at a six-year high in January, while the Labor Department said consumer prices were unchanged in December.

Meanwhile, traders are also digesting quarterly results from JP Morgan (JPM) and Goldman Sachs (GS), with both financial giants reporting better than expected earnings.

Shares of Goldman Sachs have risen by 2.8 percent on the news, reaching their best intraday level in well over a year. JP Morgan initially moved lower but has climbed back near the unchanged line since then.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.6 percent, while China's Shanghai Composite Index fell by 0.7 percent.

In the bond market, treasuries have pulled back near the unchanged line after moving modestly higher in early trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.825 percent.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - Debt ceiling fears resurface

2013-01-15T19:08:00.001+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro remains steady, trading in consolidative sideways mode, off fresh 11-month high at 1.3400, posted yesterday. Close above 1.3360, yesterday’s opening price, keeps the upside in near-term focus, however, further consolidation cannot be ruled out, as 4h studies are extended. Range floor at 1.3335 so far holds the downside, with further easing towards strong support at 1.3300, reinforced by ascending 20 day EMA, seen not harmful for near-term bulls, while only slide below 1.3247 higher platform and Fib 38.2% of 1.2996/1.3401 would delay. On the upside, clear break above 1.3400 is required to resume near-term bulls off 1.3000 base and open way towards 1.3485/1.3500, next targets.

Res: 1.3395, 1.3402, 1.3450, 1.3485
Sup: 1.3335, 1.3300, 1.3280, 1.3247

GBP/USD

Cable remains under pressure despite recovery from yesterday’s low at 1.6030, as gains failed to regain important 1.6200 barrier, where 55 day EMA caps for now. Negative hourly studies and 4h indicators sliding below the midlines, keep the downside vulnerable, with immediate support at 1.6030, ahead of very strong support zone at 1.6000/1.5991, loss of which would trigger fresh leg lower and expose 1.5960 and 1.5900. Conversely, bounce above 1.6200, would avert immediate downside risk.

Res: 1.6093, 1.6103, 1.6121, 1.6154
Sup: 1.6063, 1.6030, 1.6006, 1.5991

USD/JPY

The pair extends near-term corrective pullback off fresh high at 89.66, posted yesterday, following failure on renewed attempt higher and subsequent fall through initial support at 89.00. Dips so far retraced nearly 38.2% of 86.81/89.66 ascend at 88.62, with prevailing negative tone on hourly chart and 4h indicators descending from overbought zone that suggest further corrective action. Penetration through previous high at 88.40 would risk an extension towards 88.00, Fib 61.8% and 4h 55 day EMA, loss of which would put near-term bulls on hold in favor of stronger reversal of rally from September 2012.

Res: 89.08, 89.66, 90.00, 90.39
Sup: 88.62, 88.40, 88.00, 87.90

USD/CHF

Yesterday’s extension of recovery rally from 0.9100 support zone, eases bear-pressure, as gains retraced 76.4% of 0.9302/0.9109 decline at 0.9260. Improved near-term studies now shift focus higher, however regain of 0.9272 and 0.9300, is required to confirm base at 0.9100/0.9080 zone and allow for stronger correction. Pullback on overbought hourlies should be ideally contained at/above 0.9200, to keep bulls intact.

Res: 0.9260, 0.9272, 0.9300, 0.9345
Sup: 0.9220, 0.9200, 0.9191, 0.9165

====================================================================

Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets cautious as US debt fears resurface

Market Movers

techMARK 2,181.78 -0.42%
FTSE 100 6,117.31 +0.15%
FTSE 250 12,774.79 +0.12%

- Anglo sinks into the red by the close
- Burberry jumps after Q3 update
- Debt ceiling concerns resurface, Obama takes hard-line approach

The FTSE 100 finished with only slight gains on Tuesday afternoon as markets continued to be range-bound with concerns over the US debt ceiling weighing on the mood.

"Today saw investors pause for breath and a degree of selling took place halfway through the session only for the losses to be reversed and the FTSE 100 has ended up back in positive territory," according to Angus Campbell, the head of market analysis at Capital Spreads.

"This degree of indecision has still yet to force the hands of those sellers in putting more downward pressure on stocks to create a more convincing retracement, whilst at the same time there is little impetus to send the markets higher for the next leg upwards."

He said that investors "seem to be sitting on their hands waiting for the next big event", reflected in the FTSE 100 trading within a narrow range of around 40-50 points over the last few days.

Debt ceiling fears resurface

President Barack Obama said last night that he would not negotiate with Republicans over raising the debt ceiling, declining to trade cuts in government spending in exchange for increasing the borrowing limit.

"If the goal is to make sure that we are being responsible about our debt and our deficit - if that's the conversation we're having, I'm happy to have that conversation," Obama told a news conference. "What I will not do is to have that negotiation with a gun at the head of the American people."

The ceiling will be reached within the next month or two, according to Treasury Secretary Tim Geithner.

"While this is at least a month away, there's already a sense of anxiety in the markets due to the inability in the past of US lawmakers to come to an agreement until the 11th hour," said market analyst Craig Erlam from Alpari.

Mixed newsflow elsewhere ensured that stocks lacked direction today, as traders reacted to disappointing growth figures in Germany, a solid bond auction in Spain and hints about further stimulus measures in Japan by the central bank governor.

Meanwhile, the Centre for Economics and Business Research warned that Britain may be stripped of its AAA credit rating as national debt continues to soar through the roof.

Europe Market Report

Europe midday: Unlikely Spain will ask for a bail-out this year, Fitch says

- Fitch: Unlikely Spain will ask for a rescue in 2013
- Slight falls in most benchmarks
- German GDP contracted towards end of year
- Spanish long-term bond yields reverse course and fall

FTSE 100: 0.03%
Dax-30: -0.49%
Cac-40: -0.21%
FTSE Mibtel 30: 0.05%
Ibex 35: -1.05%
Stoxx 600: -0.07%

The main European equity benchmarks were trading slightly lower by midday for the most part.

This following a warning by ratings agency Fitch that a delay in increasing the US federal debt limit could put the country's triple A rating at risk. As well, Fitch has indicated that it does not expect Spain to petition the European Stability Mechanism (ESM) for a rescue this year.

That last observation seems to have been what weighed on Spanish bonds in the early going, despite what looked to have been a fairly successful auction of €5.7bn of bills.

Of interest as well, Bank of England Governor Sir Mervyn King was cited as insisting that a banking union is not the solution to the Eurozone's problems.
All of the above came after slight losses last night on Wall Street and the reappearance of tensions on Capitol Hill over the federal government debt limit and the need for fiscal consolidation.

Of interest, however, yesterday evening ratings agency Standard&Poor's (S&P) raised its outlook on the sovereign debt ratings for Finland and Luxembourg.

Weaker than expected German GDP

Germany's gross domestic product (GDP) grew at an 0.7% year-on-year pace in 2012, below the 0.8% pace expected and the previous year's rate of 3%.

Economic activity contracted at a 0.5% pace in the last three months of 2012 the country's Statistics Office added.

Italian consumer prices increased at a 2.3% year-on-year clip in December, versus a rise of 2.4% in November.

The Eurozone trade surplus for the month of November rose to €11bn, after a reading of €7.4bn for the previous month (Consensus: €8bn).

The Netherlands' trade surplus rose to €4.3bn in November, after a reading of €3.6bn for the month before.

Single currency nudges higher

The euro/dollar is now falling by 0.45% to the 1.3318 dollar mark. Deutsche Bank expects the single currency to reach 1.40 in its cross versus the US unit this year.

Front month Brent crude futures are down slightly, by 0,116 dollars, to the 112.17 dollar mark on the ICE.

US Market Report

Stocks Seeing Modest Weakness After Early Downward Move

After moving to the downside in early trading, stocks have seen continued weakness over the course of morning trading on Tuesday. The major averages remain stuck in negative territory after ending the previous session mixed.

The weakness on Wall Street comes as worries about continued gridlock in Washington regarding the debt ceiling has overshadowed a Commerce Department report showing stronger than expected retail sales growth.

Selling pressure has remained somewhat subdued, however, as traders continue to wait for earnings season to pick up steam before making any significant moves.

Nonetheless, computer hardware stocks are seeing notable weakness, with the NYSE Arca Computer Hardware Index down by 1 percent. Logitech is posting a steep loss after being downgraded to underperform by Credit Suisse.

Semiconductor and bio stocks have also moved to the downside on the day, while some strength is visible among gold stocks.

The major averages have moved to the upside in recent trading but remain in the red. The Dow is down 19.52 points or 0.1 percent at 13,487.80, the Nasdaq is down 16.24 points or 0.5 percent at 3,101.26 and the S&P 500 is down 3.07 points or 0.2 percent at 1,467.61.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - Markets nervous ahead of Bernanke

2013-01-14T17:37:00.001+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The single currency holds positive sentiment for now, as corrective dips from day’s fresh high at 1.3400, so far being held at initial 1.3330 support. However, further easing towards strong support zone at 1.3300/1.3280, cannot be ruled out, as the price cracks dynamic 20 day EMA support at 1.3350 and hourly indicators still in descending mode and 4h ones reversing from overbought zone. Overall bulls, however, remain intact, with upside targets standing at 1.3485/1.3500.

Res: 1.3389, 1.3402, 1.3450, 1.3485
Sup: 1.3335, 1.3300, 1.3280, 1.3247

GBP/USD

The pair lost ground after break below 1.6100 support accelerated losses, retracing 76.4% of 1.5991/1.6177 rally so far at 1.6031. Weakened near-term structure sees immediate risk of retesting 1.6015, daily Ichimoku cloud base and strong 1.6000/1.5991 support zone, below which to open 1.5960, Fib 76.4% of 1.5826/1.6380, possibly 1.5900, round figure / 200 day MA, on a break. Holding above 1.6000, would signal further sideways movements, as long as 1.6177 stay intact, but prevailing negative tone sees increased downside risk.

Res: 1.6088, 1.6104, 1.6121, 1.6154
Sup: 1.6031, 1.6006, 1.5991, 1.5960

USD/JPY

Near-term price action moves in corrective mode, reversing from today’s fresh 2 ½ years high at 89.66. Loss of bullish momentum on hourly and 4h chart indicators emerging out of overbought territory, see potential for further retracement, before bulls re-assert, as larger picture bullish structure remains intact despite overbought readings. Further easing below 89.00 handle, also hourly 55 day EMA, would focus more significant 88.40, previous top, possibly 88.00, near 61.8% of 86.81/89.66, reinforced by ascending 4h 55 day EMA that maintains bulls since mid-November, where any stronger dips should be contained.

Res: 89.34, 89.66, 90.00, 90.39
Sup: 89.00, 88.73, 88.40, 88.00

USD/CHF

The pair emerges from dangerous zone, as bounce from lows near 0.9100 support, clears initial 0.9177 resistance and approaches psychological 0.9200 barrier. Improved hourly studies reduce the downside risk, however, break and close above 0.9200 is seen as supportive element for possible further recovery towards 0.9230, Fibonacci resistance and 09 Jan low, ahead of more significant 0.9270/0.9300, key near-term resistance zone. However, failure under 0.9200, would keep the downside vulnerable, as 4h chart studies are still in the negative territory.

Res: 0.9200, 0.9210, 0.9234, 0.9272
Sup: 0.9165, 0.9142, 0.9110, 0.9100

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Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets nervous ahead of Bernanke Q&A

Market Movers

techMARK 2,190.95 -0.77%
FTSE 100 6,107.86 -0.22%
FTSE 250 12,759.14 -0.30%

- Bernanke could spark market volatility
- Traders cautious ahead of US earnings season
- Eurozone industrial production disappoints

Dovish comments from a member of the Federal Reserve weren't enough to lift stocks on Monday, as markets remained cautious ahead of a speech by Ben Bernanke this evening and earnings reports from Wall Street heavyweights later this week.

Markets across Europe were supported early on by remarks from Federal Reserve Bank of Chicago President Charles Evans who said that the government should put "in place policies that slowly but surely bring the prospects of future revenues into balance with future spending".

He said that "monetary policy has an important contribution to make" and that the central bank will maintain its expansionary policies until its main goals are met.

However, as analyst Craig Erlam from Alpari explained this afternoon: "There's been an element of caution in the markets today, ahead of Bernanke's speech later at the University of Michigan. We tend to see a lot more volatility in the markets when Bernanke speaks and with the markets being caught off-guard by the apparent three-way split at the last meeting, over when to end the current asset purchases, Bernanke is likely to be bombarded with questions."

Meanwhile, following on from Wells Fargo's results on Friday, traders are now awaiting results from other banking giants this week, including Goldman Sachs, Morgan Stanley, JPMorgan and Bank of America.

Erlam said: "Expectations are extremely low around fourth-quarter earnings, despite stock indices trading at multi-year highs, which suggests there's plenty of room for the rally to continue in the short - term."

Weighing on market sentiment today was worse-than-expected industrial production data from the Eurozone. Output fell at an annual rate of 3.7% in November, the largest contraction since November 2009.

Europe Market Report

Europe midday: Eurozone industrial production drops by most since 2009

- OECD leading indicators show growth stabilising
- Praet (ECB): Too early to talk about exit
- Spanish 10 year bond yields 8bp higher ahead of Thursday auction
- Yen at 20-month low versus the single currency

FTSE-100: 0.15%
Dax-30: 0.58%
Cac-40: 0.42%
FTSE Mibtel 30: 0.43%
Ibex 35: 0.16%
Stoxx 600: 0.03%

European equities are continuing to trade slightly higher despite the release of weaker than expected Eurozone and Italian industrial production figures earlier on and ahead of several policy speeches from different members of the US Federal Reserve, including the President Ben Bernanke himself, tonight.

That comes after two members of the US Fed expressed unease with the current policy settings last week.

Acting as a backdrop, most market commentary is calling attention to remarks out from the chief of the Chicago Federal Reserve, Charles Evans, overnight, to the effect that markets can rest assured that the central bank will maintain its expansionary policies until its main goals are met.

Worth mentioning, industrial production in the Eurozone contracted by 3.7% year-on-year in November, the largest contraction since November 2009, with widespread weakness by sectors but while at the same time being concentrated in periphery countries. Production from the capital goods sector rose by 0.7% versus the prior month, albeit after the previous two months' sharp drops.

The Organisation for Economic Cooperation and Development's (OECD) composite leading indicator for the Eurozone, during the month of November, rose to 99.5 points from 99.4 in the previous month, and points to growth stabilising.

Acting as a backdrop, the Yen hit a 20 month low versus the single currency today.

Spanish house transactions fall

The German wholesale price index for the month of December remained flat versus the previous month (Consensus: 0.1%).

Eurozone industrial production decreased by 0.3% month-on-month in November (Consensus: 0.2%), weighed down by very large falls in the periphery countries, such as Ireland, Italy and Spain.

Italy's industrial production dropped by an unexpected 1.0% month-on-month in November (Consensus: 0%).

Spanish house transactions fell at a 6.1% year-on-year pace in November, versus a rise of 12.8% in the previous month.

Euro/dollar still trading higher

The euro/dollar is now up by 0.20% to the 1.3369 dollar level.

Front month Brent crude futures are now rising by 0,557 dollars to the 111.26 mark on the ICE.

US Market Report

US open: Apple weighs on Wall Street

- Apple down 3 per cent on reports of lower component orders
- Gartner says global PC shipments fell 4.9 per cent in Q4
- Obama to speak at 16:30

Dow Jones Industrials: 0.02%
Nasdaq Comp.: -0.40%
S&P 500: -0.21%

The major US equity benchmarks are now trading mixed following a lower open and on a day bereft of economic data or first tier company earnings announcements.

Filling the vacuum is Apple. Its shares dropped by almost 5% after the Nikkei newswire reported that the company is reducing its production plans following lower than expected sales of its iPhones.

For its part The Wall Street Journal cited two unnamed sources according to which the company has lowered its first quarter orders for iPhone screens by almost half.

Some market commentary is also calling attention to the potential impact which new open source operating systems could end up having on incumbents such as Apple.

Billionaire investor Charles Icahn has acquired a stake in offshore rig contractor Transocean.

Hewlett Packard is higher after JP Morgan upgraded its views on the company's shares to neutral from underperform.

IBM has been downgraded by JP Morgan to neutral from overweight.

Ten-year US Treasury yields are now falling by 2 basis points, to the 1.84% mark.

Front month West Texas crude futures are now down by 0.12% to the 93.75 dollar mark on the NYMEX.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - ECB is significantly more optimistic

2013-01-11T16:15:00.001+00:00

Weekly Market analysis

The ECB is significantly more optimistic surrounding the financial outlook, at least in public which will help underpin Euro sentiment, with rate cuts taken off the agenda for now. There is also a more confident tone surrounding the Chinese economy, although this optimism could fade very quickly given underlying credit conditions. In this environment, risk appetite could deteriorate quickly again.

Key events for the forthcoming week

Date	Time (GMT)	Data release/event
Tuesday January 15th	13.30	US retail sales
Friday January 18th	02.00	China Q4 GDP
Friday January 18th	09.30	UK retail sales

Dollar:

The most likely outcome continues to be solid US growth in the short-term even though there has been a persistent trend for mixed economic releases. Federal Reserve policy will continue to be an important short-term focus with some increased expectations over an ending of quantitative easing this year. Member comments will be watched very closely ahead of the end-January meeting. The overall tone is still likely to be broadly dovish which will lessen potential dollar support. Risk conditions will be watched closely with tensions liable to resume over the US debt-ceiling talks and defensive dollar support may increase again.

The US currency was unable to break significant technical levels against the Euro and dipped sharply later in the week following the ECB policy meeting with a retreat back towards 1.33.

The latest US employment report was relatively close to expectations with a non-farm payroll increase of 155,000 for December from an upwardly-revised 161,000 gain the previous month. The unemployment rate was static at 7.8% and there was a modest increase in earnings. The data will reinforce expectations of a solid US expansion, but markets were expecting a strong release which lessened the potential for further dollar buying support.

There was a stronger than expected reading for the ISM non-manufacturing index with an increase to 56.1 for December from 54.7 the previous month with a particularly strong reading for the employment report which maintained optimism surrounding the outlook and potential for US out-performance.

The decision to water-down Basel bank capital reserve requirements from 2015 should have some positive impact on risk conditions which would also curb underlying dollar demand.

The Administration formally nominated Jack Lew as the new Treasury Secretary. Any comments on the debt ceiling and fiscal situation will be watched very closely and any remarks on the dollar will also be watched very closely.

US jobless claims were slightly higher than expected at 371,000 in the latest week from a revised 367,000 previously while there was a downward revision to the Philadelphia Fed index for December, but the overall impact was limited

Euro

Structural fears surrounding the Euro-zone will remain lower in the short-term. There has been a further easing of peripheral bond yields with improved investor demand for securities. The ECB is more confidence over the financing risks and appears much less willing to consider a further cut in interest rates. Confidence could, however, unravel quickly, especially with continuing GDP declines in the peripheral economies such as Spain with high levels of unemployment also increasing social tensions. Euro support is therefore liable to fade again quickly on fresh economic fears.

The Euro found firm support close to 1.30 against the US currency and advanced strongly later in the week after the ECB policy meeting.

There was a small improvement in Euro-area business confidence, but the unemployment rate increased to a record 11.8%. Data from peripheral economies inevitably remained the key focus with Spanish and Greek unemployment above 25% as youth unemployment remained above 50%. There were further concerns surrounding the substantial political tensions associated with extremely high unemployment levels.

The German industrial data was again weaker than expected with a 2.9% annual decline despite a small monthly recovery which continued to cause some unease surrounding the Euro-zone growth outlook. There was also uncertainty surrounding German parliamentary support for a Cyprus bailout which had some small negative Euro impact.

There was a stronger than expected Spanish debt auction as the five-year bond yield declined to below 4.00% from 4.20% previously and Spain was also able to sell more than the targeted amount which increased confidence in the peripheral bond market and pushed benchmark yields down further.

As expected, the ECB left interest rates on hold at 0.75%, although there had been some calls for the bank to cut rates. In the press conference, Draghi remained generally downbeat surrounding immediate growth prospects with a warning that risks were still to the downside and that further balance sheet adjustments were needed. Inflation risks were described as broadly balanced.

The rest of the briefing was significantly more optimistic as Draghi stated that financial conditions had improved to a marked extent. The ECB President stated that the decision to leave interest rates on hold had been unanimous and gave the impression that there had been no calls for rates to be cut, in contrast to the December meeting. Although he refused to rule out the possibility of further rate cuts, markets moved to price-out any reductions during 2013 and this had a strong impact in boosting Euro demand.

The Euro was also boosted by Draghi’s refusal to comment on exchange rates as he pointedly stated that the ECB did not have an unemployment target.

Yen:

There will be intense pressure for the Bank of Japan to engage in further aggressive policy easing with widespread expectations that the central bank will introduce a revised 2% inflation target at next week’s meeting. There will also be scope for a further monetary easing while the government will announce a further fiscal expansion. Defensive demand for the yen will also fade if there is a sustained improvement in risk appetite and confidence in the global growth outlook. A substantial amount of yen negative fundamentals have, however, been priced in which could trigger a sharp correction.

The yen remained under heavy selling pressure during the week with correction attempts quickly attracting selling pressure on the Japanese currency. The US currency pushed to a 29-month high above 89 and the Euro also advanced very strongly during the week.

There were widespread expectations that the Bank of Japan would introduce a 2% inflation target at next week’s policy meeting which would trigger a further easing of monetary policy by the central bank.

The yen was also undermined by improved sentiment towards global financial conditions. The Japanese currency was subjected to further heavy selling pressure later in the New York session. Prime Minister Abe stated that the government would launch a JPY10.3trn spending package to boost the economy and there was also pressure on the Bank of Japan to target employment as well as inflation.

The economic data provided no support for the yen with a JPY222bn current account deficit for November, reinforcing fears over the balance of payments position.

Sterling

There will be further uncertainty surrounding the UK outlook with particular unease surrounding the consumer spending outlook as incomes remain under pressure and there will be expectations of weak 2013 growth. The balance of payments situation will also come under greater focus with unease over potential funding pressures if there is a sustained decline in defensive Sterling demand. In contrast, there will be Sterling support from the aggressive monetary policies in the US and Japan. Trends in risk appetite will still be important at times and the UK currency will tend to gain some support when confidence in is stronger, but the currency overall will find it difficult to make much headway.

Sterling was able to find support close to 1.60 against the dollar with rallies back to the 1.6150 area while the UK currency was on the defensive against the Euro with a move beyond the 0.82 level.

The UK goods deficit declined slightly to GBP9.2bn from GBP9.5bn the previous month with a modest gain for exports. There was still underlying unease surrounding the trade outlook with exports still unable to make much underlying headway and there were also expectations that trade would be a small negative influence on the fourth-quarter UK GDP data.

There were no surprises from the Bank of England as it held interest rates steady at 0.50% and also decided against any further boost to the quantitative easing programme from GBP375bn. The UK currency gained some underlying support from the decision not to expand policy further, especially with expectations that the Federal Reserve will continue to buy bonds in the short-term.

Swiss franc:

The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term, especially with a strong determination to protect competitiveness and avert any serious deterioration in industrial conditions. The imposition of negative rates by commercial banks will also undermine franc support. An easing of Euro-zone pressures will tend to lessen the potential for defensive capital inflows into the franc, but the currency will gain at times as an alternative to the Japanese currency.

The dollar was unable to sustain a firmer tone against the franc and retreated to lows close to 0.91 later in the week. With the US currency cushioned to some extent by a weaker franc tone on the Euro cross with a move above 1.21.

There were reports that the Zurich Canton Bank was setting negative interest rates on Swiss deposits, following the example of some major banks last year and this had a significant impact in weakening the Swiss currency. The ECB shift away from a potential rate cut also undermined the franc.

Australian dollar

The Australian dollar found support below 1.05 against the US currency and pushed to highs near 1.06 despite struggling on the crosses. There was greater optimism surrounding the Chinese economic outlook which also provided some degree of support for the Australian currency.

The domestic data releases provided no support for the currency with a wider than expected trade deficit and a slight decline in retail sales for the month, although international trends tended to dominate.

There will be immediate support from greater optimism surrounding the Chinese outlook, but confidence is liable to fade quickly and limit Australian dollar gains.

Canadian dollar:

The US dollar was unable to push above the 0.99 level against the Canadian currency during the week before re-testing support below 0.9850

There were only limited domestic economic releases with a sharp decline in building permits offsetting the substantial gains seen the previous month while the PMI index edged back above the 50 level for December.

Even with optimism surrounding the fundamentals and potential capital inflows, the Canadian dollar will find it difficult to sustain any significant gains.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary-Spanish 10 year bond yields drop

2013-01-10T19:04:00.001+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

Near-term bulls returned fully in play, as the price accelerated on a break above 1.3100/38 barriers, to penetrate psychological 1.3200 resistance. With gains retraced near 76.4% of 1.3300/1.2996 descend, near-term focus shifts towards very strong 1.3300 barrier that capped several attempts in December. Studies on 4h chart are in ascending mode and see room for further extension higher, however, overextended hourly conditions could anticipate corrective action that has not been signaled yet. Daily close above 1.3200 handle would be seen as supportive element.

Res: 1.3218, 1.3227, 1.3260, 1.3282
Sup: 1.3200, 1.3160, 1.3150, 1.3138

GBP/USD

The pair bounces above 1.6100 barrier, also 55 day EMA that avoids immediate downside risk of penetrating important 1.6000 support, with rally to 1.6118 so far, nearly fully retracing 1.6126/1.5991, 08/09 Jan descend. Lift above 1.6126 and Fibonacci 38.2% at 1.6140 is required to confirm break above near-term 1.6126/1.6000 range and open way for stronger recovery, as currents movements could be described rather consolidative. Fresh bullish momentum on 4h chart is sen supportive, while hourly studies moved in the positive territory. Initial supports lie at 1.6080/70 zone, approx mid-point of today’s rally and should ideally contain any corrective dips.

Res: 1.6118, 1.6126, 1.6140, 1.6185
Sup: 1.6081, 1.6074, 1.6034, 1.6000

USD/JPY

The pair consolidates recent gains within 88.32/00 range, just ahead of key near-term barrier and recent high at 88.40. Today’s close above 88.00 would be supportive for fresh attempt and break above 88.40 to open 89.00 next. Near-term structure maintains positive tone, however, risk would be seen on a loss of 88.00 handle that may signal near-term double top and trigger stronger correction, as overextended daily studies require caution.

Res: 88.32, 88.40, 89.00, 89.14
Sup: 88.00, 87.85, 87.71, 87.40

USD/CHF

The pair lost traction on approach to 0.9280/0.9300 barriers, with subsequent reversal accelerating losses on a break below initial 0.9230 and more significant 0.92000 support. With fresh weakness retracing 61.8% of 0.9080/0.9300 rally at 0.9160, more risk is now seen towards the downside, as strong supports at 0.9100 and 0.9080 base are coming in near-term focus. As 4h chart indicators slide below the midlines, scope is seen for possible re-visit of 0.9100/0.9080, with oversold hourlies signaling corrective action that may precede fresh bears. However, no firm signal of reversal seen yet. Previous supports at 0.9200/0.9230 now revert to resistance and being reinforced by 55/20 day EMA’s respectively.

Res: 0.9200, 0.9230, 0.9241, 0.9265
Sup: 0.9160, 0.9130, 0.9100, 0.9080

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Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets flat as central banks hold rates

Market Movers

techMARK 2,192.46 -0.05%
FTSE 100 6,101.51 +0.05%
FTSE 250 12,730.78 +0.17%

The FTSE 100 swung between gains and losses for most of Thursday's session as investors digested a host of economic data, bond auctions in the Eurozone and policy decisions by the Bank of England (BoE) and European Central Bank (ECB).

Nevertheless, the Footsie managed to finish in positive territory, extending a near four-year high from the day before. The index finished at 6,099 on Wednesday and at 6,102 today, its highest closing level since May 22nd 2008.

Chinese trade rebounded strongly last month, boosting sentiment early on. The trade surplus totalled $31.6bn in December, well ahead of the $19.6bn surplus reported in November and the $20bn forecast. Exports jumped by 14.1% year-on-year, ahead of the 5% estimate, while imports also beat expectations rising by 6%, ahead of the 3.5% estimate.

Meanwhile, solid debt auctions in Spain and Italy also provided some support this morning, as Eurozone peripheral bond yields on the secondary market plunged. Specifically, Spanish benchmark 10-year yields dropped below 5% for the first time since March 2011.

At midday, the BoE announced that it has kept its official Bank Rate at 0.5% and its asset purchase programme at £375bn. Analyst Philip Shaw from Investec said that 'on-hold' decision was widely expected. "We characterise recent economic data as mixed rather than gloomy and share some of the MPC's optimism over the potential effects from the FLS. Accordingly we consider the chances that the committee sanctions more QE to be less than 50-50, especially as we expect inflation to exceed 3% later this year."

Shortly after, the ECB also decided to keep rates on hold at 0.75%. In the following press conference, ECB President Mario Draghi reiterated that medium-term inflation expectations remained well anchored and that he expected inflation to come in below or very close to the 2% target this year. While he said that risks to the economic outlook remain on the downside, the Eurozone recovery is expected to begin at the year.

Markets looked like they would finish higher today, but disappointing jobless claims figures in the USerased gains in afternoon trade. Claims for unemployment benefits increased to 371,000 last week, higher than the 365,000 consensus forecast.

Europe Market Report

Europe midday: Periphery bond yields move lower

-Investors wating for ECB press conference
-Successful Spanish and Italian Treasury debt auctions
-Spanish 10 year bond yields drop 18bp to 4.95 per cent

FTSE-100: 0.09%
Dax-30: 0.21%
Cac-40: 0.23%
FTSE Mibtel: 0.68%
Ibex 35: -0.05%
Stoxx 600: -0.05%

The tone to trading on the main European equity benchmarks has improved somewhat but remains mixed ahead of European Central Bank President Mario Draghi's press conference, which is scheduled to start at 13:30.

Both the European Central Bank and the Bank of England opted to maintain their current monetary policy settings.

It will be interesting to see if the Basel Committee on Banking Supervision's decision to relax the requirements for bank's liquidity buffers –taken this past Sunday – influences the ECB's thinking.

Both the Spanish and Italian treasury auctions this morning have been successful.
For its part the Spanish Treasury sold €5.8bn in debt instruments, versus the €5bn that were expected. The bid-to-cover ratio for the 5 year debt on offer rose to 2.6, versus 1.57 last time, and to 2.9 for the tranche of 13 year debt being sold, versus 2.06 the last time around. "Influenced by this past Sunday's decision from the Basel Committee on Banking Supervision?" economists at Digital Look are asking.

Acting as a backdrop, speaking on Bloomberg TV PIMCO's Andrew Bosomworth forecast that the ECB will cut rates, but not at today's meeting.

Slight gains in single currency

The euro/dollar is now edging higher by 0.35% to the 1.31 dollar mark.

Front month Brent crude futures are rising by 0,869 dollars to the 112.73 dollar per barrel mark on the ICE.

US Market Report

US open: Stocks waver at resistance

- Acampora sees multi-year advance on Wall Street
- In-line initial weekly unemployment claims

Dow Jones Industrials: 0.27%
Nasdaq Comp.: 0.42%
S&P 500: 0.34%

The major US equity benchmarks are now registering modest advances.

Helping to hold stocks aloft are the better than expected export figures which were released overnight in China.

Nevertheless, levels of technical resistance have yet to fall, with the S&P 500 having reached an intra-day high of 1,469, versus resistance at 1,471 which some analysts are now watching.

Of interest, technical analyst and Wall Street legend Ralph Acampora believes investor sentiment toward US stocks is poised to change for the better and contribute to a multi-year advance, Bloomberg reports.

Weekly US initial unemployment claims rose by 4,000 to 371,000 (Consensus: 365,000). The previous week's reading was revised down by 5,000 to 367,000.

Front month West Texas crude futures are now rising by 1.19% to the 94.16 dollar level on the NYMEX.

10 year US Treasury yields are now rising by 3 basis points, to the 1.90%.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - Earnings Optimism Leads To Strength On Wall Street

2013-01-09T19:12:00.000+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro dips below today’s range floor and Fib 61.8% of 1.2996//1.3138 bounce at 1.3055, unable to regain 1.3100 handle. Negative hourly structure sees the downside favored, with 1.3000 support in focus. Break here to confirm completion of 4h H&S pattern and trigger fresh extension of reversal from 1.3300, with next downside targets standing at 1.2980, 50% of 1.2660/1.3307 and 1.2950, daily Ichimoku cloud top. Daily high at 1.3094 offers initial resistance, reinforced by descending 20 day EMA.

Res: 1.3060, 1.3094, 1.3138, 1.3150
Sup: 1.3020, 1.3000, 1.2980, 1.2950

GBP/USD

The pair remains under pressure, as corrective rally from 1.6000, 04 Jan low is now fully retraced. Penetration through 1.6000 tested 1.5990, daily Ichimoku cloud base, so far, with negative near-term structure seeing potential for further weakness. Clear break below pivotal 1.6000 support is required to confirm and open 1.5960 Fib 76.4% of 1.5826/1.6380, and 1.5900, 200 day MA.

Res: 1.6030, 1.6074, 1.6100, 1.6126
Sup: 1.5990, 1.5960, 1.5911, 1.5900

USD/JPY

Near-term bulls off 86.81 base are gaining pace, as the pair continues to travel north and regains important 86.80 level, yesterday’s high and Fib 61.8% of 88.40/86.80 descend, after breaking above 4h 20 day EMA at 87.47. This gives more credibility to the current recovery, with clearance and close above 88.00 barrier seen as confirmation. Positive near-term studies support the notion, with intraday lows and higher platform at 87.40, reinforced by ascending hourly 20 day EMA, offering solid support.

Res: 88.00, 88.40, 89.00, 89.14
Sup: 87.57, 87.40, 87.20, 87.00

USD/CHF

The pair resumes recovery from 0.9200, breaking above today’s consolidation top at 0.9255 and looking for test of next barriers at 0.9285, 07 Jan high / Fib 76.4%, to possibly fully retrace near-term 0.9302/0.9207 corrective phase. Hourly studies maintain positive tone, however, lack of bullish momentum, seen on 4h chart, may see hesitation on approach to 0.9285, also trendline resistance and key near-term barrier at 0.9300, break of which is required near-term base and allow for stronger recovery. Ascending 20 day EMA at 0.9237, underpins the action, ahead of 55 day one at 0.9210, reinforcing 0.9200 base.

Res: 0.9285, 0.9300, 0.9339, 0.9381
Sup: 0.9255, 0.9230, 0.9200, 0.9180

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Daily Market Commentary: (Evening Report)

London Market Report

Index closes at highest level since 2008

    Market Movers
    techMARK 2,193.52 +0.91%
    FTSE 100 6,098.65 +0.74%
    FTSE 250 12,709.06 +0.59%

UK markets closed significantly higher on Wednesday, up 45 points equal to 11.41bn pounds, with the index closing at its highest level since May 22nd 2008.

The gains were led by banking stocks after UBS hiked its targets for the Lloyds, Barclays and RBS, saying 'the UK is over its experiment of combining fiscal and monetary austerity'.

The broker revised its price target on Lloyds to 60p from 50p, for Barclays to 315p from 255p and RBS to 410p.

This came in anticipation of an expected improvement in mortgage lending and a reduced need to raise capital after the Basel committee on banking supervision last Sunday eased financial institutions’ liquidity requirements.

The result, which has ‘read-across’ to other countries is that “Britain’s experiment of combining fiscal and monetary austerity may be over and the incoming Bank of England governor’s openness to monetary policy innovation may not even need to be tested if,” as UBS expects, banks return to lending.

On a more realistic note – sombre even - plenty of long-term policy challenges remain.

UK shop prices steady, food inflation still an issue

Shop price inflation remained unchanged at a 1.5% year-on-year pace in December, according to the latest data released today by the British Retail Consortium (BRC).

More specifically, food inflation fell to 4.1% in December from 4.6% in November. Non-food prices were broadly flat in December after falling 0.3% in November.

Meanwhile, the Recruitment and Employment Confederation's (REC) seasonally adjusted index of permanent staff placements fell to 53.2 in December from 56.0 in November. That was the highest since April 2011. Readings above 50 indicate growth compared to a month earlier.

UK trade gap narrowed in November

The UK's trade deficit closed in November as exports caught up slightly with imports, according to the Office for National Statistics.

The deficit on goods and services totalled £3.5bn in November, compared with £3.7bn in October. There was a deficit of £9.2bn on goods, partly offset by an estimated surplus of £5.7bn on services.

Income disparity 'biggest risk to global security'

The biggest single threat to global security in the next ten years is severe income disparity, according to the World Economic Forum’s annual Global Risks Report.

The survey of more than 1,000 experts from industry, government, academia and civil society, also found the risk that would cause the most damage - were it to happen - is major systemic financial failure.

Two risks appeared in the top five risk categories in terms of impact and likelihood – chronic fiscal imbalances and water supply crisis.

Europe Market Report

European Markets Climbed After Positive Report From Alcoa

The European markets finished in positive territory Wednesday. Banks were among the best performing stocks of the session. Investors were encouraged by the fourth quarter profit reported by aluminum producer Alcoa, which is viewed as the start of the earnings reporting season in the United States. Alcoa's earnings were in line with expectations, while sales topped estimates. The company also expects global aluminum demand to grow 7 percent this year, up from 6 percent in 2012.

Policymakers of the Bank of England are set to adopt a "wait and see" stance at the start of the year as policymakers see little compelling case for another stimulus.

The Monetary Policy Committee headed by Mervyn King is expected to keep the size of its bond buying program unchanged at GBP 375 billion and the interest rates unchanged at record low 0.50 percent on Thursday. The announcement is due at 7.00 am ET.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.57 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.75 percent.

The DAX of Germany climbed by 0.32 percent and the CAC 40 of France advanced by 0.31 percent. TheFTSE 100 of the U.K. rose by 0.74 percent and the SMI of Switzerland gained 1.09 percent.

Germany's industrial production rose 0.2 percent in November from a month ago, the Federal Ministry of Economics and technology showed Wednesday. Although it reversed a 2 percent fall logged in October, the growth rate was weaker than the 1 percent rise forecast by economists.

The U.K. visible trade deficit narrowed to GBP 9.2 billion in November from GBP 9.5 billion in October, the Office for National Statistics reported Wednesday. The deficit was seen at GBP 9 billion.

British shop price inflation remained at 1.5 percent for a third consecutive month in December, but food inflation eased noticeably, a report from the British Retail Consortium (BRC) showed Wednesday. Economists expected the shop price index to rise 1.7 percent year-on-year. Food inflation fell to 4.1 percent in December from 4.6 percent in November.

US Market Report

Earnings Optimism Leads To Strength On Wall Street

With quarterly results from Alcoa (AA) generating some optimism about the outlook for corporate earnings, stocks have moved mostly higher during trading on Wednesday after ending the two previous sessions in the red.

The major averages have moved roughly sideways in recent trading, hovering firmly in positive territory. The Dow is up 83.69 points or 0.6 percent at 13,412.54, the Nasdaq is up 17.49 points or 0.6 percent at 3,109.30 and the S&P 500 is up 6.21 points or 0.4 percent at 1,463.36.

The strength on Wall Street is partly due to a positive reaction to quarterly results from Alcoa, which unofficially kicked off the earnings season after the close of trading on Tuesday.

Alcoa reported fourth quarter adjusted earnings of $0.06 per share compared to a year ago loss of $0.03 per share, matching analyst estimates.

The aluminum giant also reported fourth quarter revenues that came in above expectations and forecast a 7 percent increase in aluminum demand in 2013.

While shares of Alcoa rose as much as 2.5 percent at the open and reached a three-month high, the stock has given back some ground since then. Alcoa is currently up by 0.7 percent.

The news from Alcoa has generated some optimism about the unfolding earnings season, although traders still seem reluctant to add to the substantial rally that was seen last week.

A lack of major U.S. economic data may also be keeping some traders on the sidelines, with today reflecting the third straight quiet day on the economic front.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Wednesday. Japan's Nikkei 225 Index advanced by 0.7 percent, while Hong Kong's Hang Seng Index ended the day up by 0.5 percent.

In the bond market, treasuries have pulled back near the unchanged line after moving modestly higher in early trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is currently unchanged at 1.871 percent.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily FX & Market Commentary - Hedge funds expect S&P 500 to rise

2013-01-08T18:14:00.001+00:00

Daily FX Commentary: (Morning Report)

EUR/USD

Near-term bulls regained control after the pair found ground at psychological / trendline support at 1.3000 and subsequent bounce closed above initial 1.3088/1.3100 barriers. Gains were so far limited by still bearish 4h 55 day EMA and just ahead of strong 1.3150/60 barriers, 50% retracement of 1.3300/1.2996 and previous consolidation floor / Fib 38.2% expansion of wave from 1.3000, clearance of which would open way towards 1.3200. Four-hour chart indicators are pointing higher, in attempt to break into positive territory, however, reversing hourlies, do not rule out further consolidative / corrective action, with 1.3100/1.3088, offering good support and expected to contain. Only break below 1.3050 would signal an end of near-term corrective phase and bring bears back in play.

Res: 1.3138, 1.3150, 1.3160, 1.3183
Sup: 1.3100, 1.3088, 1.3050, 1.3020

GBP/USD

Cable is losing traction, as yesterday’s rally and close above psychological 1.6100 barrier, failed to sustain gains. Reversal below the latter, pressures strong supports at 1.6080/65, last Friday’s intraday high / daily Ichimoku cloud top, loss of which would re-focus 1.6000. Weakening hourly structure and 4h indicators in the negative territory, support such scenario. However, holding above 1.6065 would keep hopes for fresh recovery alive, with break above 1.6140/50, 55 day EMA / Fib 38.2% of 1.6380/1.6008, required to avert immediate downside risk and open way for recovery towards 1.6200.

Res: 1.6100, 1.6126, 1.6150, 1.6200
Sup: 1.6080, 1.6065, 1.6040, 1.6020

USD/JPY

The pair remains at the back-foot, as basing attempt at 87.60 failed to clear psychological 88.00 barrier and fresh weakness cracked strong supports at 87.35, Fib 38.2% of 85.64/88.40 / 03 Jan previous high. Negative hourly structure and 4h indicators descending from overbought zone, see potential for further retracement, with loss of 87.22, overnight’s low, to open 87.00, 50% retracement and 86.75/70, 03 Jan low / Fib 61.8%. Any bounce higher would face good barrier at 88.00 and only break here to shift focus higher.

Res: 80.43, 80.55, 80.67, 81.00
Sup: 80.00, 79.80, 79.63, 79.27

USD/CHF

Upside rejection at 0.9300 and formation of hourly failure swing, increases the downside risk, as hourly studies turned negative and reversal retraced nearly 50% if 0.9080/0.9300 recovery rally. Temporary support was found at 0.9200, also 55 day EMA, however, holding below 0.9230, previous low / Fib 38.2% and hourly 55 day EMA, would keep focus at the downside, with break below 0.9200 to open way for further retracement and expose 0.9180, previous range top and 0.9163, Fib 61.8%.

Res: 0.9230, 0.9250, 0.9263, 0.9285
Sup: 0.9200, 0.9180, 0.9163, 0.9130

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Daily Market Commentary: (Evening Report)

London Market Report

London close: Slight losses seen on FTSE

Market Movers

techMARK 2,173.65 +0.08%
FTSE 100 6,053.63 -0.18%
FTSE 250 12,635.01 -0.68%

UK stocks ended Tuesday's session with small losses, influenced in part by some weaker-than-expectedeconomic indicators from the Eurozone, marking the second day of losses this year.

Eurozone unemployment hit a new record high of 11.8% in November, according to official figures. This was a slight rise on the 11.7% rate the 17-nation bloc registered in October. More than 26m people are now unemployed across the EU, with that number totalling 18.8m in the Eurozone.

Also of concern was the British Retail Consortium's (BRC) prediction for this 2013. How will 2013 go you say? "Underwhelming" is the BRC's answer.

After reviewing the data economists at Barclays Research are of a similar mind, saying that: "With consumer confidence remaining depressed and spending power growth likely to be measured, we do not expect the retail environment to improve significantly this year."

Sales at stores open at least a year gained 0.3% in December versus a year ago, the worst performance since 2010, when adverse weather conditions deterred shoppers.

Meanwhile, research by a leading business group shows the UK economy grew in the fourth quarter of 2012, despite widespread fears of a triple dip recession.

The British Chamber of Commerce (BCC) Quarterly Economic Survey showed a pick up in both the manufacturing and service sectors in the last three months of the year. The survey of 7,662 businesses also found that levels of confidence and investment had increased over the period, despite remaining weak by historical standards.

Of possible import, an adviser to China's central bank was cited as saying that it will be more cautious in the second half of the year regarding its monetary policy.

Europe Market Report

Europe midday: Stocks push higher ahead of the BoE and ECB

- Banks deposit 244.5bn euros overnight at ECB
- Weak German import and export data
- Italian banks downgraded
- BoJ to buy ESM bonds

FTSE-100: 0.11%
Dax-30: 0.04%
Cac-40: 0.56%
FTSE Mibtel 30: 0.81%
Ibex 35: 0.58%
Stoxx 600: 0.21%

European stocks had moved back into the blue by midday following an earlier start lower. That following the small losses seen on Wall Street overnight and cautious remarks out from some Chinese policy makers.

Weaker than forecast German export data was surely another factor weighing on European shares early in the session. Even so, this is what economists at Barclays Research were saying, "We therefore believe that the recent weakness in German trade figures is mainly the lagged response to the slowdown in global growth that occurred earlier in 2012. Despite the recent weakness, however, Germany's trade performance in 2012 through November has been much better than expected at the beginning of last year."

Those economists also seem to have given short shrift to the drop seen in imports.

All of the above came ahead of the start of the regular earnings season, Stateside, later today, with the release of Alcoa's results, which are due after the close.

Also worth noting, the Bank of Japan (BoJ) has announced its intention to acquire bonds issued by the European Stability Mechanism (ESM), which is a positive for the wider market.

Italian banks downgraded

Weak German import and export data

Italian unemployment remained at an 11.1% rate in November (Consensus: 11.2%).

France's trade deficit improved to -€4.33bn in November, following a reading of -€4.71bn in the previous month (Consensus: -€4.8bn).

Germany's trade surplus shrank in that same month, to €14.6bn from €15.2bn in October (Consensus: €15bn). The country's exports fell by 3.4% month-on-month (Consensus: -0.5%). Imports decreased by a similarly large 3.7%, which may denote underlying weakness in the economy.

Switzerland's unemployment rate rose to 3.3% for December, after a reading of 3.1%.

Slight drop in the single currency

The euro/dollar is now falling by 0.35% to the 1.3078 dollar mark.

Front month Brent crude futures are up by 0.589 dollars to the 112.09 level on the ICE.

US Market Report

US open: Hedge funds expect S&P 500 to rise

- State and local governments back to health
- Overwhelming majority of hedge funds expect S and P 500 to rise

Dow Jones: -0.51%
Nasdaq Comp.: -0.54%
S&P 500: -0.54%

US equities are now registering moderate losses ahead of this evening's results from aluminium giant Alcoa, which typically marks the start of the corporate earnings season on the other side of the pond.

Of interest, state and local governments are in their best financial shape since the recession, giving them leeway to cushion the US economy from federal budget cuts with spending and hiring of their own, according to analysis by Moody's Analytics, Bloomberg reports.

Respondents to a December survey of hedge fund managers carried out by Trimtabs overwhelming expect the S&P 500 to go up this year, but few expected as strong a performance as 2012.

Large drop in retail sales

Same store retail sales dropped 4.2% last week, according to the latest survey data from ICSC.

The NFIB's small company confidence index improved slightly, to 88 points in November (Consensus: 87.2) after a reading of 87.8 in the month before.

Slight rise in cure futures

West Texas crude futures are now rising by 0.39% to the 92.893 dollar mark on the NYMEX.

10 year US Treasury yields are now lower by 3 basis points, to 1.87%.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - Fed minutes have injected a greater mood of uncertainty

2013-01-04T13:03:00.000+00:00

Weekly Market analysis

Following the drama surrounding the US fiscal cliff talks, monetary and currency policies will remain a very important focus. The Federal Reserve will maintain a very loose monetary policy for now, butt he latest Fed minutes have injected a greater mood of uncertainty and the possibility of a tightening. TheBank of Japan will also be under intense pressure to boost policy further. The ECB will also consider further action to underpin the economy which will ensure very loose monetary conditions and may serve to lessen the threat of a severe deterioration in risk appetite.

Key events for the forthcoming week

Date	Time (GMT)	Data release/event
Friday January 4th	13.30	US employment report
Thursday January 10th	12.00	Bank of England interest rate decision
Thursday January 10th	12.45	ECB interest rate decision

Dollar:

The US fiscal deal has eased immediate fears surrounding a disorderly policy tightening. Nevertheless, there will still be a significant policy tightening which will have some impact in curbing consumer spending growth. The deal was also only a stop-gap measure and there will be further political confrontation surrounding spending cuts and the debt ceiling. There will be uncertainties surrounding the growth outlook and risk conditions. There is a very dovish Federal Reserve committee for 2013, but the latest minutes will spark some speculation that there will be some tightening later in 2013. Net longer-term yields should be dollar supportive for the US currency.

After initial weakness following the US budget deal, the dollar found support near 1.33 against the Euroand rallied strongly against European currencies

Following the deal to avert the immediate US fiscal crisis, there was a renewed consideration of the longer-term outlook. There were further concerns that the spending issue would have to be tackled again before the end of February and Congress will also have to tackle the debt-ceiling issue with the potential for further tense negotiations. There was some reassessment of risk considerations which also curbed dollar selling.

As far as the US data releases were concerned, there was an increase in the ISM manufacturing index to 50.7 from 49.5 which provided some degree of relief.
The ADP employment data was stronger than expected with a gain of 215,000 private-sector jobs for December from a revised 118,000 previously. Although there was a higher than expected release for jobless claims, there was greater optimism surrounding the US payroll report.

The latest FOMC minutes stated that some members were concerned surrounding risks associated with further quantitative easing, especially as it would make it more difficult to secure an eventual exit strategy. In this context, several members wanted to scale-back bond purchases well before the end of 2013. There was still some degree of caution surrounding the labour market, but there was shift in expectations on potential tightening this year as markets had been primed for a very dovish tone.

Euro

Structural fears surrounding the Euro-zone have eased for now which will lessen the potential for aggressive selling pressure. There will still be a high degree of unease surrounding the growth outlook and there will also be pressure for the ECB to relax monetary policy further. The bank will still be uneasy over the prospect of negative deposit rates and there will also be opposition from the Bundesbank. Any friction within the ECB will tend to undermine confidence in the Euro. There is also less scope for capital repatriation which will tend to lessen scope for Euro buying and a Spanish aid request would be likely to provide only initial currency relief.

The Euro was unable to sustain an initial advance following the New Year break and retreated sharply towards the 1.30 level against the dollar.

Italy’s lower house approved the 2013 budget in parliament and, as expected Prime Minister Monti submitted his resignation. There were some suggestions that he could stand for election in forthcoming elections, but uncertainty remained high.

The final Euro-zone PMI data was slightly weaker than expected with a dip to 46.1 from 46.3 as there was a dip in the German index with an improvement in the Italian index offset by a weaker Italian outcome. The data maintained some degree of unease surrounding the Euro-zone outlook which dampened Euro demand.

There was some speculation that capital repatriation associated with the year-end Euro demand to bolster balance sheets had eased. An easing of flows could be significant in triggering a wider loss of Euro support.

There was further speculation that the ECB could consider a cut in interest rates at the January meeting, but a higher than expected German inflation reading increased speculation that there would be Bundesbank opposition to any rate cut and there would also be unease within the Council over any move to set a negative deposit rate.

Although a surprise decline in Spanish unemployment, provided some relief, there were concerns that the fall reflected longer-term unemployed leaving the labour market rather than any real improvement in conditions. The German labour-market data was close to expectations with a 3,000 unemployment increase for December.

The latest money-supply data recorded an eighth successive decline in private lending which maintained unease over the outlook, but there was a small increase in banking-sector deposits in Italy and Spain which provided some relief. Spain’s admission that it was using social security funds to buy government bonds also unsettled confidence and sparked expectations of a bailout soon.

Yen:

There will be intense pressure for the Bank of Japan to engage in further aggressive policy easing with the next policy meeting due in the third week of January. The government is also planning a further round of aggressive fiscal stimulus in an attempt to ease deflationary pressure. These factors combined will tend to have a negative impact on the yen, especially with a lack of confidence in the Japanese fundamentals. The Japanese currency will still gain some degree of support when risk appetite deteriorates and there will also be pressure for a limited correction after recent sharp losses.

The yen remained extremely weak as it dipped to the lowest levels in more than two years against the dollar. Incoming Prime Minster Abe continued aggressive calls for deflation to be tackled and warned that he would look to change the central bank Act which ensures independence if the Bank of Japan fails to meet inflation targets.

Expectations that there would be aggressive action to ease deflation risks through aggressive monetary and fiscal policies continued to have a negative impact on the yen. Weak underlying yen sentiment was offset by pressures for a technical correction following sharp losses and the dollar consolidated above the 87 level with Japanese markets still closed for a holiday.

The dollar found strong support on dips and pushed back above 87 with initial support from the stronger than expected US ADP report. There was further buying support following the Fed minutes with a shift in expectations. Japanese markets re-opened following the new-year break which triggered a fresh round of yen selling, particularly with a widening in yield spreads to the highest level since April. The dollar pushed to a fresh 29-month high above 87.75 against the Japanese currency.

Sterling

There will be mixed expectations surrounding the UK outlook with a divergence in analyst expectations and mixed data. Overall, there is slightly reduced fear surrounding the threat of another slide into recession, especially with some evidence that consumer lending is improving. In relative terms, the UK currency will also gain some support on relative grounds with expectations of loose monetary policies in the US and Euro-zone. The UK currency will tend to lose ground when risk appetite deteriorates and will struggle to make further significant headway against the US currency.

Sterling initially spiked higher against the US currency following the New Year break before hitting strong selling pressure with a retreat to lows below 1.61 .

The UK data was significantly stronger than expected with an increase in the PMI manufacturing datato 51.4 for December from a revised 49.2 the previous month which was the highest figure for 16 months. The data also provided some degree of optimism surrounding the UK economy which provided underlying Sterling backing.

There was initial Sterling support from an improvement in international risk appetite as the UK equity market tested the highs from mid 2011, but there was a slightly more cautious tone later in the week which pushed Sterling lower.

The latest PMI construction report was weaker than expected with a decline to a six-month low of 48.7 from 49.3 the previous month. The data dampened optimism triggered by the stronger than expected manufacturing release and the latest services-sector data will be watched very closely on Friday and will have an important impact on underlying sentiment.

Swiss franc:

The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term, especially with a strong determination to protect competitiveness and avert any serious deterioration in industrial conditions. Aggressive policy relaxation elsewhere will maintain the risk that upward pressure on the franc will intensify again as investors look for a safe-haven, especially if the Japanese yen is subjected to further selling.

The Euro held relatively steady against the franc, but was unable to hold above 1.21. After finding support around seven-month lows, the US currency pushed to a fresh 3-week high above 0.9280 as the dollar secured wider support.

The latest PMI report recorded an increase to 49.5 for December from 48.5 previously. In contrast, the latest KOF index retreated to 1.28 for the month from 1.50 previously which will maintain unease surrounding business confidence and pressure for franc gains to be resisted.

Australian dollar

The Australian dollar continued to probe resistance above 1.05 against the dollar, but it was unable to sustain the gains and retreated back to below this resistance area late in the week. The currency drew initial support from gains in risk appetite following the US fiscal deal before the mood turned more cautious again as enthusiasm faded.

There was a slightly more optimistic tone surrounding the Chinese outlook which provided some support for the Australian currency. The domestic PMI indices were still generally lacklustre amid fears over a further slowdown with a significant deterioration in the services-sector index.

Despite potential reserve diversification, the Australian dollar will find it difficult to sustain gains, especially as Chinese economic sentiment is liable to deteriorate again.

Canadian dollar:

After finding support on dips towards parity, the Canadian dollar was able to recover ground and move back to the 0.9840 area on a general improvement in risk appetite following the US fiscal deal.

The US currency was resilient at lower levels and moved higher as markets turned significantly more cautious while the Fed minutes provided net US support.

Even with near-term resilience and optimism surrounding the fundamentals, the Canadian dollar will find it difficult to sustain any significant gains.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily Market Commentary - Markets start 2013 in bullish mood

2013-01-03T18:47:00.000+00:00

Daily Market Commentary: (Evening Report)

London Market Report

Markets start 2013 in bullish mood

    Market Movers
    techMARK 2,157.14 +0.29%
    FTSE 100 6,047.34 +0.33%
    FTSE 250 12,651.25 +0.31%

London’s blue-chip index was able to build on Wednesday’s massive surge today in the aftermath of the fiscal cliff deal Stateside on New Year’s Day.

Market analyst Michael Hewson from CMC Markets said this afternoon: “While currency markets appear somewhat dismissive of the agreement on the fiscal cliff, equity markets have still managed to hold on to a good chunk of yesterday’s gains, helped by better than expected German and Spanish unemployment data and some extremely robust US ADP payrolls numbers for December.”

Stock markets across the globe rallied strongly on Wednesday after US politicians decided to allow some tax increases on America's wealthiest workers and delay specifics on spending cuts by two months. The FTSE 100 jumped 130 points, or 2.2%, yesterday.

However, despite the strong end to today’s session, the Footsie started out with slight losses early on as investors digested the agreement and what it means for the US economy in the coming months.

Market strategist Ishaq Siddiqi from ETX Capital said today that the agreement “only addressed certain facets of the fiscal cliff”. He said: “Lawmakers will need to kick-off another round of negotiations to compromise on a matter that both Republicans and Democrats are at total opposite ends; longer term spending cuts.”

In other news, the yield on a 10-year UK bond surpassed 2% for the first time since May 2012. The borrowing rate has jumped from 1.83% to 2.07% over the past three days since the fiscal cliff deal, as the demand for safety diminished.

Economic news comes in mixed

Providing some support to stocks early on was the China non-manufacturing purchasing managers' index (PMI) which rose from 55.6 to 56.1 in December, "providing yet more evidence that the turnaround of the Chinese economy is gaining pace with stronger economic growth likely in the months ahead," according to Markus Huber, the head of German HNW trading at ETX Capital.

However, sentiment was dampened slightly after Markit's construction PMI for the UK dropped from 49.3 to 48.7 in December, missing forecasts for a slight rise to 49.5. Nationwide also reported that UK average house prices fell by 0.1% month-on-month in December; forecasts were for no change.

German unemployment increased by 3,000 in December, well below the 10,000 gain expected. Meanwhile, Spain registered its first drop in unemployment in four months in December, down 59,094, much to the surprise of economists who had forecast a 62,000 increase.

Europe Market Report

European Markets Finished Mixed Following Yesterday's Strong Rally

The European markets ended Thursday's trading session with mixed results. The markets rallied strongly yesterday, due to the 11th hour agreement between Democrats and Republicans to avoid the fiscal cliff in the United States. With the fiscal cliff resolved, investors have now shifted their focus to the U.S. debt ceiling issue.

Banks and miners were among the biggest gainers on Wednesday, but turned in a much weaker performance Thursday. The markets pared their losses, or climbed into the green, following the release of the better than expected ADP private employment data from the United States. Investors will be watching for the release of the U.S. jobs report for December on Friday.

The U.S. reached its statutory borrowing limit on December 31, 2012 and the treasury has begun employing extraordinary measures, giving two months time to the law makers to raise debt ceiling. The debt ceiling would do more damage to the world's largest economy than the fiscal cliff. After passing the deal to avert the fiscal cliff, Republicans said they would press their demand to secure new spending cuts.

Moody's Investors Service said it expects further fiscal measures in months ahead to lower future budget deficits, which are necessary if the negative outlook on the government's bond rating is to be returned to stable.

The Euro Stoxx 50 index of eurozone bluechip stocks lost 0.34 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.67 percent.

The FTSE 100 of the U.K. climbed by 0.27 percent and the SMI of Switzerland surged by 2.90 percent. The DAX of Germany fell by 0.29 percent and the CAC 40 of France decreased by 0.34 percent.

Germany's unemployment rate remained unchanged in November, data released by the Federal Statistical Office showed Thursday. The adjusted unemployment rate, which is based on the calculation concept of the International Labor Organization (ILO), remained unchanged month-on-month at 5.4 percent in November. In November 2011, the jobless rate was 5.6 percent.

Germany's unemployment increased in December, but the increase was less-than-expected, as the economy likely entered a contraction in the fourth quarter of 2012. The number of unemployed rose only 3,000 in December, following an increase of 5,000 a month ago, the Federal Labor Agency said Thursday. Economists had forecast an increase of 11,000 for December.

Spain's unemployment decreased for the first time in five months in December as service providers increased their head-counts during the holiday season, giving rise to hopes that the country might emerge from recession in late 2013, latest data showed Thursday.

The number of unemployed persons decreased 1.2 percent from the previous month to around 4.85 million in December, the Labor Ministry said.

U.K. construction sector contracted at the fastest pace in six months in December, driven mainly by a steep reduction in housing activity, data from a survey by Markit Economics and the Chartered Institute of Purchasing & Supply (CIPS) showed Thursday.

The seasonally adjusted purchasing managers' index (PMI) for the construction sector dropped to 48.7 in December from 49.3 in November, hitting the lowest level since June. Economists had forecast the index to rise to 49.5.

U.K. house prices declined in December as demand and supply conditions in the housing market remained weak, a survey by the Nationwide Building Society showed Thursday. House prices declined 0.1 percent month-on-month in December, after recording no change in the previous month. Economists had expected prices to remain flat in December.

US Market Report

Stocks Roughly Flat After Moving Lower At The Open

After moving modesty lower at the open, stocks have moved back to the upside over the course of the trading day on Thursday. Buying interest has remained subdued, however, leading to a lackluster performance on Wall Street.

The major averages are currently turning in a mixed performance, with the Dow just below the unchanged line. While the Dow is down 5.09 points or less than a tenth of a percent, the Nasdaq is up 2.94 points or 0.1 percent at 3,115.20 and the S&P 500 is up 1.21 points or 0.1 percent at 1,463.63.

The choppy trading on Wall Street comes on the heels of the substantial rally that was seen in the previous session, which came amid news of a last-minute fiscal cliff agreement in Washington.

With the strong gains on Wednesday, the Dow and the Nasdaq reached their best closing levels in well over two months, while the S&P 500 reached a three-month closing high.

Profit taking contributed to the initial weakness, although traders seem reluctant to make any significant moves ahead of the release of the Labor Department's monthly jobs report on Friday.

An upbeat report on private sector employment may have helped to lift stocks off their lows, with payroll processor ADP reporting stronger than expected private sector job growth.

ADP said private sector employment increased by 215,000 jobs in December following an upwardly revised increase of 148,000 jobs in November. Economists had expected employment to rise by about 150,000 jobs.

On the other hand, the Labor Department release a separate report showing that initial jobless claims climbed to 372,000 in the week ended December 29th, an increase of 10,000 from the previous week's revised figure of 362,000.

Jobless claims had been expected to climb to 363,000 from the 350,000 originally reported for the previous week.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Thursday, adding to yesterday's gains. Hong Kong's Hang Seng Index rose by 0.4 percent, while Australia's All Ordinaries Index advanced by 0.8 percent. The markets in Japan and mainland China remained closed.

In the bond market, treasuries have moved modestly lower, extending the sharp downward move seen over the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.1 basis points at 1.86 percent.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Daily Market Commentary - Market rally after US budget deal

2013-01-02T20:17:00.000+00:00

Daily Market Commentary: (Evening Report)

London Market Report

FTSE 100 breaks 6,000 after US budget deal

    Market Movers
    techMARK 2,150.87 +1.97%
    FTSE 100 6,027.37 +2.20%
    FTSE 250 12,611.85 +1.91%

The FTSE 100 surged past the psychologically-important level of 6,000 on Wednesday as stock markets across the globe celebrated the last-minute deal by US politicians to avert the fiscal cliff.

While the budget saga Stateside is far from over - talks over spending cuts go on while concerns over the government’s debt ceiling have resurfaced - the House of Representatives passed a Senate-backed bill in the early hours of Tuesday morning to stop massive tax rises and spending cuts, by 257 votes to 167. A day before it had cleared the Senate by a majority of 89 votes to 8.

The fiscal cliff - scheduled tax rises of around $536bn and spending cuts of $109bn - was widely expected to throw the US economy back into recession if politicians couldn't break months of impasse.

Major benchmark indices across Europe finished today’s session up 2-3%, while markets on Wall Street opened around 2% higher. London’s blue-chip index gained 130 points, or 2.2%, to finish at 6,027. The last time the Footsie closed higher was at the end of April 2011. Nevertheless, the largest technical hurdle will come in towards the 6,100 point level, according to analysts at Digital Look.

"Immense New Year relief rally for global financial markets following the passage of a bill in the US to avert the full force of the fiscal cliff," said market strategist Ishaq Siddiqi from ETX Capital.

"2013 has kicked off with a bang with bulls in full control of price-action – the risk rally sees all your traditional investments in vogue (stocks EUROSTOXX making 16-month high, euro, commodities, peripheral bond yields, banks, miners et al) while core government bonds and US Treasuries take a beating."

Gains on stock markets were cemented in afternoon trade following a series of upbeat manufacturing figures. Manufacturing purchasing managers’ indices (PMIs) in the UK, Italy and US managed to beat expectations today, though the Eurozone PMI number missed forecasts slightly.

Europe Market Report

Stocks at 19-month high after US budget deal

FTSE 100: 2.13%
Dax-30: 2.15%
Cac-40: 2.37%
FTSE Mibtel 30: 3.81%
Ibex 35: 3.12%
Stoxx 600: 1.97%

European equities rocketed to a 19-month high Wednesday after the US breathed a sigh of relief as they reached a budget deal.

Lawmakers passed a bill Tuesday that avoided most tax hikes and postponed spending cuts by raising taxes for higher earners.

The legislation brought an end to a year-long impasse over how to avert the so-called fiscal cliff. President Barack Obama will sign off the bill after the House voted 257-167.

"Thanks to the votes of Democrats and Republicans in Congress I will sign a law that raises taxes on the wealthiest 2% of Americans while preventing a middle-class tax hike that could have sent the economy back into recession and obviously had a severe impact on families all across America," he said in a press conference.

However, the bill has left a number of problems unresolved with some strategists saying it was merely a short-term fix which did nothing to prevent future budget conflicts.

Swedish regulator cracks down on traders

The Swedish Financial Supervisory Authority will step up pressure on traders who break rules that require them to report company bond prices.

The watchdog will crack down on corporate debt traders to abide by existing rules in a bid to improve transparency in a growing market.

Traders will have to file trade reports including volumes and closing prices no later than 9:00 the following day. The krona strengthened 0.23% at 6.4877 to the dollar at 16:30 Wednesday.

Euro falls against dollar
The euro dropped 0.07% to the 1.3195 dollar despite a positive start to the day. Front month Brent crude futures increased 1.130 to 112.370 on the ICE.

US Market Report

Stocks Holding On To Strong Gains After Early Rally

After moving sharply higher at the start of trading, stocks have continued to perform well over the course of morning trading on Wednesday. The major averages have not seen much follow-through on their initial upward moves but remain firmly positive.

The rally on Wall Street comes as traders breathe a sigh of relief after both the House and the Senate approved legislation that allows the U.S. to avoid the fiscal cliff.

The agreement calls for the expiration of the Bush-era tax rates for individuals earning more than $400,000 and households earning more than $450,000. Payroll taxes and taxes on capital gains and dividends also go up under the agreement, which also extends unemployment benefits.

Meanwhile, the legislation delays the automatic spending cuts that were due to go into effect for two months, meaning that there are future budget negotiations ahead.

With the news eliminating some of the uncertainty about the outlook for the economy, steel stocks have moved substantially higher on the day. The NYSE Arca Steel Index is up by 3.5 percent after reaching its best intraday level in eight months.

Semiconductor stocks are also seeing considerable strength, with the Philadelphia SemiconductorIndex up by 3.1 percent. Earlier in the session, the index reached a three-month intraday high.

Most of the other major sectors have also shown strong moves to the upside, with housing, biotechnology, railroad, and telecom stocks posting standout gains.

The major averages have moved roughly sideways in recent trading, holding on to strong gains. The Dowis up 249.23 points or 1.9 percent at 13,353.37, the Nasdaq is up 71.70 points or 2.4 percent at 3,091.21 and the S&P 500 is up 27.00 points or 1.9 percent at 1.453.19.

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Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Weekly Market analysis - currency policies remain in focus following FED decision on additional QE

2012-12-21T14:37:00.001+00:00

Weekly Market analysis

Monetary and currency policies will remain a very important focus following the Federal Reserve decision to sanction additional quantitative easing during 2013 and further action by the Bank of Japan. There will be further unease over the implications of currency gains and resistance is liable to increase which will risk fuelling a more aggressive phase of currency wars as central banks look to resist currency appreciation.

Key events for the forthcoming week

Date	Time (GMT)	Data release/event
Thursday December 27th	15.00	US jobless claims
Thursday December 27th	15.00	US consumer confidence

Dollar:

Fiscal policy will remain important in the short-term as fiscal talks continue and there is likely to be a deterioration in risk appetite which would support the dollar if there is no progress. The Federal Reserve stance will remain an important focus throughout the next few months and the dovish policies will have a negative impact on the US currency as the Fed continues its policies of bond purchases. There will still be expectations that the US economy will out-perform the Euro-zone which should provide some degree of dollar support. There has also been a retreat in precious metals prices which suggests that underlying dollar selling is likely to be contained.

The dollar remained on the defensive for much of the week, but did find some respite as risk appetite faded again as the Euro retreated from the 1.33 area.

Regional Fed Presidents Lacker and Fisher continued to voice opposition to the recent additional quantitative easing. There were, however, strong expectations that the dovish view would prevail, especially with the doves maintaining a strong position on the 2013 FOMC which will keep policy loose.

The US current account deficit narrowed to US$107.5bn from a revised US$118.1bn the previous quarter. As a percentage of GDP the deficit was below 3.0% compared with a peak above 6% of GDP in 2005. There is the potential for a medium-term decline in the deficit as the energy deficit narrows and the US currency will be slightly less vulnerable to underlying selling.

The US jobless claims data was slightly weaker than expected with an increase to 361,000 in the latest week from a revised 344,000 figure the previous week. The other releases were stronger than expected with the third-quarter GDP estimate revised up to 3.1% from 2.7%. In addition, there was a stronger than expected reading for existing home sales at 5.04mn from 4.76mn the previous month while the Philadelphia Fed index increased to 8.1 from -10.7 the previous month.

US budget negotiations remained an important focus as the House of Representatives debated the so called ‘plan B’. Speaker Boehner insisted that the House had the votes to pass the bill while President Obama stated that it would be vetoed. As the vote deadline approached, Boehner admitted that he did not have enough support and the vote was cancelled as some Republicans refused to back any tax increases. Further votes are not scheduled until at least December 27th which triggered a sharp deterioration in risk appetite on fears that the year-end deadline would be missed.

Markets still expect that a compromise deal will be reached eventually which helped cushion the impact, but sentiment could deteriorate sharply if deadlock persists

Euro

There will be further relief that the acute Euro-zone crisis phase has eased with the Greece debt buyback completed while there has been a further decline in peripheral bond yields. There is a very heavy schedule of peripheral debt issuance during the first quarter of 2013 which will make it difficult for Spain to resist a bailout. The underlying growth outlook remains extremely weak which will maintain pressure for a more aggressive ECB policies. Political tensions will also intensify with Italian elections likely in February and the Euro will find it very difficult to make any sustained headway given the net economic risks.

The Euro advanced to 7-month highs against the dollar on an easing of Euro-zone fears and improved risk appetite and peaked at 1.33 before edging lower.

ECB President Draghi was also cautiously optimistic surrounding the 2013 outlook as Euro-zone officials continued their attempts to play-up the economic prospects. Draghi expressed confidence that competitiveness in Spain was starting to improve and was optimistic over the benefits of a single bank supervisor.

There was a further increase in bad debts within Spanish banking sector as the ratio rose to a fresh historic high of 11.2% in November from 10.7% previously which will maintain fears over the Spanish outlook. For now, however, wider fears surrounding the Euro-zone have eased which has encouraged a further drop in speculative short positions against the currency and the Greek credit rating was revised to B- from selective default with a stable outlook.

The German IFO index was slightly stronger than expected with a second successive monthly increase to 102.4 from 101.4. Although there was a lower than expected reading for current conditions, the data maintained a more favourable tone.

There was a further decline in peripheral bond yields which helped underpin sentiment as Italian benchmark yields declined to a two-year low. ECB member Asmussen stated that he would be very reluctant to cut the deposit rate to below zero which cast some doubt over the prospects for an ECB rate cut.

Yen:

The LDP won a huge victory in the recent lower-house elections and the strength of their majority should mean that they can over-ride any veto attempt from the Upper House. The government will push ahead with aggressive policies to combat deflation. There will also be intense pressure on the Bank of Japan to take an even more aggressive stance on monetary policy and the bank will consider an increased inflation target early in 2013. These pressures will exert downward pressure on the yen, but the currency could still gain at times when there is a deterioration in global risk appetite.

The Japanese election result recorded a major LDP victory as they won 294 of the 400 seats in the lower house with their partner winning a further 30. The results give the coalition a two-thirds majority and this is extremely important as the government can over-rule opposition from the Upper House

The latest trade data recorded a headline deficit of JPY953bn from a revised JPY549bn previously as exports recorded a 4.1% annual decline. The data reinforced fears surrounding the export outlook and reinforced negative yen sentiment.

The Bank of Japan announced a further JPY10trn in quantitative easing which was in line with market expectations. There is still a high degree of pressure on the central bank to take additional steps to boost the economy and sanction additional policy measures. Incoming Prime Minister Abe stated that the central bank was carrying out policy steps sought by the government one at a time in a clear reference to the government expecting further action. The administration is planning an emergency economic package in January and the yen remained under heavy selling pressure.

The yen found support towards the 84.50 area against the dollar and recovered ground as risk appetite deteriorated sharply following the collapse in US fiscal cliff talks. The US currency moved back to the 84 area as the Euro retreated to below 111.

Sterling

There will be further unease surrounding the UK economic outlook with expectations of a weak fourth-quarter. There will be major uncertainties surrounding Bank of England policies and there will certainly be pressure for the central bank to maintain an aggressive stimulus policy to underpin demand. There will be speculation over a shift towards nominal GDP targeting when Carney takes over as Governor later next year. The UK currency will continue to gain some protection from the aggressive policies pursued by other global central banks, but Sterling is unlikely to make significant headway.

Sterling was resilient during the week and challenged 3-month highs around 1.63 against the dollar before consolidating slightly lower.

There were further concerns surrounding the AAA credit-rating following the Standard & Poor’s decision to downgrade the outlook to negative and there was further speculation that the rating would be lost during 2013. With the Federal Reserve increasing its bond purchases and the Bank of Japan expand policy further this week, there will be some initial Sterling support on relative grounds with expectations that the Bank of England will hold policy steady in the short-term..

The latest inflation data recorded an unchanged annual rate of 2.7% for November compared with expectations of a marginal decline. Although the RPI rate dipped to 3.0% from 3.2%, there were some expectations that the stickiness in inflation would curb any further quantitative easing by the Bank of England.

The Bank of England minutes were broadly in line with expectations as the MPC voted 9-0 for unchanged interest rates while there was a 8-1 vote in favour of leaving quantitative easing on hold as Miles again voted for a further £25bn expansion in bond purchases. The bank was generally pessimistic over the growth outlook and warned over the stickiness of inflation. There were also further calls for a weaker exchange rate with Sterling’s gains described as unhelpful and a headwind for recovery and this is likely to be an important issue during 2013.

The headline retail sales report was weaker than expected with sales unchanged for November following a revised 0.7% decline for October. There was also a sharp decline in the latest GfK consumer confidence reading from -22 to -29.

Swiss franc:

The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term, especially with a strong determination to resist franc appreciation to protect competitiveness. Aggressive policy relaxation elsewhere will maintain the risk that upward pressure on the franc will intensify again as investors look for a safe-haven, especially if the Japanese yen is subjected to further selling pressure.

The dollar remained firmly on the defensive against the franc and dipped to fresh 7-month lows just below 0.91 before staging a weak corrective recovery. The Euro consolidated around the 1.2080 area with narrow ranges prevailing.

With liquidity declining into the Christmas period there is likely to be an increased reluctance to take on the National Bank and the 1.20 minimum level and a potential for a further round of short Euro covering. There were wider concerns surrounding the risk of renewed tensions during 2013 and the franc also gained support from a lack of attractive safe-havens, especially with the yen under serious selling pressure.

Australian dollar

The Australian dollar continued to probe resistance above 1.05 against the dollar during the week, but it was unable to sustain the gains and retreated back to below the 1.05 level. The currency was unsettled to some extent by a decline in gold prices and dipped again when there was a deterioration in risk appetite.

The monetary policy minutes suggested that the bank could be cautious over further interest rate cuts, but Reserve Bank Governor Stevens also continued to suggest that the currency was over-valued and that it should be weaker.

There is likely to be resistance to currency gains with the Reserve Bank under pressure to push the currency weaker, especially if growth fears intensify.

Canadian dollar:

The Canadian dollar was unable to make further headway during the week and edged back to the 0.99 area as narrow ranges generally prevailed.

The latest retail sales data was stronger than expected which provided some relief and oil prices were generally firm, but a decline in gold prices had some negative impact.

Even with near-term resilience and optimism surrounding the fundamentals, the Canadian dollar will find it difficult to advance from current levels.