Daily Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD The single currency bounces strongly from 1.2500, psychological support, driven by news, to regain levels above 1.2600 but rally stalls again on approach to key 1.2626/36 barriers. Failure to clear this barrier, along with hourly indicators starting to point lower, suggests further congestion within 1.2500 and 1.2600 band. Initial support lies at 1.2560/50 zone, loss of which would re-focus lower boundaries. Alternative scenario requires lift above 1.2636 to trigger fresh bull-phase and expose 1.2680/1.2700. Res: 1.2600, 1.2611, 1.2626, 1.2636 Sup: 1.2585, 1.2560, 1.2550, 1.2520

GBP/USD Near-term structure turns positive, as the price finds ground at 1.5825, bull-trendline off 1.5489 low, where fresh strength has emerged. Strong rally through two-week barrier at 1.5900/11, posted new low at 1.5933 so far. Improved conditions see prospect for further extension of three-month uptrend from 1.5267 to look for test of psychological barrier at 1.6000. Previous barriers at 1.5900 zone, now offer initial support and today’s close above here is required to maintain current bullish stance. Any dips below 1.5900 will focus good support at 1.5850 that is expected to contain. Res: 1.5933, 1.5950, 1.5984, 1.6000 Sup: 1.5900, 1.5890, 1.5850, 1.5828 USD/JPY Near-term price action gets congested at 78.30/45 zone, following reversal from 78.55, recovery high,, posted yesterday. Weakening hourly studies and break below trendline support, sees more risk towards the downside, as loss of 78.20 would bring strong 78.00 base in focus. On the upside 78.55/60 zone caps for now and only break here would revive bulls and possible expose key near-term barriers at 78.80 and 79.00. Res: 78.46, 78.55, 78.60, 78.83 Sup: 78.33, 78.20, 78.15, 78.00 USD/CHF Today’s failure to regain initial 0.9615 barrier and subsequent sharp fall that retraced approx 76.4% of two-day rally from 0.9507 to 0.9606, sees increased risk of revisiting near-term base at 0.9500, loss of which to signal resumption of broader downmove from 0.9970, 24 July peak. As near-term studies are moving into the negative zone, near-term focus remains at the downside, while 0.9615/34 barriers and trendline resistance at 0.9640 stay intact. Res: 0.9560, 0.9580, 0.9600, 0.9615 Sup: 0.9528, 0.9507, 0.9500, 0.9461

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Daily Market Commentary: (Evening Report)

London Market Report

Footsie at five-week low ahead of ECB decision

Market Movers
techMARK 2,086.82 +0.26%
FTSE 100 5,657.86 -0.25%
FTSE 250 11,446.07 +0.15%

Mixed remarks from Eurozone officials prompted a volatile day of trade on London’s stock market on Wednesday as eyes remain fixed on tomorrow’s policy rate decision from the European Central Bank (ECB) and subsequent press conference with bank President Mario Draghi.

“Conflicting headlines from Eurozone policy-makers markets feeling rather confused at the end of Wednesday’s session,” said market strategist Ishaq Siddiqi from ETX Capital. The FTSE 100 index closed at 5,658, its lowest level since July 31st.

According to Bloomberg this afternoon, unnamed central bank officials have said that Draghi will announce unlimited purchases of short-dated government debt (with maturities of up to three years) that will be sterilised, though the ECB would refrain from setting a public cap on yields.

However, according to Michael Fuchs from Merkel’s Christian Democratic Union party, Germany would oppose the ECB’s bond-buying plan if it purchases “too much” sovereign debt without ensuring that these nations agree to strict conditions.

“Today’s events have left investors extremely uncertain over the ECB’s action on Thursday – what we know is that the ECB does have the firepower to significantly ease tensions in the debt markets in the near term, however the central bank is extremely constrained with Germany’s opposition,” Siddiqi added this afternoon.

Also pressuring stocks today were global growth concerns: Australian second-quarter economic growth figures came in below expectations; Chinese data continues to point to a deceleration in the services sector; a Bank of Japan board member said that the odds of an extended world economic slowdown have increased.

Europe Market Report 

European Markets Largely Finished With Gains Ahead Of ECB Announcement

The majority of the European markets closed in positive territory on Wednesday. Investors appeared to be cautiously optimistic ahead of Thursday's announcement from the European Central Bank meeting. The upward revision to the second quarter U.S. productivity and costs data also provided some support in the afternoon. The FTSE 100 of the U.K. was under pressure due to the negative performance of BP along with the rest of the energy stocks, as well as the declines in shares of miners and tobacco companies.

The European Central Bank on Thursday is widely expected to announce measures to battle the sovereign debt crisis that has plagued the euro area, which could include buying bonds of peripheral governments as indicated by the bank's President Mario Draghi last month.

The central bank of 17 nations may also cut the refinancing rate, which is currently at 0.75 percent, while the deposit rate that is already at zero is likely to be left unchanged. The ECB is set to announce the decision at 7.45 am ET and Draghi will hold the regular press conference at 8.30 am ET.

Bank of England policymakers are expected to hold steady on quantitative easing and interest rates, as officials continue to assess the impact of bond purchases and the lending facility on economic activity. Given the weak economic condition, the case for more stimulus is seen in the pipeline.

Economists widely expect the Monetary Policy Committee headed by Governor Mervyn King to maintain the quantitative easing programme at the current GBP 375 billion. It is set to leave the Bank Rate unchanged at 0.50 percent. The announcement is due on Thursday at 7.00 am ET.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.22 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, decreased by 0.14 percent.

The DAX of Germany climbed by 0.46 percent and the CAC 40 of France gained 0.20 percent. The SMI of Switzerland rose by 0.98 percent, but the FTSE 100 of the U.K. fell by 0.25 percent.

In Frankfurt, Fresenius increased by 1.39 percent. Commerzbank upgraded its rating on the stock to "Add" from "Hold."

US Market Report

hoppy Trading Persists Ahead Of ECB Meeting After turning mixed over the course of the previous session, stocks have shown a lack of direction during trading on Wednesday. The choppy trading comes as traders look ahead to the European Central Bank's monetary policy meeting. Currently, the major averages are posting modest gains. The Dow is up 32.91 points or 0.3 percent at 13,068.85, the Nasdaq is up 0.79 points or less than a tenth of a percent at 3,075.85 and the S&P 500 is up 1.16 points or 0.1 percent at 1,406.10. Uncertainty about tomorrow's European Central Bank meeting is contributing to the lackluster performance on Wall Street, with the bank expected to announce details of a plan to purchase bonds from troubled eurozone countries such as Italy and Spain in order to reduce borrowing costs. Bloomberg News reported that ECB President Mario Draghi's bond-buying proposal involves unlimited purchases of government debt but will refrain from setting a public cap on yields. Traders are also staying on the sidelines ahead of Friday's monthly U.S. jobs report, which is expected to show an increase of about 125,000 jobs in August. Meanwhile, the markets have largely shrugged off a report showing that U.S. labor productivity increased by much more than previously estimated in the second quarter. The Labor Department said productivity increased by an upwardly revised 2.2 percent in the second quarter compared to the preliminary estimate for 1.6 percent growth. Economists had expected the rate of productivity growth to be revised to 1.9 percent. With the upward revision, the productivity growth in the second quarter reflects an even more substantial turnaround from the 0.5 percent drop seen in the first quarter.