Daily FX & Market Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD The Euro remains well supported during the early hours of US session, as rather quiet sideways trade followed morning’s fresh high at 1.2570. Today’s close above here, also 90 day MA, to confirm positive short-term structure and further recovery, with 1.2600 seen on a break. Near-term consolidation floor and 20 day EMA offer initial hourly support at 1.2530, with more downside risk seen on overextended 4h chart studies. Any dip under 1.2500 to focus breakpoint at 1.2440/30 zone. Res: 1.2570, 1.2590, 1.2600, 1.2624 Sup: 1.2530, 1.2500, 1.2486, 1.2430

GBP/USD Near-term corrective action is underway, with hourly studies emerging from overbought territory and price finding temporary support at 1.5860, 20 day EMA. However, as 4h chart studies are still overextended, further easing is not ruled out, with good support seen at 1.5800 zone. Positive larger picture’s structure keeps the upside in focus, with clearance of today’s high and Fib 61.8% of 1.6300/1.5267 at 1.5910, to open 1.6000, psychological barrier. Res: 1.5896, 1.5911, 1.5931, 1.5950 Sup: 1.5860, 1.5816, 1.5800, 1.5776 USD/JPY Comes under pressure again after corrective action off 78.27, yesterday’s low, was capped by descending 20 day EMA at 78.70. Fresh slide keeps intact the upside barrier at 79.00, where 20/55 day EMA bearish crossover puts additional pressure on the near-term price action and increases risk of revisiting strong 78.00 support zone. Today’s close below broken bear-trendline off 84.08 high to confirm negative near-term stance. Res: 78.46, 78.70, 78.80, 78.96 Sup: 78.27, 78.15, 78.00, 77.65 USD/CHF Short-term bears remain in play, as brief consolidative action failed to clear initial barrier at 0.9580, 20 day EMA. Short-term indicators continue to point lower, despite oversold conditions. Violation of 0.9550 support, also daily Ichimoku cloud base, to open way for further weakness to 0.9500, initially, with extension towards 0.9461 and 0.9420, seen on a break. Res: 0.9584, 0.9600, 0.9617, 0.9655 Sup: 0.9550, 0.9500, 0.9461, 0.9420

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Daily Market Commentary: (Evening Report)

London Market Report

Gains erased as poor data dents stocks

Market Movers
techMARK 2,099.97 +0.12%
FTSE 100 5,776.60 +0.04%
FTSE 250 11,466.54 -0.24%

Stimulus hopes for the US pushed the Footsie higher early on, but disappointing economic data across the globe meant that the bullish mood was short-lived, with gains erased by the close.

Meanwhile, according to an exclusive in Reuters this afternoon, while the Spanish government has not officially requested a bailout, it is in talks with Eurozone officials over conditions for aid to reduce its bond yields. Citing three sources close to the matter, the news agency said that the favoured option being talked about its using the EFSF to buy Spanish debt at primary auctions, while the European Central Bank would purchase bonds on the secondary markets to cut borrowing costs.

The minutes of the Federal Open Market Committee (FOMC) meeting said that "many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery".

However, St Louis Fed President James Bullard poured cold water on stimulus hopes today after saying that the minutes are now outdated because they do not pick up the stronger economic data that has been released since then.

Turning back to the Eurozone, Eurogroup President Jean-Claude Juncker made clear that “the ball is in Greece’s court” following his meeting with the country's Prime Minister Antonis Samaras yesterday. While the Greek PM requested a two-year extension on the deadline to implement austerity measures, the head of the Eurozone's finance ministers said that the Troika’s visit to Athens in September will give the Hellenic Republic “one last chance” to meet its commitments.

The Markit preliminary composite purchasing managers' index (PMI) for the Eurozone rose from 46.5 to 46.6 in August but stayed well below 50, showing that activity in the single-currency region had contracted for a seventh straight month. Meanwhile, the HSBC China manufacturing PMI fell from 49.3 to 47.8 in August, a nine-month low.

Data from the US was mixed today also. Initial weekly jobless claims rose by 4,000 last week to a seasonally adjusted 372,000, from an upwardly revised 368,000 the week before. Economists were expecting a reading closer of 369,000. Meanwhile, the Markit US flash manufacturing PMI rose from 51.4 to 51.9 in August, above the 51.5 forecast. Nevertheless, as analyst Cooper Howes from Barclays points out, the flash PMI “remains well below levels seen in Q1.”

Europe Market Report 

European Markets Slipped Into The Red In Late Trading

The majority of the European markets were unable to hold on to early gains Thursday and finished in negative territory. Investor optimism regarding potential stimulus actions from both the U.S. and China fueled today's early gains. The initial optimism fizzled out as the session wore. Bank stocks, which had been strong in early trade, sharply reversed direction in late trade.

The Federal Reserve is losing patience with the pace of the fragile U.S. economic recovery, according to the minutes of their most recent policy meeting, which were released Wednesday. Many members of the Federal Reserve say additional monetary policy accommodation is likely warranted unless the economy improves substantial. This may open the door for another round of quantitative easing measures at their next meeting in September.

China's manufacturing sector contracted in August at the fastest pace in nine months suggesting that producers are struggling with strong global headwinds, a closely watched survey showed Thursday. Largely due to a fall in factory orders, the flash HSBC manufacturing Purchasing Managers' Index dropped to 47.8 from 49.3 in July, Markit Economics said.

Most people in the U.K. would have been worse off without quantitative easing and interest rate reduction to record low, the Bank of England said in a paper published on Thursday. The asset purchases added over GBP 600 billion wealth to households, equivalent to around GBP 10,000 per person if assets were evenly distributed across the population, it said.

Germany's Finance Minister Wolfgang Schaeuble said on Thursday that allowing more time to Greece to implement economic reforms is unlikely to solve the country's problems.

In an interview to SWR Radio, Schaeuble said, "More time is no solution to the problems." More time could also mean 'more money', he said, adding that euro area had reached its limits of what is economically feasible in providing funding to Greece.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.88 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.45 percent.

The DAX of Germany fell by 0.97 percent and the CAC 40 of France finished down by 0.84 percent. The SMI of Switzerland dropped by 0.33 percent, but the FTSE 100 of the U.K. increased by 0.04 percent.

US Market Report

Stocks Mostly Lower On Jobs Data, Europe Worries Stocks have moved mostly lower during trading on Thursday after turning in a mixed performance in the previous session. Disappointing jobs data is contributing to the weakness in the markets along with continued worries about Europe. The major averages have climbed off their worst levels of the day but remain stuck in the red. The Dow is down 92.53 points or 0.7 percent at 13,080.23, the Nasdaq is down 16.16 points or 0.5 percent at 3,057.51 and the S&P 500 is down 8.39 points or 0.6 percent at 1,405.10. The weakness on Wall Street is partly due to the release of a report from the Labor Department showing an unexpected increase in initial jobless claims in the week ended August 18th. The report showed that initial jobless claims edged up to 372,000 from the previous week's revised figure of 368,000. The modest increase came as a surprise to economists, who had expected jobless claims to slip to 365,000 from the 366,000 originally reported for the previous week.