Daily FX & Market Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The Euro comes under renewed pressure, following brief consolidation above yesterday’s low at 1.2766, with previous strong support at 1.2800, keeping the upside limited for now. Negative near-term sentiment, sees the downside favored, with immediate focus at 1.2760/40 zone, channel support / 09/10 Sep lows / Fib 38.2% of 1.2042/1.3170 rally. Only bounce above 1.2840, yesterday’s high / 20 day EMA, would delay bears.

Res: 1.2800, 1.2825, 1.2841, 1.2862
Sup: 1.2766, 1.2760, 1.2740, 1.2700


GBP/USD

The pair holds within broader 1.5911/1.6174 range, with near-term tone turning negative after losing 1.6000 and 1.5974 supports. Losses have so far been contained at 1.5956, with corrective action seen on oversold conditions. Initial barrier lies at 1.6000, near 23.6% of 1.6175/1.5956, while only lift above 1.6030/40, 4h Ichimoku cloud base / Fib 38.2% would provide temporary relief and prevent the pair sliding towards 1.5911, key near-term support.

Res: 1.6000, 1.6038, 1.6066, 1.6075
Sup: 1.5969, 1.5956, 1.5935, 1.5911


USD/JPY

Near-term bulls are losing traction, as pullback from 80.67 peak, cracks important 80.00 support. With hourly studies in the negative territory, the downside remains vulnerable, as 4h indicators are pointing lower. Larger picture, from the other side, holds firm bullish tone, with near-term risk seen on a slide below 78.80, Fib 61.8% of 79.27/80.67 that may trigger retest of 79.50/27 supports. Conversely, regain of 80.40 zone, would shift focus higher again.

Res: 80.30, 80.37, 80.55, 80.67
Sup: 79.96, 79.80, 79.50, 79.27


USD/CHF

The pair consolidates the latest rally that broke above near-term range top at 0.9430 zone and posted fresh high at 0.9449. Overall bullish tone remains intact, however, overbought conditions on 4h studies and appearance of MACD bearish divergence on hourly chart, may signal further hesitation on the way towards 0.9500, round figure / Fibonacci barrier. Any reversal sees good support at 0.9400/0.9385, while only loss of the latter, would be a signal of stronger corrective action.

Res: 0.9449, 0.9461, 0.9500, 0.9523
Sup: 0.9428, 0.9400, 0.9385, 0.9374 

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Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets in bullish mood ahead of US election results

Market Movers
techMARK 2,111.86 +0.77%
FTSE 100 5,884.90 +0.79%
FTSE 250 12,081.55 +0.42%

- Markets gear up for climax of presidential race
- Economic data disappoints
- Corporate earnings impress, Resolution leads risers after upgrade

The UK stock market shrugged off some disappointing economic data to finish Tuesday's session with decent gains as a barrage of updates and results from some heavy hitters impressed.

However, the mood was cautious with all eyes turning to the eagerly-awaited presidential election which comes to an end today. Polls show a tight race between current Democratic President Barack Obama and Republican candidate Mitt Romney. Whoever wins will have to urgently address the 'fiscal cliff' as spending cuts and tax increases are scheduled to come into effect in the next few months.

Jason Hollands, the Managing Director at Bestinvest, said that the conclusion of the election could herald the first step towards "renewed business confidence". He said: "A resolution of the 'fiscal cliff' would create the potential for a relief rally in US equities. We think a deal will ultimately happen: probably by reinstating Bush-era tax cuts. Much US business activity has simply been put on hold for months, from hiring through to M&A activity.

"With high levels of cash on their balance sheets, US companies look well positioned to either engage in corporate activity once some of the political and economic uncertainty is removed. If they can't find better uses for their cash, then expect a continued improvement in dividend pay-outs, which makes the US a potentially more interesting place for income seekers." 

UK and European data paints a gloomy picture 

UK industrial production registered a contraction of 1.7% month-on-month in September (-2.6% year-on-year), missing consensus estimates for a fall of just 0.6%m/m (-1.6% y/y). Meanwhile, UK retail sales rose by 1.5% m/m in October, but fell by 0.1% y/y, in value and like-for-like terms, according to the latest data from the British Retail Consortium (BRC).

Meanwhile, the Eurozone service-sector PMI fell from 46.2 to 46.0 in October, below expectations of a flat reading. Meanwhile, the composite PMI, which measures services and manufacturing combined, fell from 45.8 to 45.7.

Market analyst Michael Hewson from CMC Markets said: "Given that most of today's European economic data has been nothing short of woeful you could be forgiven for thinking that markets would be trading lower today.

"Fortunately investors appear to be focusing on the better-than-expected performances of companies that have been reporting their latest numbers today with the stand-out performer being BMW latest numbers as the company posted a record Q3 profit, boosted by sales in China and Japan. Better-than-expected numbers from high street retailers Marks & Spencer and Primark have also helped."


Europe Market Report 

Europe midday: Markets rebound as investors await US election results

FTSE-100: +0.62%
Dax-30: +0.56%
Cac-40: 0.48%
FTSE Mibtel 30: +0.55%
Ibex 35: +0.14%
Stoxx 600: +0.52%

European equities manage to rebound after yesterday's 1% drop as markets take a "wait and see" approach to the day's session.

Headlines are filled with the US elections that get in full-swing tonight and bets are equal on which candidate will walk away with the presidency. The latest poll posted in The Wall Street Journal shows Barack Obama with a slight lead over Republican rival Mitt Romney of 48.8% to 48.1%.

It's clearly anyone's race and European markets "should" awake tomorrow with the results in hand. However, The New York Times' warning is well worth noting: "should there be delayed counts, recounts and court challenges, Election Day becomes Election Week or — gasp! — Month."

Speaking of waiting, events in Athens are at a standstill as Greeks have begun a two-day strike to protest reforms. The Hellenic Parliament is expected to vote on the austerity package tomorrow and then the 2013 budget on Sunday. Yesterday afternoon reports indicated that nothing would go through in time for the meeting of Eurozone finance ministers on Monday.

Meanwhile, Spain, the other major player in the current chapter of the European debt crisis, has also decided not to give any new information for the markets to digest. At the same time that reports indicate that the European Commission will be officially announcing tomorrow much direr forecasts for the peripheral country, Prime Minister Mariano Rajoy seems content to stand pat. In an interview this morning, he simply repeated that deficit reduction was Spain's first priority and his government has yet to make a decision about requesting a bailout. 

Eurozone services sector continues to contract

The latest data on the Eurozone's service sector released on Tuesday morning shows that the European economic slowdown continues its course.

The Eurozone's Purchasing Managers' Index (PMI) for the services sector, compiled by Markit Economics fell to 46.0 points in October from 46.2 points, remaining below the 50-point threshold that indicates recession.

It's also worth mentioning that region's heavyweights Germany and France showed deterioration while peripheral countries such as Spain and Italy managed a slight improvement.

Other markets

The euro/dollar managed a slight rebound (+0.08% to the 1.2808) after recent losses.

Front month Brent crude futures currently trade up by 0,80% to $108.59.

US Market Report

Stocks have moved to the upside in early trading on Tuesday, adding to the gains posted in the previous session. The major averages have all climbed into positive territory, further offsetting last Friday's substantial losses. The major averages have recently pulled back off their highs for the young session but are currently holding on to gains. The Dow is up 60.27 points or 0.5 percent at 13,172.71, the Nasdaq is up 2.93 points or 0.1 percent at 3,002.59 and the S&P 500 is up 4.76 points or 0.3 percent at 1,422.02. The early strength on Wall Street comes despite continued uncertainty about the outcome of today's elections, although trading activity is likely to be relatively subdued as voting gets underway. The outcome of the presidential race between President Barack Obama and Republican Mitt Romney as well as key congressional races will not be known until much later tonight at the earliest. A lack of major U.S. economic data may also keep traders on the sidelines, although some investors will be willing to make bets on particular sectors based on their expectations for the outcome of the elections. A win for Obama is expected to be good news for the alternative energy, telecom, and housing sectors, while a win for Romney could benefit the defense, resource, and financial sectors. In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance on Tuesday. While Australia's All Ordinaries Index inched up by 0.2 percent, Japan's Nikkei 225 Index dipped by 0.4 percent and Hong Kong's Hang Seng Index edged down by 0.3 percent. Meanwhile, the major European markets have all moved to the upside on the day. The French CAC 40 Index has risen by 0.4 percent, while the U.K.'s FTSE 100 Index and the German DAX Index are both up by 0.6 percent. In the bond market, treasuries have given back some ground after moving notably higher over the course of the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, has edged up by 1.4 basis points to 1.698 percent.