Daily FX & Market Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The near-term structure improves, as the pair sustains gains above initial 1.2700 barrier and reaches 1.2755, near 50% of 1.2875/1.2660 descend, so far. Consolidation above 1.2720/00, would keep bulls in play for possible further retracement, however, failure to regain 1.2800 zone, previous range floor and 200 day MA, would keep the downside vulnerable, as 4h studies still hold in the negative territory and daily bears remain in play. Today’s close above 1.2700 would give more credibility to the latest rally.

Res: 1.2755, 1.2768, 1.2787, 1.2800
Sup: 1.2723, 1.2700, 1.2670, 1.2660


GBP/USD

Overall bearish tone keeps the downside favored, as double failure in attempts through 1.5900 barrier, resulted in fresh weakness that is attacking 200 day MA. Hourly studies are regaining bearish momentum, with clear break below 1.5848, seen as a trigger for extension towards 1.5800 initially and trendline support at 1.5760, expected to come in near-term focus on a break below the latter.

Res: 1.5857, 1.5878, 1.5900, 1.5914
Sup: 1.5841, 1.5800, 1.5782, 1.5760


USD/JPY

USD/JPY is a top performer today, as acceleration through important 80.00 barrier, retraced approx 76.4% of corrective 80.67/79.06 downleg, with 80.30 seen so far, where overbought hourlies limited gains for now. Corrective action is seen likely and preceding fresh rally, as reversing hourly indicators are giving initial signal. Immediate support lies at 80.00, reinforced by Fib 23.6% of 79.20/80.30 rally and 10 day EMA, while any deeper pullback should not exceed 79.80/70 zone, to keep bulls intact. Positive near-term structure brings 80.67 peak back in focus, with break here to signal a resumption of larger uptrend from 77.12.

Res: 80.30, 80.43, 80.55, 80.67
Sup: 80.00, 79.88, 79.75, 79.63


USD/CHF

The pair consolidates above today’s fresh low at 0.9436, as reversal from 0.9511 high, tests the upper side of strong 0.9430/0.9400 support band, also 4h 55 day EMA. Overextended hourly conditions, see potential for fresh bounce, also signaled by reversing 4g indicators, with good barrier seen at 0.9475, today high / 50% of 0.9511/0.9436, break of which to revive bulls and shift focus towards 0.9500 zone. Otherwise, risk of lower top and fresh bear-leg towards pivotal 0.9400, 200 day MA, would be increased.

Res: 0.9461, 0.9475, 0.9500, 0.9511
Sup: 0.9436, 0.9427, 0.9400, 0.9380

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Daily Market Commentary: (Evening Report)

London Market Report

Footsie drops over one per cent after Rehn comments

Market Movers
techMARK 2,048.86 -0.65%
FTSE 100 5,722.01 -1.11%
FTSE 250 11,718.65 -0.67%

The Footsie lost nearly one per cent on Wednesday as risk appetite waned after comments from Olli Rehn on Spain and concerns about the global economy brought out the bears.

Rehn, the European Commissioner for Economic and Monetary Affairs, quashed speculation this afternoon that Spain was near to a bailout request, saying that the country has taken “effective action” to cut its budget deficit for this year and the next, though 2014’s targets could be a stretch.

Financial trader Shavaz Dhalla said: “Global headline shares continued to tread with caution today as investors remained confused as to what is actually being done to solve the Eurozone debt crisis as well as the US’s impending fiscal cliff. Furthermore, worse-than-expected monthly retail sales from the US also added to the concern that the global economic recovery has probably stalled.”

Meanwhile, some mixed economic data closer to home and remarks from the Bank of England (BoE) did their bit to add to the selling pressure.

Claims for unemployment benefits in the UK increased by 10,100 in October, disappointing the consensus of analysts who were expected no change. This was the largest increase in over a year. Nevertheless, it was revealed today that the UK jobless rate declined to 7.8% in the third quarter, below the consensus estimate of a flat 7.9% reading.

The BoE has reduced its 2013 UK growth forecast to about 1% in its quarterly inflation report. The report said there was "a greater risk that the UK economy may be in a period of persistent low growth”, with problems in the Eurozone and the rest of world continuing to have an impact at home. The Bank also said inflation should fall towards the government's 2% target in the second half of 2013, later than previously thought.

Europe Market Report 

European Markets Fell Amid Weak Economic Data & Protests

The European markets weakened on Wednesday, after anti-austerity protests broke out across Europe. Labor unions organized coordinated walkouts in Greece, Spain, Portugal and Italy. Some weak economic numbers also raised concerns, like the larger than expected decline in Eurozone industrial output and the unexpected jump in British jobless claims.

The impending fiscal cliff in the U.S. continued to weigh on investor sentiment. President Obama is expected to meet with Congressional leaders at the end of the week to begin discussions to avoid the cliff.

Greek Finance Minister Giannis Stournaras and Labor Minister Giannis Vroutsis told the European Parliament's Economic Affairs and Employment Committees on Tuesday that it is up to the EU to come forward with the next aid tranche.

There were many distortions in the Greek finance and labor markets that had to be tackled, but Greece has taken all the necessary measures, they noted.

Meanwhile, the Greek economy contracted at a faster pace in the third quarter, signaling a further deepening of the ongoing recession, as the downturn in economic activity intensified amid the unresolved debt crisis, preliminary data from the Hellenic Statistical Authority showed Friday.

Gross domestic product, on an unadjusted basis and at constant prices, fell 7.2 percent year-on-year in the third quarter, after falling 6.3 percent in the second quarter. The economy has contracted for the seventeenth consecutive quarter.

The Bank of England forecast for contraction by the British economy and sluggish growth in the near term has opened the door for more quantitative easing. On the inflation front, the central bank does not expect inflation to fall back until the second half of 2013.

In its quarterly Inflation Report published on Wednesday, the BoE trimmed its growth forecast but lifted its inflation outlook on the recent out turn of higher inflation and the spike in energy charges.

At the press conference, BoE Governor Mervyn King warned that the economy faces an "unappealing mix of a weak recovery and high inflation."

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.65 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 1.00 percent.

The DAX of Germany dropped by 0.94 percent and the CAC 40 of France fell by 0.89 percent. The FTSE 100 of the U.K. decreased by 0.76 percent and the SMI of Switzerland finished down by 0.68 percent.

US Market Report

Abercrombie & Fitch defies weaker trend Market movers Dow Jones: -64 at 12,692 S&P 500: -3 at 1,371 NASDAQ Composite: -8 at 2,876 US equities have opened lower after US retail sales fell in October by slightly more than analysts expected, though there were extenuating circumstances in the form of Hurricane Sandy. Retail sales fell by 0.3% in October (+3.8% year-on-year) to $411.6bn. The market consensus was expecting a 0.2% decline. Retail sales for September were revised higher to 1.3% (5.4% year-on-year) from the previously reported 1.1%. Of more concern to investors is the shadow of the so-called fiscal cliff, updates on which are likely to preoccupy markets for most of the rest of the year. President Obama is set to hold talks with luminaries from both his own party and the opposition party on moves to avert the compulsory spending cuts and tax increases that would kick in were Congress unable to agree on a budget before the end of the year. On the corporate front, networking equipment firm Cisco has given a boost to the whole sector with better than expected fiscal first quarter figures. Juniper Networks and F5 Networks are both pulled along on Cisco's coat-tails. Trendy high priced Clothing seller Abercrombie & Fitch soared after raising profit guidance for the year on back of better than expected third quarter figures. US Treasuries are holding steady with yields on the 10-year Treasuries little changed.  On the futures market, West Texas Intermediate is trading at $85.83 a barrel, up 45 cents on the day.