Daily FX & Market Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The single currency maintains positive tone on basing attempt at 1.2660, as fresh gains spiked to 1.2777 yesterday, Fib 23.6% of 1.3138/1.2660 descend / 55 day EMA. Subsequent consolidation that holds above 1.2700, sees potential for further recovery, signaled by double Doji. Regain of significant 1.2800 resistance zone and 200 day MA, is seen as a trigger for extension 1.2880/1.2900. Conversely, slide below 1.2700, would risk retest of 1.2660/52, 13 Nov fresh low / daily Ichimoku cloud base.

Res: 1.2752, 1.2777, 1.2787, 1.2800
Sup: 1.2730, 1.2715, 1.2700, 1.2670

GBP/USD

Overall bearish tone keeps the downside under pressure, as double failure to clear 1.5900 barrier, resulted in fresh weakness that cracked 200 day MA and extended losses to 1.5836 so far. Near-term risk is seen on penetration of 1.5800 support, also near 50% of 1.5267/1.6308 that would trigger further weakness and expose 1.5760, trendline support. On the upside, immediate resistance lies at 1.5860 zone, while only clear break above 1.5900 would provide relief.

Res: 1.5857, 1.5878, 1.5900, 1.5914
Sup: 1.5836, 1.5800, 1.5782, 1.5760

USD/JPY

The pair surged through key near-term barrier at 80.67, previous peak and 50% of 84.17/77.12 descend, following brief consolidation above 80.00, with 80.94 seen so far, just ahead of our initial target at 81.00. Fresh bulls will be looking for extension through 81.00 and test of 81.48, Fib 61.8%, however, gains may be interrupted by corrective pullback, as near-term studies are in the overbought zone. Previous barrier at 80.67, now offers initial support, with any further easing, seeing 80.30 zone as ideal reversal point.

Res: 80.94, 81.00, 81.48, 81.77
Sup: 80.67, 80.52, 80.30, 80.10

USD/CHF

The pair remains at the back foot, as yesterday’s fresh weakness spiked to 0.9420, denting important support zone at 0.9430/00. With subsequent bounce being capped by descending 55 day EMA and near-term studies in negative territory, the downside remains vulnerable. Risk is seen on violation of 0.9400, 200 day MA that may be a signal of major reversal and bring the price back into previous 0.9213/0.9430 range. To avert immediate downside risk and shift near-term focus higher, regain of 0.9470 zone is required.

Res: 0.9462, 0.9475, 0.9500, 0.9511
Sup: 0.9435, 0.9420, 0.9400, 0.9380 

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Daily Market Commentary: (Evening Report)

London Market Report

Footsie at two-month low on global uncertainty

Market Movers
techMARK 2,041.69 -0.35%
FTSE 100 5,677.75 -0.77%
FTSE 250 11,683.50 -0.30%

Political uncertainty and disappointing economic figures the world over weighed heavily on UK stock markets today, pushing the FTSE 100 close to its lowest levels since early Septmeber.

The Footsie finished at its intraday low of 5,678. The last time the index closed lower was on September 5th when it finished at 5,658.

Stateside, stocks suffered declines after the opening bell in New York after some disappointing guidance from economic bellwether Wal-Mart, a surge in jobless claims last week and a fall in the Philly Fed manufacturing survey in November.

Nervousness ahead of President Barack Obama's face-to-face negotiations with Republicans about the 'fiscal cliff' in Congress tomorrow was also on investors' minds, as well as violence in the Middle East as the Gaza Strip conflict reignites.

On this side of the Atlantic, it was revealed today that Eurozone gross domestic product (GDP) contracted by 0.1% in the third quarter, in line with consensus estimates. When accounting for the 0.2% decline in the second quarter, it means that the single-currency area entered technical recession after contracting for a second consecutive quarter.

"Even though we saw a slight upward adjustment in German and French numbers for Q3, investors remain more worried about the data for Q4 which continues to disappoint," said market analyst Michael Hewson from CMC Markets.

Things weren't much brighter for domestic data either after the Office for National Statistics revealed that UK retail sales volumes fell by 0.8% in October, much worse than the 0.1% fall expected by analysts. Sentiment in the UK is still fragile after the Bank of England yesterday cut its growth estimate for 2013.

Meanwhile, Moody's has said that if the UK falls back into recession then it could downgrade its 'AAA' credit rating.

Europe Market Report 

European Markets Pulled Back On Weak Economic Data

The European markets ended Thursday's session in negative territory. The Eurozone slipped into recession in the third quarter, despite increases in both Germany and France. A jump in U.S. weekly jobless claims also weighed on investors, as did the sharp decline in the Philly Fed index.

The impending fiscal cliff in the U.S. also remains a concern. President Barack Obama has reiterated that higher taxes on wealthier Americans should be part of an agreement to address the looming fiscal cliff. Obama once again called for a balanced approach to dealing with the U.S. budget deficit. "But what I'm not going to do is to extend Bush tax cuts for the wealthiest 2 percent that we can't afford and, according to economists, will have the least positive impact on our economy," he said.

Spain should urgently seek an emergency aid, European Central Bank Governing Council member Luc Coene was quoted as saying by Belgian daily De Standaard on Thursday.

Coene, who also heads Belgium's central bank, expressed concern over the Spanish economy as the country's 10-year bond yields have climbed back to around 6 percent in the recent days.

The fiscal and monetary possibilities to stimulate the Eurozone economy have become very remote. "The margins have exhausted," Coene said in remarks made during an event at Ghent University.

On Greece, Coene said a partial waiver of Greek debt is necessary to bring it to the sustainable level. His views were similar to that expressed by the International Monetary Fund. However, Germany has repeatedly rejected the idea.

Moody's Investors Service on Wednesday said it will revisit the U.K.'s AAA government debt rating and the current 'negative' outlook next year in the face of gloomier economic prospects and rising risks from euro area crisis.

Releasing the annual credit report on the country, Moody's cautioned that the government's efforts to achieve fiscal consolidation and reduce debt are being hampered by weaker economic prospects as well as by the risks posed by the ongoing euro area sovereign debt crisis.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.44 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.94 percent.

The DAX of Germany dropped by 0.82 percent and the CAC 40 of France fell by 0.52 percent. The FTSE 100 of the U.K. decreased by 0.75 percent and the SMI of Switzerland finished lower by 1.53 percent.

Despite expansions in Germany and France, the euro area officially slipped into a recession in the third quarter as governments across member nations unfold tough austerity measures in the face of widespread protests.

In line with expectations, gross domestic product slid 0.1 percent from a quarter ago, when it dropped 0.2 percent, the flash estimates published by Eurostat on Thursday showed.

The German economy expanded for the third straight quarter and at a faster than expected pace, preliminary data from the Federal Statistical Office showed Thursday. The gross domestic product gained 0.2 percent sequentially in the third quarter, but slightly slower than the 0.3 percent rise in the second quarter. Economists had forecast a 0.1 percent expansion.

The French economy expanded 0.2 percent quarter-on-quarter in the third quarter, the latest figures from the statistical office Insee revealed Thursday. Economists expected the economy to stagnate during the period. Meanwhile, the GDP estimate for the second quarter was revised down to show 0.1 percent contraction for the economy.

Inflation in the euro area weakened in October as estimated earlier, final data released by statistical office Eurostat showed Thursday.

The harmonized index of consumer prices (HICP), measured under the EU methodology, increased 2.5 percent year-on-year in October, in line with the preliminary estimates. In September, the rate of inflation was 2.6 percent.

U.K. retail sales eased more-than-expected in October, reflecting weak demand for food and clothing ahead of the Christmas shopping season.

Sales volume that include automotive fuel declined 0.8 percent month-on-month in October, reversing the previous month's 0.5 percent rise, the Office for National Statistics reported Thursday. It was forecast to fall just 0.1 percent in October.

US Market Report

Stocks Extending Downward Trend On Disappointing Data

After initially showing a lack of direction, stocks have moved mostly lower over the course of the trading day on Thursday. The weakness that has emerged on Wall Street extends the sharp drop seen since last week's elections.

The major averages have seen some further downside in recent trading, hitting new lows for the session. The Dow is down 57.97 points or 0.5 percent at 12,512.98, the Nasdaq is down 15.14 points or 0.5 percent at 2,832.67 and the S&P 500 is down 6.10 points or 0.5 percent at 1,349.39.

A disappointing batch of U.S. economic data has contributed to the weakness on Wall Street even though the data reflected disruptions caused by Hurricane Sandy.

A report from the Labor Department said jobless claims jumped to 439,000 in the week ended November 10th, an increase of 78,000 from the previous week's revised figure of 361,000. Economists had expected jobless claims to climb to 376,000 from the 355,000 originally reported for the previous week.

The much bigger than expected increase lifted jobless claims to their highest level since coming in at 464,000 in the week ended April 30, 2010.

However, the data was distorted by the impact of Hurricane Sandy, with several states in the mid-Atlantic and Northeast regions reporting large increases due to the storm.

The New York and Philadelphia Federal Reserves also released separate reports showing contractions in regional manufacturing activity in the month of November.

Noting the impact of the storm, Peter Boockvar, managing director at Miller Tabak, said, "We're going to somehow have to carve out the business activity in the Northeast of late in order to get an accurate pulse of the state of the rest of the national economy."

"In terms of the market, all eyes now are on the Congressional meeting tomorrow with the White House, and with a very oversold market and bearishness at the individual investor level at the highest since August 2011, a bounce is due if there is any positive commentary in that meeting," he added.

Other Markets In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Thursday, with Hong Kong's Hang Seng Index tumbling by 1.6 percent. Meanwhile, Japan's Nikkei 225 Index bucked the downtrend and surged up by 1.9 percent. In the bond market, treasuries have climbed back near the unchanged line after seeing early weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 1.591 percent.