Wednesday, 30 January 2013

Daily FX & Market Commentary US contracts in the fourth quarter

Daily FX Commentary: (Morning Report)


The Euro eventually attacks strong 1.3500 barrier, after yesterday’s break and close above previous high at 1.3477. Positive sentiment that drives the pair is supported by positive technicals and strong bullish momentum for clear break above 1.3500, 50% retracement of 1.4938/1.2042 and weekly inverted H&S neckline that is seen as a trigger for extension of broader uptrend from July 2012 annual low at 1.2042. Immediate targets lie at 1.3547/67, 02 Dec / 18 Nov 2011 highs, ahead of psychological 1.3600 barrier. On the downside, previous peaks at 1.3477 offer initial support, while any stronger retracement is expected to hold above 1.3420/00, 28/29 Jan range floor / previous highs. 

Res: 1.3547, 1.3567, 1.3600, 1.3650 
Sup: 1.3495, 1.3477, 1.3460, 1.3420 


Near-term structure remains positive, as the pair recovers from the recent lows under 1.5700 handle, where temporary support was found. With over 61.8% of 1.5825/1.5673 being retraced so far, focus remains at 1.5800/20 breakpoint, reinforced by descending 55 day EMA, clearance of which is required to confirm near-term base and allow for stronger recovery. However, studies on 4h chart are still below their midlines and unless 1.5820 is cleared, risk of lower top and fresh weakness, as a part of larger downmove from 1.6380, still exists. 

Res: 1.57721.5784, 1.5800, 1.5823 
Sup: 1.5740, 1.5708, 1.5694, 1.5673 


The pair regains strength, as corrective easing from 91.24 peak was contained by 20 day EMA at 90.31, just above strong 90.23/00 support zone. With 91.00 handle being regained and hourly studies turning positive, attack at 91.24 and fresh extension towards 92.00, is seen as likely near-term scenario. Any retracement should not exceed 90.00, in order to keep immediate bulls intact. 

Res: 91.08, 91.24, 91.50, 92.00 
Sup: 90.83, 90.31, 90.23, 90.00 


Near-term bears remain in play, as the price consolidates above 0.9200 handle, following break below that spiked to 0.9191, Fib 138.2% extension of 0.9220/0.9291 upleg. With negative structure dominating on the lower timeframes studies, the downside remains favored, with sustained break below 0.9200, expected to open 0.9100/0.9080 base. The upside is seen protected at 0.9240/50 zone, Fib 50% / 61.8% of 0.9291/0.9191 / 55 day EMA, where rallies should be capped.


Daily Market Commentary: (Evening Report)

London Market Report

Market Movers 
  • techMARK 2,266.83 +0.30%
  • FTSE 100 6,323.11 -0.25%
  • FTSE 250 13,046.54 -0.47%
After a decent start, London's FTSE 100 index slipped into the red in the afternoon session, as disappointing gross domestic product (GDP) figures from the US dampened risk appetite.

Mining stocks bore the brunt of the selling today, pulling the resource-heavy Footsie down from the four-and-a-half-year high reached the day before.

US contracts in the fourth quarter

The world's largest economy saw GDP shrink 0.1% in the fourth quarter of 2012, surprising analysts who had expected 1.1% growth. This was a sharp contrast to the 3.1% expansion seen in the third quarter.

While the headline figure does not look good, analyst Peter Newland from Barclays Research gave reasons why it's "not all doom and gloom". He said that the downside surprise was mainly due to two components – inventory accumulation and government defence spending – so when excluding these, "the tone of the report was positive".

He said that the relative strength of consumption and business investment "suggests that household and corporate sector demand was resilient in the face of uncertainty over the outcome of the fiscal cliff and in a solid position heading into the new year."

That would probably suggest why the negative market reaction (on the FTSE 100 at least) to the report was only modest, especially when you consider the recent rally seen in stock markets worldwide since the start of the month.

All eyes now on the FOMC

The focus now turns to tonight's announcement (at 19:15) by the Federal Open Market Committee after its two-day meeting in Washington.

"There was some unrest at the last meeting according to the minutes that were released, with some members suggesting that the programme be wrapped up either in June or at the end of the year," said market analyst Craig Erlam from Alpari.

"That is unlikely to happen now, with unemployment remaining stubbornly high and growth far from the levels needed to bring it down," he said.

Europe Market Report 

Europe midday: Stocks edge lower
- Investors eye US monetary policy decision
- Italy's benchmark falls on confidence index
- Europe's economic confidence improves
- Spain reveals worse-than-expected contraction

FTSE-100: 0.03%
Dax-30: -0.13%
Cac-40: -0.12%
FTSE Mibtel 30: -2.04%
Ibex 35: -0.20%
Stoxx 600: -0.34%

European equities were trading lower at the midday mark Wednesday as investors awaited a monetary policy decision from the US.

The Federal Open Market Committee is due to reveal its plans at 19:15 after a two-day meeting in Washington. While the decision will be closely watched, analysts have labelled it as the most anticipated "non-event" of the week.

Meawhile, Italy's FSE MIB benchmark plunged as the Italian Statistics office ISTAT's business confidence index for the month of January fell to 88.2 (consensus: 89.5) after a reading of 88.9 in the previous month.

Elsewhere in the country a shock profit warning came from oil services firm Saipem. Shares were suspended as the Italian group forecast an 80% fall in earnings.

The announcement hit the oil services sector which was expected to grow 35.3% year-on-year in the coming quarter, according to Thomas Reuters data.

More promising news for the Eurozone came from data revealing a rise in economic confidence.

An index of executive and consumer sentiment climbed to 89.2 from a revised 87.8 in December, the European Commission in Brussels said Wednesday.

The results pointed to signs the 17-nation currency bloc may be emerging from a recession.

Spain reveals worse-than-expected contraction

Spain reported worse-than-expected contraction of its economy during the fourth quarter of 2012.

According to the preliminary data from the INE (government statistics office), Spain's economy fell 0.7% during the quarter, compared to the prior drop of 0.3%. Consensus had expected a contraction of 0.6%.

It comes as the Spanish government grapples with the implementation of austerity measures required as part of its Eurozone bailout.

In a separate report, the country's autonomous community Catalonia has asked for more bailout funds from the central government.

The Catalan regional government requested €9.1bn for 2013, compared with the €5.37bn it asked for last year.

Euro strengthens

The euro topped $1.35 for the first time since December 2011, while the Eurozone single currency reached its highest level since April 2010.

Brent crude features ascended 0.453 dollars to the 114.880 dollar mark on the ICE following a flat start.

US Market Report

US open: Equity investors keep the faith

US markets shook off a disappointing fourth quarter GDP figure to open just slightly down on Wednesday.

The Standard & Poor's 500 Index fell just 0.1% to 1,507 in New York, while the Dow Jones Industrial Average was also down 0.1 percent, to 13,942.

Amazon, the world's biggest online retailer, rose 4.5% after it reported a rise in both sales and North American operating margin.

One person probably not happy about Chesapeake Energy's 7.2% rise was Chief Executive Officer Aubrey McClendon, coming, as it did, on the back of the announcement of his retirement.

Economists had predicted GDP growth to the tune of around 1.1% but the number came in at -0.1% as huge defence cuts began to bite.

It was the first fall in US GDP in three-and-a-half years - the last drop was in the second quarter of 2009 when the country was in recession.

The latest figures showed government spending fell 6.6% in the fourth quarter, while companies cut back on inventories to the tune of 1.3%.

Trade also held the economy back, as exports fell 5.7% during the quarter.

One market commentator remarked that "the bulls are immortal".

However, another said the headline figure was misleading and the US economy was in better shape than it suggested.

In fact, Peter Newland at Barclays pointed out the tone of the report was positive when inventories and defence were excluded.

Private consumption growth picked up to 2.2% in Q4 from 1.6% in Q3.

Fixed investment saw growth jump from 0.9% to to 9.7% , reflecting gains in equipment and software (12.4%) and residential (15.3%), which more than offset a small decline in structures (-1.1%).

The ongoing bullish tone was supported by separate figures which showed a healthy rise in employment in the US.

Private-sector jobs in the country increased by 192,000 in January, according to a national employment report calculated by payroll processor Automatic Data Processing.


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.

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