Daily FX & Market Commentary: Fiscal cliff resolution may be postponed

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro remains well supported, with last Friday’s surge through key barriers at 1.3138/70, resulted in testing levels just under psychological 1.3200 level and 30d Bollinger Band during the Asian session. Corrective easing is seen likely, as hourly indicators are emerging out of overbought zone, while 4h ones started o reverse. However, overall bullish tone remains intact, as clear break above 1.3200 would signal fresh bull phase after three-month congestion under 1.3170/38 peaks. On the upside, immediate target lies at 1.3282, 01 May high and psychological 1.3300 barrier. With dips being contained by 20 day EMA at 1.3140 for now, next strong supports lies at 1.3100 zone, also 55 day EMA and 1.3070, last Friday low / Fib 38.2% of 1.2876/1.3186 ascend.

Res: 1.3170, 1.3186, 1.3200, 1.3250
Sup: 1.3142, 1.3118, 1.3100, 1.3065 

GBP/USD

Cable is poised to break above psychological 1.6200 barrier, also Fib 76.4% of 1.6308/1.5826, the last barrier en-route to strong 1.6300 resistance zone. Near-term studies are positively aligned and keep the upside favored, with psychological support at 1.6100, also 50% of 1.6000/1.6200, expected to contain any stronger reversal.

Res: 1.6200, 1.6216, 1.6250, 1.6271
Sup: 1.6175, 1.6155, 1.6130, 1.6100


USD/JPY

Strong bullish stance has been confirmed by overnight’s gap-higher opening, as the price broke above previous annual high at 84.17. Corrective action off overnight’s fresh high at 84.32, holds for now above last week’s closing price, with any stronger retracement, as 4h studies are overbought and divergence appears on hourly chart, would face good supports at 83.30 and 83.00, levels expected to contain. On the upside, psychological 85.00 barrier comes in the near-term focus.

Res: 84.00, 84.15, 84.32, 84.50
Sup: 83.84, 83.50, 83.30, 83.00 


USD/CHF

Near-term bears remain fully in play, as the pair dips to 0.9150, following loss of 0.9200 base. Brief corrective action on oversold near-term conditions strong barriers at 0.9200/40 area that are expected to cap, with 0.9100 zone seen in the near-term focus, as the pair resumes broader downtrend from 0.9970, 24 July annual high.

Res: 0.9192, 0.9200, 0.9213, 0.9240
Sup: 0.9175, 1.9164, 0.9151, 0.9100

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Daily Market Commentary: (Evening Report)

London Market Report

London close: Stocks falls as 'fiscal cliff' deadline looms
Market Movers

• techMARK 2,107.82 -0.40%
• FTSE 100 5,912.15 -0.16%
• FTSE 250 12,218.58 -0.21%

Increasing optimism surrounding budget talks between US politicians may have helped the FTSE 100 come off its intraday low, but the index was stuck firmly in negative territory with markets remaining nervous ahead of the January 1st deadline.

Without a deal, the $600bn in automatic spending cuts and tax increases which come into effect are expected to pull the US economy back into recession.

House Speaker John Boehner, under increasing pressure to soften his opposition to raising taxes for the wealthy, made an offer over the weekend that proposed increasing taxes on those who earn over $1m. While the Obama administration declined the proposal – it wants higher taxes for those who take in more than $250,000 a year – the White House described the offer as "progress".

"It's like a game of chicken between President Barack Obama and House Speaker John Boehner. Both know they must soften their stance at some point if they are going to come to an agreement, but neither wants to do it first," said market analyst Craig Erlam from Alpari.

"Boehner has now tempted Obama in claiming he may be willing to allow tax breaks expire for millionaires in exchange for cuts to entitlements, however Obama is unlikely to go for it, instead sticking to his original demands of tax hikes on the top 2%. What it may do though is encourage Obama to offer something in return which is desperately needed if these talks are going to progress given that there's only two weeks until the deadline." 

Europe Market Report 

Europe midday: Italy and Spain hold steady

- Peugeot leads gains on the Stoxx 600
- Shares of KPN crater
- Banks deposited 225.06bn euros overnight at ECB

FTSE-100: -0.49%
Dax-30: -0.03%
Cac-40: -0.36%
FTSE Mibtel 30: 0.13%
Ibex 35: 0.07%
Stoxx 600: -0.25%

The main European equity benchmarks were registering slight falls by the midday mark, despite news that the Liberal Democratic Party (LDP) had won in this past weekend´s elections in Japan. The LDP has been a fierce critic of the Bank of Japan, pressuring it to carry out a more aggressive monetary policy.

Market commentary is linking the selling pressure in equities to doubts and worries regarding the outlook for the US fiscal cliff; more specifically, the possibility that any agreement might get pushed out beyond year-end.

In European news, Germany´s central bank – the Bundesbank – has today forecast that the country´s phase of economic weakness could "soon be over," even if it does expect a "noticeable" contraction in fourth quarter gross domestic product. 

Trade surplus contracted in October

Labour costs in the Eurozone rose at a 2.0% year-on-year clip in the third quarter, according to Eurostat.

The Eurozone trade surplus fell to €7.9bn in October, from a revised level of €11bn in the month before (Consensus: €11bn). 

 

Slight drop in the single currency
The euro/dollar was dropping 0.07% to the 1.3160 dollar level.

Front month Brent crude futures were rising by 0,120 dollars to the 108.31 dollar per barrel mark on the ICE.

US Market Report

US open: Fiscal cliff resolution may be postponed until January
-Analysts see 10 per cent rise next year in S&P 500

Dow Jones Industrials: 0.35%
Nasdaq Composite: 0.44%
S&P 500: 0.45%

The major US equity benchmarks began the session moving higher.

While today is rather light in terms of the economic calendar, rather the opposite is true of the rest of the week.

Acting as a backdrop, the news-flow regarding the fiscal cliff is mixed at best. On the one hand, some reports suggest that both Republicans and Democrats are beginning to 'talk' of possibly waiting until January before signing off on anything. That delay seems to have irked some investors.

On the other hand, the Republican speaker of the House, John Boehner, is willing to accept higher taxes on millionaires in exchange for restraint on spending on entitlement programs such as Medicare and Social Security.

Obama, however, has rejected that proposal, possibly due to the fact that he wishes to tax higher incomes starting from $200.000 per individual or $250,000 per family. 

Slight rise in other asset classes
10 year US Treasury yields were higher by 1 basis point, to 1.72%.

Front month West Texas crude futures were rising by 0.3% to the 86.91 dollar per barrel mark on the NYMEX.

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