Daily FX & Market Commentary - Fed likely to introduce further monetary stimulus

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro steadies above 1.2900 support, with overnight’s brief break above initial 1.2950 resistance, lacking momentum for test of more significant 1.2970, Fib 38.2% and 1.3000, round figure / 50% retracement of 1.3125/1.2876. Hourly studies are losing traction, while 4h 20 day EMA capping and indicators in the negative territory, with Stochastic reversing, seeing the downside still vulnerable. Failure to regain 1.3000 handle that would open way for stronger recovery, sees risk of retesting 1.2900/1.2876, to possibly trigger further retracement of larger 1.2660/1.3125 ascend.

Res: 1.2961, 1.2971, 1.3000, 1.3030
Sup: 1.2927, 1.2900, 1.2885, 1.2876


GBP/USD

Cable holds near-term positive tone, established on a strong bounce from 1.6000 support zone, despite yesterday’s rejection on approach to psychological 1.6100 barrier. While the near-term consolidation holds above 1.6060, previous resistance, scope exists for fresh attempt higher, with clearance of 1.6100 and more important 1.6129 double-top, required to confirm bullish stance. Otherwise, loss of 1.6060, also 55 day EMA, would see increased risk of re-visiting 1.6000 area. Hourly studies are losing momentum, while 4h indicators are about to break above the midlines, with regain of 1.6100, required to confirm.

Res: 1.6086, 1.6095, 1.6100, 1.6127
Sup: 1.6060, 1.6042, 1.6012, 1.6000 


USD/JPY

The pair holds in the middle of near-term 81.70/82.83 range, following unsuccessful attempt at upper boundary and dips being contained above psychological 82.00 support. Near-term studies remain neutral, with break of either side of the range, required to establish fresh direction.

Res: 82.43, 82.63, 82.74, 82.83
Sup: 82.29, 82.10. 82.00, 81.68


USD/CHF

The pair holds near-term positive tone, as reversal from last Friday’s fresh high at 0.9381, finds ground at initial support at 0.9320, reinforced by 20 day EMA. Positive 4h chart structure keeps the upside in focus, with hourly studies starting to point higher and gaining bullish momentum. Regain of important 0.9400 barrier is seen as initial signal of bullish resumption, with break above 200 day MA at 0.9420 and previous peaks at 0.9430 zone, required to confirm. Conversely, loss of 0.9320/00 would revive bears and re-expose 0.9239 and key support at 0.9213.

Res: 0.9368, 0.9381, 0.9400, 0.9430
Sup: 0.9320, 0.9300, 0.9263, 0.9254 

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Daily Market Commentary: (Evening Report)

London Market Report

London close: 'Fiscal cliff' hopes lift markets
Market Movers

• techMARK 2,128.24 +0.11%
• FTSE 100 5,924.97 +0.06%
• FTSE 250 12,190.58 +0.10%

- Fiscal cliff optimism increases ahead of FOMC
- German ZEW smashes expectations
- Tullow drops 8.4 per cent

After a weak start, the FTSE 100 finished Tuesday's session with slight gains on the back of increasing optimism about the 'fiscal cliff', as well as a better-than-expected reading of German sentiment.

"The improved sentiment in the markets today has been largely come from the US," said market analyst Craig Erlam from Alpari.

"It appears that negotiations over how to avoid the fiscal cliff at the end of the year are actually starting to go somewhere. Details of the discussions between Obama and Boehner haven't been released but it now appears to be a case of deciding which entitlements to cut back on."

Meanwhile, the Federal Open Market Committee (FOMC) meeting will conclude tomorrow with analysts expecting the Fed to announce a new long-term bond purchase programme valued at $45bn per month as "Operation Twist" comes to an end.

Stock markets across Europe pushed into the blue this morning after the German ZEW Institute's economic sentiment index shot up to 6.9 points in December from -15.7 the month before. The consensus estimate was for a slight improvement to -11.5.

Analyst Thomas Harjes from Barclays Research said that the results "bode well for our forecast of a rebound in economic activity early next year even if further improvements in investor expectations turn out to be more modest in coming months."

Also helping the mood this morning was a Spanish debt auction which sold €3.89bn of 12- and 18-month bills, ahead of the €3.5bn targeted. They were sold at lower yields than the previous auction.

Europe Market Report 

Europe midday: Stocks rise on German economic confidence

-Confindustria lowers Italian 2013 GDP view
-RWI cuts German growth view
-Mixed newsflow out of the Eurozone periphery
-10 year Spanish bond yields down by 8 basis points to 5.49 per cent

FTSE-100: 0.13%
Dax-30: 0.71%
Cac-40: 0.76%
FTSE-Mibtel 30: 0.83%
Ibex 35: 0.18%
Stoxx 600: 0.22%

The main European equity benchmarks were standing moderately higher by the midday point of the session, buoyed by a surprisingly large rise in German economic sentiment - as measured by the well-known ZEW institute - and the relatively respectable results seen at the latest Spanish Treasury bill auctions this morning.

That following the slight gains on Wall Street last night and despite the somewhat weaker than expected money supply and bank lending figures out in China overnight.

The news-flow out of the Eurozone's periphery this morning was also somewhat mixed.

Thus, there were reports that Greece is very close to meeting its debt buy-back targets, but the Spanish region of Catalonia has informed the central government in Madrid that it will not meet this year's fiscal targets.

Acting as a backdrop, the two day meetings of both the US Federal Reserve and OPEC were slated to start on Tuesday. 

From a sector stand-point the best performance on the DJ Stoxx 600 is now to be seen in the following groups of shares: Automobiles (1.11%), Utilities (1.09%), and Construction (1.03%). 

German 2013 GDP forecasts lowered

The Germany's ZEW institute's economic sentiment index for the month of December improved to 6.9 points after a reading of -15.7 in the month before (Consensus: -11.5).

Some market commentary is calling attention to the fact that according to the survey results just over 75% of respondents were saying that they expected no change in the European Central Bank's (ECB) main policy rate during the next six months.

Italian business lobby Confindustria has lowered its forecast for the country's economic growth rate in 2013 to -1.1% from -0.6% before.

Single currency back at the 1.30 area

The euro/dollar is now rising again, by 0.34%, to the 1.2985 dollar mark.

Front month Brent crude futures are now rising by 0,813 dollars to the 108.20 dollar mark on the ICE.

US Market Report

Stocks Rally On Upbeat German Data, Optimism On Fiscal Cliff
Stocks have moved sharply higher over the course of the trading day on Tuesday, adding to the modest gains posted in the previous session. The markets have benefited from some upbeat German economic data as well as optimism about the looming fiscal cliff.

The major averages have moved roughly sideways in recent trading, hovering near their best levels of the day. The Dow is up 120.59 points or 0.9 percent at 13,290.47, the Nasdaq is up 41.96 points or 1.4 percent at 3,028.92 and the S&P 500 is up 14.13 points or 1 percent at 1,432.68.

The rally on Wall Street is partly due to the release of a report from the Center for European Economic Research showing a bigger than expected improvement in German investor confidence.
The report showed that the expectations index climbed to a positive 6.9 in December from a negative 15.7 in November, turning positive for the first time since May. The current conditions index edged up to 5.7 from 5.4.

Positive sentiment has also been generated by a report from the Wall Street Journal indicating that negotiations between the White House and Republican House Speaker John Boehner have progressed steadily in recent days.

Citing people familiar with the matter, the Journal said the talks have taken a marked shift recently, becoming more "serious."

The reported progress on talks between Obama and Boehner comes as a number of Republicans have indicated they would be willing to accept higher tax rates on wealthy Americans in exchange for significant spending cuts and reform to entitlement programs.

The strength on Wall Street also comes as traders look ahead to the Federal Reserve's monetary policy announcement on Wednesday.

Many analysts expect the Fed to announce a new round of Treasury securities purchases to replace its "Operation Twist" program, which expires at the end of the year.

Meanwhile, traders are also digesting a report from the Commerce Department showing that the U.S. trade deficit came in narrower than expected in the month of October.

The Commerce Department said the U.S. trade deficit widened to $42.2 billion in October from a revised $40.3 billion in September. Despite the increase by the size of the deficit, it still came in narrower than the $42.8 billion deficit forecast by economists.

A separate Commerce Department report said wholesale inventories increased by more than expected in October, although wholesale sales showed a notable decrease.

Other Markets In overseas trading, stock markets across the Asia-Pacific region moved mostly higher on Tuesday. Hong Kong'sHang Seng Index and Australia's All Ordinaries Index rose by 0.2 percent and 0.4 percent, respectively. However, Japan's Nikkei 225 Index bucked the uptrend and edged down by 0.1 percent. The major European markets also moved to the upside on the day. The U.K.'s FTSE 100 Index inched up by 0.1 percent, while the German DAX Index and the French CAC 40 Index advanced by 0.8 percent and 0.9 percent, respectively. In the bond market, treasuries have come under pressure, more than offsetting the modest gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 3.6 basis points at 1.652 percent. ==================================================================== Disclaimer: The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.