Daily FX & Market Commentary - Traders Keep Close Eye On Washington

Daily FX Commentary: (Morning Report)

EUR/USD

The single currency is taking a pause in recent strong rally, as psychological 1.3300 level proves to be tough barrier. Subsequent quick pullback and slide below 1.3200 handle, sidelines near-term bulls, as hourly indicators moved in the negative territory and notion being supported by Gravestone Doji that signals loss of upward momentum and stronger reversal. With initial strong support at 1.3200/1.3186 being dented, where 20 day EMA contained dips for now. However, further reversal cannot be ruled out, with next support at 1.3140 zone, Fib 38.2% of 1.2876/1.3307 and 17 Dec low, required to hold and prevent the pair form deeper slide. On the upside, lift above 1.3250 would signal higher low and shift focus towards 1.3300 barrier. Strong bullish stance on a daily chart, still keeps the upside favored, with 1.3360, weekly 90 day MA and 1.3380, April highs, seen as near-term targets.

Res: 1.3227, 1.3253, 1.3307, 1.3360
Sup: 1.3200, 1.3186, 1.3142, 1.3100 

GBP/USD

Near-term bulls are losing traction, after Cable briefly tested very strong 1.6300 barrier but failure to sustain gains, resulted reversal to initial support zone at 1.6240, where 55 day EMA so far contained losses. Negative structure on hourly chart, with price holding below descending 20 day EMA and 4h indicators reversing from overbought zone, see potential for further retracement, with 1.6200, round figure / near 38.2% of 1.6000/1.6305, seen as next downside target, with break here to confirm near-term top and open way towards 1.6100.

Res: 1.6260, 1.6268, 1.6300, 1.6308
Sup: 1.6236, 1.6200, 1.6190, 1.6175


USD/JPY

The pair dips below psychological 84.00 support, as gains stalled at 84.61 and reversal retraced nearly 61.8% of 83.30/84.61 upleg at 83.84. near-term structure is now negatively aligned, with immediate risk seen towards 83.60/30 support. Losing the latter will also fill last Monday’s gap and risk stronger correction of the recent rally. Reversing 4h and overbought daily studies are supporting such scenario, with close below 84.00, required to confirm. Conversely, regain of previous top at 84.32, would avert immediate downside risk.

Res: 84.00, 84.32, 84.46, 84.61
Sup: 83.80, 83.60, 83.30, 83.00 


USD/CHF

The pair enters corrective phase after fresh losses through psychological 0.9100 support, found temporary ground at 0.9085, 20 day lower Bollinger Band. Subsequent bounce so far tested initial barrier and previous low at 0.9150, where 20 day EMA limited recovery for now. Improved conditions on hourly chart, see potential for possible further extension higher and test of psychological 0.9200 barrier, break of which is required to confirm recovery. From the other side, firmly bearish daily structure, sees the current move as corrective and preceding fresh weakness that would focus 0.9040/00, next downside targets.

Res: 0.9153, 0.9200, 0.9240, 0.9268
Sup: 0.9126, 0.9100, 0.9085, 0.9040

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks finish flat on US budget uncertainty

    Market Movers
    techMARK 2,131.98 +0.12%
    FTSE 100 5,958.34 -0.05%
    FTSE 250 12,422.77 +0.16%

The FTSE 100 index finished broadly flat on Thursday afternoon, taking a pause of two days of decent gains, with the focus remaining on the US 'fiscal cliff' ahead of the Christmas holiday.

Even a positive surprise in US gross domestic product (GDP) failed to give markets a boost. The American economy expanded at an adjusted annual rate of 3.1% in the third quarter, well ahead of the previously estimated 2.7% growth forecast.

"European markets have struggled to retest yesterday’s highs despite gaining momentum in the first few hours of trading," said sales trader Toby Morris from CMC Markets.

"Investors saw the early recovery from yesterday’s late sell off halted with traders unable to find any real distractions to the politics in the US to push markets to new levels," he said.

Stocks finished slightly higher on Wednesday after Standard & Poor's upgraded Greece's credit rating to 'B-minus' and the IFO German business climate index beat expectations. However, gains were pared by the close after the White House Communications Director Dan Pfeiffer said that President Barack Obama would veto any ‘plan B’ for the 'fiscal cliff' from House Speaker John Boehner.

Europe Market Report 

European Markets Finished Mixed On Fiscal Cliff Concerns

The European markets ended Thursday's trading session with mixed results. The stalemate in the U.S. fiscal cliff negotiations has investors concerned, as the end of the year draws ever closer. The strong upward revision in U.S. GDP for the third quarter initially sparked gains in Europe, which then quickly eroded.

The White House Wednesday threatened to veto a plan put forward by leading House Republicans aimed at delaying the onset of the 'fiscal cliff.' The plan, called 'Plan B,' was presented by House Speaker John Boehner.

According to a White House, Boehner's proposal would only raise roughly a third of the $1 trillion in tax increases from high-income households that had previously been proposed by the Speaker.

The White House Communications Director Dan Pfeiffer said President Barack Obama is still seeking "a significant, balanced deal that is good for American families, the economy and for our nation's future" and has put forward a proposal that offers to meet Boehner halfway on taxes and spending.

The European Commission on Thursday approved restructuring plans of four Spanish banks, allowing those banks to receive aid from the Eurozone bailout fund. The commission concluded that the restructuring plans of four Spanish banks, namely Liberbank, Caja3, Banco Mare Nostrum (BMN) and Banco CEISS, are in line with EU state aid rules.

The Italian Senate has approved Prime Minister Mario Monti's budget bill for 2013. Monti had previously announced that he will resign as Prime Minister once the budget receives final approval. His resignation will lead to a general election.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.21 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, declined by 0.05 percent.

The DAX of Germany climbed by 0.05 percent and the CAC 40 of France gained 0.50 percent. The FTSE 100 of the U.K. fell by 0.05 percent and the SMI of Switzerland decreased by 0.48 percent.

US Market Report

Stocks Nearly Flat As Traders Keep Close Eye On Washington

Stocks continue to turn in a lackluster performance in mid-day trading on Thursday amid renewed uncertainty about the looming fiscal cliff. The focus on developments in Washington has overshadowed a batch of largely upbeat economic data.

Currently, the major averages are nearly flat on the day. While the S&P 500 has edged up 1.62 points or 0.1 percent to 1,437.43, the Dow is down 1.80 points or less than a tenth of a percent at 13,250.17 and the Nasdaq is down 1.64 points or 0.1 percent at 3,042.72.

The choppy trading on Wall Street comes as traders continue to keep a close eye on Washington, as uncertainty about the fiscal cliff has crept back into the markets following recent comments by President Barack Obama and House Speaker John Boehner.

Boehner has indicated that he will bring his "Plan B" legislation to the floor of the House for a vote despite a veto threat from the White House.

The "Plan B" legislation would extend the Bush-era tax cuts for people making up to $1 million, but Democrats claim it would raise taxes on millions of working families.

Boehner has argued that the president would be responsible for the largest tax increase in American history if he can't persuade Senate Democrats to approve the legislation.

As a result of the focus on the budget negotiations, traders have largely shrugged off the latest batch of U.S. economic data, including reports showing stronger than expected existing home sales growth and a rebound in Philadelphia-area manufacturing activity.

The National Association of Realtors said existing home sales rose 5.9 percent to an annual rate of 5.04 million in November from a downwardly revised 4.76 million in October. Economists had expected existing home sales to climb to 4.90 million.

With the bigger than expected increase, existing home sales rose to their highest level since spiking to 5.44 million in November of 2009.

Separately, the Philadelphia Federal Reserve said its diffusion index of current activity climbed to a positive 8.1 in December from a negative 10.7 in November, with a positive reading indicating an increase in regional manufacturing activity. Economists had expected the index to remain negative.

The Commerce Department also released a report showing a bigger than expected upward revision to the pace of GDP growth in the third quarter, while the Labor Department reported a modest rebound in weekly jobless claims.

Other Markets


In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Thursday. While Japan's Nikkei 225 fell by 1.2 percent following recent strength, Hong Kong's Hang Seng Index inched up by 0.2 percent.

In the bond market, treasuries are pulling back near the unchanged line after moving higher earlier in the session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.793 percent after hitting a low of 1.77 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.