Daily Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD The Eur/Usd moved lower during the European session, hitting session low at 1.2836, driven by negative technicals and increasing fears of further deepening of Eurozone’s crisis, with Spain now being in focus. The price touched important support, 200 day MA, en-route towards 1.2800, broken bear-trendline off 1.3485 lie. Potential break here would be a signal for further correction, as a part of reversal from 1.3170, 14/17 Sep double-top, with next significant support at 1.2740, mid-June highs / regression channel support, expected to come in focus. Negative near-term outlook is also confirmed by bearish 4h chart Ichimoku studies, as the price breaks below the cloud base at 1.2900, which now acts as initial resistance, along with Tenkan-sen line. Res: 1.2886, 1.2900, 1.2911, 1.2952 Sup: 1.2835, 1.2826, 1.2800, 1.2740

GBP/USD The pair finds near-term base at 1.6150, despite quite negative technicals, as three attempts lower were contained at this level, with price action congested between 1.6150 and 1.6200, during European and early US session hours. Failure to clear initial barrier at 1.6200, keeps the downside under pressure, with hourly 20 day EMA capping for now. Any stronger move higher, requires break above 1.6265, to avert immediate downside risk, otherwise, break below 1.6150 would signal completion of Head and Shoulders pattern and open way for stronger correction of 7-week ascend from 02 Aug low at 1.5489 and expose 1.6100/1.6065, Fibonacci / trendline supports. Res: 1.6180, 1.6200, 1.6242, 1.6265 Sup: 1.6148, 1.6130, 1.6100, 1.6074 USD/JPY The pair’s bounce of fresh session low at 77.58, provided temporary relief, despite gains being capped at initial 77.90 barrier. Slight improvement on hourly chart studies, keeps hopes of possible stronger corrective action, boosted by comments from Japanese Central Bank, however, overall negative sentiment does not leave much room for this, unless clear break above 78.00 occurs. On the downside, loss of 77.58 support, will focus our near-term targets at 77.12/00. Res: 77.90, 78.00, 78.27, 78.36 Sup: 77.58, 77.45, 77.12, 77.00 USD/CHF The pair remains supported, as fresh extension higher, cracks important 0.9400/16 barrier, 200 day MA / 50% retracement, reaching fresh high at 0.9414 so far. Near-term studies remain in the positive territory, however, extended hourly studies would signal possible hesitation at this strong resistance. Today’s close above 200 day MA is seen as supportive factor for fresh extension of near-term corrective bounce from 0.9237, 14 Sep low, as break higher would open Fib 61.8% at 0.9447, possibly psychological, 0.9500 barrier, on a break. Any dips should ideally be contained at 0.9360/50 zone, to keep near-term bulls in play. Res: 0.9416, 0.9432, 0.9447, 0.9465 Sup: 0.9390, 0.9366, 0.9355, 0.9340

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Daily Market Commentary: (Evening Report)

London Market Report

Pain in Spain again

Market Movers
techMARK 2,112.49 -1.39%
FTSE 100 5,768.09 -1.56%
FTSE 250 11,737.88 -1.62%

Stock markets all over the world were in retreat on Wednesday, and London was no exception, as investors fretted about Spain's negotiations over bailout terms.

Spain will restrict early retirement programmes as one of the new measures that President Rajoy will announce during the 2013 budget presentation on Thursday.

In an interview with The Wall Street Journal, Mariano Rajoy said that his government will also create an independent agency to oversee that budget targets are reached. According to analysts at UniCredit, this agency is one of the bailout conditions from the European Union. Rajoy also said that measures will include new job-training programmes and legislation that does away with onerous government regulations.

Rajoy was unable to avoid the question of whether a bailout request was pending. "At the moment, I cannot tell you," he said, adding that the government would need to determine whether conditions attached to the bailout are "reasonable." However, he did clarify that he would definitely ask for the bailout if Spanish debt yields were too high for too long.

It was unclear what his definition of "too high" is, but yields on 10-year Spanish Treasury bonds rose more than a quarter of a point to rise above the 6% level today.

Europe Market Report 

European Markets Finished Solidly Lower Due To Concerns Over Spain

The European markets closed solidly in the red Wednesday, as investors concerns over the situation in Spain took center stage. There was also some concern over Greece today, but the turmoil in Spain dominated headlines with large protests in Madrid. A number of sectors were under pressure Wednesday, including banks, miners, automakers and energy stocks.

In an interview to the Wall Street Journal on Tuesday, Prime Minister Mariano Rajoy said his government would seek a bailout only if it is satisfied that the conditions attached to it are "reasonable". But, if Spain's bond yields remain "too high for too long", "I can assure you 100 percent that I would ask for this bailout," Rajoy told the daily.

Spain's benchmark 10-year yield moved closer to 6 percent today as Rajoy's government prepares to present the 2013 budget tomorrow, which is expected to unveil more austerity measures. Protesters took to streets in Madrid and clashed with the police.

Meanwhile, political pressure on Rajoy is mounting with the autonomous region of Catalonia calling for election in November. The region, which generates nearly 20 percent of Spain's economic output, had also raised secession calls in recent days due to dissatisfaction over Rajoy's handling of the crisis.

The Bank of Spain on Wednesday signaled further decline in the gross domestic product in the third quarter amid continued financial difficulties in the economy. The available data for the third quarter suggest that the GDP kept "falling at a significant pace in an environment in which financial stress remained at very high levels," the bank said in its monthly economic bulletin.

According to official data, Spanish GDP contracted 0.4 percent quarter-on-quarter in the second quarter of 2012, deepening recession in the Eurozone's fourth-largest economy. This followed a 0.3 percent decline in GDP in the first quarter.

The German government on Wednesday approved a memorandum, clearing the last hurdle in the ratification of the permanent bailout fund, the European Stability Mechanism.

The ratification was held up for months on the grounds of its legality. The top court on September 12 cleared Germany's participation in the bailout fund with certain conditions. The court set a cap on Germany's bailout fund liability at EUR 190 billion.

Reiterating his opposition to the European Central Bank's new bond-purchase program, ECB Governing Council member Jens Weidmann said the policy move could take the pressure off Eurozone governments to accelerate the reform process.

Governments have the right tools in hand to rein in the crisis. The central bank funding should not be seen as a comprehensive problem solver, he said in an interview to Neue Zuercher Zeitung, published Tuesday.

European Commissioner for Economic and Monetary Affairs Olli Rehn reportedly said Tuesday that he does not foresee the possibility of another restructuring of Greek debt. Rehn declined to comment more on Europe's future plans on Greece, saying the country is currently undergoing a review of its bailout program by the troika.

Italy's borrowing costs for six-month funds declined to the lowest level since March at an auction on Wednesday as investor confidence remained supported by hopes of peripheral bond purchases by the European Central Bank.

The Italian Treasury sold the targeted EUR 9 billion of its 181-day bills compared to the EUR 12.52 billion worth bids it received. The yield on the 6-month paper fell to 1.503 percent from 1.585 percent paid at the previous sale on August 29.

Elsewhere, Germany witnessed weak investor appetite for its low-return 10-year bond that led to a technically uncovered auction as bids fell short of the target set for the sale.

Philadelphia Federal Reserve President Charles Plosser said Tuesday that the Fed's third round of quantitative easing is not likely to do much to benefit growth or employment. He said the move risks the central bank's credibility.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 2.44 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.50 percent.

The DAX of Germany finished lower by 2.00 percent and the CAC 40 of France dropped by 2.82 percent. The FTSE 100 of the U.K. fell by 1.56 percent and the SMI of Switzerland decreased by 1.10 percent

US Market Report

Stocks Remain Mostly Lower In Mid-Day Trading Stocks remain mostly negative in mid-day trading on Wednesday amid continued concerns about the financial situation in Europe. The markets are extending the steep downward move that was seen in afternoon trading on Tuesday. The major averages have climbed well off their lows for the session but currently remain in negative territory. The Dow is down 10.18 points or 0.1 percent at 13,447.37, the Nasdaq is down 23.23 points or 0.8 percent at 3,094.50 and the S&P 500 is down 5.37 points or 0.4 percent at 1,436.22. Much of the weakness on Wall Street stems from worries about the ongoing European debt crisis, with traders keeping a close eye on protests in the debt-plagued nations of Spain and Greece. With the yield on Spain's ten-year bond climbing above 6 percent, the country seems increasingly likely to seek a bailout despite the widespread public protests against austerity measures. Adding to the concerns about Europe's debt crisis, German newspaper Bild reported that Bundesbank is preparing a lawsuit against the European Central Bank claiming that the central bank is overstepping its mandate in launching the latest round of bond purchases. Traders are also digesting a report from the Commerce Department that unexpectedly showed a modest decrease by U.S. new home sales. The Commerce Department said new home sales edged down 0.3 percent to a seasonally adjusted annual rate of 373,000 in August from the revised July rate of 374,000. Economists had expected new home sales to climb to an annual rate of 380,000 from the 372,000 rate originally reported for the previous month. At the same time, the report also showed a notable increase in home prices, with the median sales price of new houses sold in August coming in at $256,900, up 11.2 percent from July. With the increase, the median sales price of new houses rose to its highest level since coming in at $262,600 in March of 2007.