Daily FX & Market Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The single currency bounced off dangerous 1.2800 zone, supported by fundamentals, with break above trendline resistance at 1.2890 and yesterday’s highs at 1.2910, extending gains to 1.2934 so far, previous low of 08 Oct and upper Bollinger band. Improved hourly structure sees potential for further recovery towards 1.2950/60, 50% of 1.3070/1.2825 and 09 Oct high, with 1.2900 zone required to contain dips.

Res: 1.2875, 1.2900, 1.2910, 1.2920
Sup: 1.2825, 1.2820, 1.2800, 1.2745

GBP/USD

Cable’s bounce from 1.6000 support zone, tests the upper boundary of near-term range at 1.6050 area, with slight improvement on hourly studies, bringing some more optimism in near-term outlook. Regain of minimum 1.6066, low of 03 Oct and Fib 38.2% of 1.6216/1.5975, is required to confirm positive stance and open way for stronger recovery towards 1.6100, near 50% retracement. However, larger picture’s bears remains in play, unless 1.6150, daily 20 day MA is regained.

Res: 1.6054, 1.6066, 1.6100, 1.6124
Sup: 1.6033, 1.6000, 1.5983, 1.5975

USD/JPY

Strong rally that emerged from important 78.00 support zone, regained 78.40/50 barriers, previous range ceiling / Fib 61.8% of 78.86/77.94 descend, to avert immediate downside risk and shift near-term focus higher. Hourly indicators moved into positive territory and continue to point higher despite the overbought readings. However, to confirm positive near-term structure and higher base at 78.00, break above 90 day MA at 78.75 and regain of previous peak of 05 Oct at 78.86, is required.

Res: 78.75, 78.86, 79.00, 79.21
Sup: 78.40, 78.15, 78.00, 77.94

USD/CHF

The pair dips below initial support and consolidation floor at 0.9370, following upside rejection s at 0.9417 and 0.9400 that confirm failure swing. With losses approaching important support at 0.9330/20 zone, Fib 61.8% of 0.9273/0.9330 / 08/09 Oct higher platform, increased risk is seen on break here and psychological 0.9300 support, to signal top at 0.9430 and open way for possible full retracement of 0.9273/0.9430 upleg that will also confirm double-top at 0.9436/30. With hourly studies deep in the negative zone and 4h indicators descending, further bearish pressure could be anticipated. Alternative scenario requires regain of 0.9400 to turn focus towards the upper barriers at 0.9400/30.

Res: 0.9370, 0.9400, 0.9417, 0.9430
Sup: 0.9335, 0.9320, 0.9300, 0.9273

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Daily Market Commentary: (Evening Report)

London Market Report

Footsie thunders ahead

Market Movers
techMARK 2,109.44 +0.37%
FTSE 100 5,829.75 +0.92%
FTSE 250 11,898.39 +0.59%

Better than expected US jobless figures gave a little early afternoon boost to a London market already going along nicely, as investors shrugged off a downgrade of Spain's credit rating by S&P, leaving the Iberian nation's debt status barely above a junk rating.

Initial weekly unemployment claims dropped by 30,000 to 339,000 last week in the US. The market had been expecting a reading of 370,000.

Europe Market Report 

European Markets Finished Solidly Higher Despite Spanish Downgrade

The European markets rallied higher on Thursday, thanks to some positive corporate news from the region. The better than expected U.S. jobless claims report in the afternoon helped the markets to extend their early gains. A Spanish ratings downgrade from S&P and lingering concerns over Greece were unable to hinder the day's positive move. Investors are hoping that the Spanish downgrade may bring the country closer to a bailout request. Banks stocks turned in a strong performance Thursday, as well as shares of luxury goods companies.

Standard & Poor's Ratings Services downgraded its sovereign ratings on Spain by two notches to the lowest investment grade, highlighting the mounting risks to public finances from rising economic and political pressures.

The outlook on the long-term rating remained negative, reflecting S&P's assessment of significant risks to the country's economic growth and budgetary performance and a lack of a clear direction in Eurozone policy.

The long-term sovereign credit rating on Spain was reduced to 'BBB-', one level above junk, from 'BBB+'. The agency also warned of possible further downgrade.

Italy's borrowing costs for three-year funds increased at a bond auction as Spain's rating downgrade coupled with the uncertainty about that country's bailout request weighed on investor sentiment.

The Treasury sold EUR 3.75 billion of its three-year benchmark BTPs. The yield climbed to 2.86 percent from 2.75 percent at the prior auction on September 13.

International Monetary Fund Managing Director Christine Lagarde said the struggling euro area member Greece requires two more years to meet its budget targets and should be brought back to its feet.

"This is what we advocated for Portugal, this is what we advocated for Spain, and this is what we are advocating for Greece, where I said repeatedly that an additional two years was necessary for the country to actually face the fiscal consolidation program that is considered," Lagarde said on Thursday at a news conference ahead of the IMF-World Bank annual meetings in Tokyo.

German Finance Minister Wolfgang Schaeuble said Eurozone governments will not share losses on Greek debt holdings. Everyone in Europe agrees to wait for Troika report and will then decide on Greece, he said in Tokyo. He added that no country is thinking about exiting from the euro.

Germany's leading economic research institutes downgraded economic outlook as the euro crisis is putting a strain on the economy. The think tanks said economic growth will remain weak for the moment and only looks set to recover again slightly over the course of next year.

The institutes lowered 2012 growth outlook to 0.8 percent from 0.9 percent. The institutes forecast 1 percent expansion next year, slower than the 2 percent growth estimated in April.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 1.29 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, advanced by 0.79 percent.

The DAX of Germany climbed by 1.06 percent and the CAC 40 of France gained 1.42 percent. The FTSE 100 of the U.K. rose by 0.92 percent and the SMI of Switzerland added 0.38 percent.

US Market Report

Stocks Give Back Ground But Hold On To Modest Gains While stocks showed a strong upward move in early trading on Thursday, buying interest has waned over the course of the trading day. The major averages have subsequently pulled back well off their best levels of the session. Currently, the major averages are clinging to modest gains. The Dow is up 23.29 points or 0.2 percent at 13,368.26, the Nasdaq is up 6.63 points or 0.2 percent at 3,058.41 and the S&P 500 is up 5.32 points or 0.4 percent at 1,437.88. Bargain hunting contributed to the early strength on Wall Street, with some traders picking up stocks at reduced levels following the weakness seen in recent sessions. Adding to the buying interest was the release of a report from the Labor Department showing an unexpected drop in initial jobless claims in the week ended October 6th. The report said initial jobless claims tumbled to 339,000 from the previous week's revised figure of 369,000. The drop surprised economists, who had expected jobless claims to edge up to 370,000 from the 367,000 originally reported for the previous month. With the unexpected decrease, jobless claims fell to the lowest level since a matching number in the week ended February 16th, 2008. However, the steep drop may reflect a distortion due to an irregular filing by a large state. Labor Department officials declined to name the state. Peter Boockvar, managing director at Miller Tabak, said, "After talking to a contact listed on the Labor Department press release in this morning's jobless claims data, I was told the state not revealed subtracted 30,000 from the weekly initial jobless claims figure." "This would take the 'adjusted' number to 369,000, about in line with the original expectations of 370,000," he added. Lingering concerns about the global economic outlook may have also helped to limit the upside for the markets, with a report from the Commerce Department showing a notable drop in U.S. exports in August.