Daily Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The Euro remains directionless, moving within narrowed 1.2875/1.2940 range, awaiting today’s data. Larger range top at 1.2870, along with psychological 1.3000 barrier, also 4h Ichimoku cloud top, is seen as an upside trigger for fresh bulls. Otherwise, loss of range floor and trendline support at 1.2875 would expose more significant 1.2820, 200 day MA and 1.2800, 01 Oct low, with break of either side, to define near-term direction.

Res: 1.2938, 1.2966, 1.2970, 1.3000
Sup: 1.2900, 1.2886, 1.2875, 1.2865

GBP/USD

The pair remain under pressure, following break below 1.6125/00 bull trendline /near-term base and psychological support, that triggered fresh losses to 1.6066, breaking below our initial target at 1.6074, 13 Sep low. As recovery bounce stays capped at 1.6100 for now and near-term studies holding in the negative territory, fresh losses could be anticipated, 1.6160/75 pivotal zone stays intact. Main downside targets lie at 1.6035/00 zone, 07 Sep high / 50% retracement of 1.5769/1.6308 / round figure support.

Res: 1.6105, 1.6125, 1.6141, 1.6175
Sup: 1.6083, 1.6066, 1.6035, 1.6000

USD/JPY

Regain of important 78.50 barrier and yesterday’s close at this level, signals further extension of near-term rally, as the pair rallied to a fresh session high at 78.71 overnight. Positive sentiment keeps the upside favored, with key barriers at 79.00, psychological and 79.21/30, 19 Sep high / daily Ichimoku cloud top / 200 day MA, coming in near-term focus. However, gain s may be interrupted by corrective pullback, as near-term indicators enter overbought zone. Any dips should ideally be contained at 78.40/30 zone, while only loss of psychological 78.00 support and 02 Oct low, would soften the structure.

Res: 78.71, 78.78, 79.00, 79.21
Sup: 78.41, 78.29, 78.10, 78.00

USD/CHF

Near-term price action remains capped by 0.9400 barrier, round figure and 200 day MA, with choppy trading within narrowed 0.9365/90 range, sees the near-term action in a directionless mode. As the price holds below main bull-trendline off 0.9237 low, has already been dented and yesterday’s close occurred below 0.9400, further weakness looks more likely. Loss of 0.9330 higher base is required t confirm bearish stance.. Conversely, lift above initial 0.9400 barrier, is seen as spark for fresh rally and possible test of 0.9436, 01 Oct fresh 3-week high.

Res: 0.9390, 0.9400, 0.9416, 0.9436
Sup: 0.9366, 0.9353, 0.9331, 0.9326 

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks end flat after BoE and ECB decisions

Market Movers
techMARK 2,150.84 +0.40%
FTSE 100 5,827.78 +0.03%
FTSE 250 11,954.42 +0.69%

The Footsie swung between gains and losses for most of Thursday’s session but finished the day broadly flat following a busy day on the global economic calendar, which saw policy decisions in the UK and Europe, a news conference with Mario Draghi and some better-than-expected economic figures from the US.

At midday, the Bank of England’s Monetary Policy Committee (MPC) maintained the Bank Rate at 0.5% and the asset purchase programme at £375bn. The decision was more or less as expected, though many analysts are expecting the Bank to embark on further easing and possibly a rate cut in November.

The European Central Bank (ECB) also remained in ‘wait-and-see’ mode this afternoon, leaving its key interest rate at 0.75% after it was cut by 25 basis points earlier in the year. In the following press meeting with ECB President Draghi, he said the "euro is irreversible" and explained that last month’s decision to announce a bond-buying programme will act as an effective backstop for the Eurozone.

Analyst Craig Erlam from Alpari said this afternoon: “It’s very difficult to argue with this point, all you have to do is look at the borrowing costs of the peripheral countries to see that investors are much more comfortable with the situation in the Eurozone than they were a few months ago.”

Stateside, initial weekly jobless claims increased to 367,000 last week, more than the 363,000 recorded the week before but under the 370,000 expected by the consensus. Factory orders fell by 5.2% in August, the second fall in three months, according to the Commerce Department. This was better than the 5.9% decline forecasted.

In Eurozone news, Spain's Treasury sold €3.99bn in two-, three- and five-year debt, the top end of its targeted range. While bid-to-cover ratios fell across all maturities, so did the yields on offer. Meanwhile, the Troika has said it expects the Greek economy to contract by 5% in 2013, notably worse than the 3.8% fall in gross domestic product (GDP) expected by Greece's own government.

Europe Market Report 

European Markets Finished Mixed After Central Bank Announcements

The European markets ended Thursday's session with mixed results. Investors exercised caution ahead of the interest rate decisions by the central banks and Friday's upcoming U.S. jobs report. Both the European Central Bank and the Bank of England decided to leave interest rates unchanged. There was no news with regards to the delayed bailout request from Spain.

The European Central Bank adopted a wait-and-watch stance on Thursday while leaving euro area interest rates unchanged, amid uncertainty regarding a Spanish request for bailout and its fallout. The central bank of 17 nations held the refinancing rate unchanged at 0.75 percent for a third consecutive month, following the Governing Council meeting in Ljubljana, the capital of Slovenia.

The decision was in line with economists' expectations. The central bank also kept its deposit rate at zero and the marginal lending facility rate at 1.50 percent.

The U.K. central bank also refrained from a quantitative easing increase, as a slight economic improvement eased the pressure on policymakers to expand the ongoing stimulus at this stage.

The Monetary Policy Committee of the Bank of England headed by Governor Mervyn King retained the size of the quantitative easing programme at GBP 375 billion. The asset purchases, which were last initiated in July, will continue until early November.

The European Banking Authority (EBA) has asked banks in the European Union to hold on to more than EUR 200 billion capital buffer raised between December 2011 and June 2012, given the still challenging market environment.

Disclosing the final report on its EU-wide recapitalization exercise and the data on all individual banks on Wednesday, the EBA said 27 banks with an initial shortfall that submitted capital plans have strengthened their capital position by 116 billion euros.

Spain successfully raised EUR 3.99 billion from bond auction on Thursday amid continuing uncertainty whether the nation seek a bailout or not. The auction met the upper end of the EUR 3 billion to EUR 4 billion target range, the Madrid-based Treasury said. The average yield on the new three-year benchmark debt rose to 3.956 percent from 3.845 percent at the prior auction on September 20.

Portugal on Wednesday announced a number of austerity measures, including higher tax on incomes, to help the government achieve the deficit target in 2013, despite mounting opposition to the ongoing fiscal consolidation efforts.

Finance Minister Vitor Gaspar said the tax measures, which the finance ministry termed as "enormous", included an additional 4 percent surcharge on annual income in 2013.

The Euro Stoxx 50 index of eurozone bluechip stocks decreased by 0.32 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.24 percent.

The CAC 40 of France dropped by 0.14 percent and the DAX of Germany fell by 0.23 percent. The FTSE 100 of the U.K. climbed by 0.03 percent and the SMI of Switzerland gained 0.41 percent.

US Market Report

Stocks On The Upside Ahead Of Monthly Jobs Report Stocks continue to see some strength in mid-day trading on Thursday, although buying interest has remained relatively subdued. Uncertainty about tomorrow's monthly jobs report has helped to limit the upside for the markets. The major averages are currently all in positive territory, although the tech-heavy Nasdaq is up only 1.92 points or 0.1 percent at 3,137.15. The Dow is up 64.97 points or 0.5 percent at 13,559.58 and the S&P 500 is up 7.02 points or 0.5 percent at 1,458.00. The strength on Wall Street is partly due to a positive reaction to the latest batch of U.S. economic data, including a report from the Labor Department showing that initial jobless claims rose by less than expected in the week ended September 29th. While jobless claims edged up to 367,000 from the previous week's revised figure of 363,000, economists had expected jobless claims to climb to 370,000. Peter Boockvar, managing director at Miller Tabak, said, "Bottom line, it's encouraging to see the pace of firing's moderate over the past 2 weeks but we'll see tomorrow how the recent pace of hiring's are going." A separate report from the Commerce Department showed a notable decrease in factory orders in the month of August, although orders actually rose when excluding a steep drop in orders in the volatile transportation sector. Traders have also reacted positively to comments from European Central Bank President Mario Draghi, who spoke following the central bank's widely expected decision to leave interest rates unchanged. Draghi said the ECB is prepared to start buying government bonds and said the decision to institute the bond buying program has helped to alleviate tensions in euro area financial markets. The ECB President also said the risks to the outlook for the European economy continue to be on the downside but said the risks to the outlook for inflation continue to be broadly balanced.