Daily FX & Market Commentary: Weaker than forecast consumer confidence number

Daily FX Commentary: (Morning Report)

EUR/USD 

The single currency remains in a near-term consolidative mode, following repeated failure at 1.3477 that keeps key 1.3500 zone intact for now. With the lower boundary of near-term range and 55 day EMA, coming under pressure, further easing is seen likely, as hourly studies are negatively aligned. From the other side, positive tone on 4h chart, keeps the upside in focus, with possible extension into 1.3400/1.3370, Fib 38.2% / 50% of 1.3264/1.3477, seen preceding fresh rally. Only slide below 1.3300, psychological support at Fib 38.2% of larger 1.2996/1.3477, would be harmful for near-term bulls. 

Res: 1.3459, 1.3477, 1.3485, 1.3490 
Sup: 1.3425, 1.3400, 1.3370, 1.3345 

GBP/USD 

Cable maintains negative near-term tone, with steady descent from 02 Jan’s peak at 1.6380, losing another support at 1.5700. Yesterday’s close below the latter, suggests further easing towards next targets at 1.5634 and 1.5600. Corrective bounce on oversold hourly conditions faces good resistance at 1.5745, previous low and 50% of 1.5825/1.5673 downleg, with 1.5800 zone expected to cap recovery attempts, as 4h studies remain in red. However, appearance of bullish divergence on 4h chart RSI and MACD, cannot rule out stronger rally that requires break above 1.5800/25 to confirm near-term base and put immediate bears on hold. 

Res: 1.5745, 1.5784, 1.5800, 1.5823 
Sup: 1.5673, 1.5660, 1.5634, 1.5600 

USD/JPY 

Hourly structure is neutral, as the pair moves within 90.40/91.00 range, following repeated failure at 91.00 yesterday. More downside risk is seen on 4h chart studies that are in descending mode, from overbought zone, with immediate risk seen on a break below 90.40/23, overnight’s low / 20 day EMA / previous high, as well as psychological 90.00 level, loss of which would trigger stronger corrective action. Conversely, regain of 91.00 would open 91.24 and possible resumption of larger uptrend. 

Res: 91.00, 91.08, 91.24, 91.50 
Sup: 90.58, 90.40, 90.23, 90.00 

USD/CHF 

Near-term bears remain in play, as the price slides after yesterday’s recovery failure on approach to psychological 0.9300 barrier, on recovery attempt from 0.9220, last Friday’s fresh low. With 61.8% of 0.9220/91 rally being retraced so far, immediate focus comes at 0.9220/00 support zone, loss of which to signal further retracement of the larger 0.9109/0.9387 rally that so far reversed 61.8%. Negative 1 and 4h chart studies support the notion and only sustained break above 0.9300 barrier, reinforced by daily Ichimoku cloud top, would ease immediate bear-pressure. 

Res: 0.9266, 0.9291, 0.9300, 0.9323 
Sup: 0.9245, 0.9220, 0.9200, 0.9175 



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Daily Market Commentary: (Evening Report)

London Market Report

London close: Markets at five-year high after US earnings

Market Movers

• techMARK 2,259.98 +0.13%
• FTSE 100 6,339.19 +0.71%
• FTSE 250 13,107.56 -0.19%

After a subdued morning session, the FTSE 100 rallied in afternoon trade to finish at its highest level since early 2008, helped by upbeat earnings from corporate heavyweights in the US.

The Dow Jones Industrial Average in New York was also trading at a five-year high today after pharmaceutical group Pfizer, refiner Valero Energy and home-builder DR Horton all topped analysts' estimates.

The FTSE 100 has extended gains seen since the start of 2013 and has now risen around 7.5% in January alone.

According to technical analyst Bill McNamara from Charles Stanley this afternoon: "the UK index isoverbought (its 14-day relative strength index is now above 80%) but that in itself does not represent a sell signal in a strong bull phase and it now looks pretty likely that we will see a test of the May 2008 peak, at 6,376, before this move reaches any kind of conclusion."

However, he warned that a correction – "when it comes" – will probably be "fairly sharp" after the Footsie's recent strong run.

The markets' focus is now starting to turn to tomorrow's economic growth data and a policy rate decision in the US. The world's biggest economy is expected to have grown at an annualised rate of 1.1% in the fourth quarter of 2012, according to preliminary estimates, well below the 3.1% growth in the third quarter.

Meanwhile, while the Federal Open Market Committee (FOMC) meeting is expected to be a "complete non-event", according to Jefferies, traders will keep an eye on any comments regarding the length of the current asset purchase programme.

Europe Market Report 

Europe midday: Spain must continue consolidation efforts, Minister says

- Spain´s tax revenues rose by 4 per cent in 2012
- Southern European countries have yet to regain competitiveness -IFO
- EU could soften Spain´s budget consolidation timeline

FTSE-100: 0.11%
Dax-30: -0.18%
Cac-40: -0.21%
FTSE Mibtel 30: -0.66%
Ibex 35: -0.56%
Stoxx 600: 0.00%

European equities are trading 'mixed' ahead of tomorrow´s US Federal Reserve policy meeting and a barrage of economic data due out in the rest of the week. Not least is the US monthly employment, which is scheduled for release this next Friday.

Of great interest, the European Union´s Economic Affairs Commissioner Olli Rehn yesterday signaled that the possibility exists that the EU might tolerate modifying the timeline for Spain to consolidate its budget.

Speaking today in Madrid however Spain´s Finance Minister, Cristobal Montoro, indicated that for now the above remains to be seen and efforts must be maintained to meet Brussels´s targets. In that same vein, Montoro added that Spanish tax revenues actually grew by 4.2% in 2012, reaching €168.67bn thanks to the new Budget consolidation measures put in place.

Also worth pointing out are the remarks to be heard this morning out of the German IFO Institute´s Chief Economist, Hans Werner Sinn, according to whom most southern European nations hit by the crisis have not yet undertaken sufficient measures so as to regain lost competitiveness.

Swedish tool and equipment maker Sandvik has reported fourth quarter profit of 728m kronor, missing the market's average forecast.

Software AG has reported fourth-quarter profit of €50.7m, missing analysts' estimates moderately. Revenue in the fourth quarter, however, came in at €276m, well below forecasts.

Spain's Telefonica has asked its banks to extend the maturity of €1.25bn ($1.7bn) of an existing €2bn loan that expires in July 2016, according to Reuters.

Still on the equity front, but from a sector stand-point, the best performing industrial groups are: Basic resources (0.89%), Oil (0.48%) and Telecommunications (0.43%).

Eurozone money supply below forecasts

The Gfk survey of German consumer sentiment improved slightly in February, to 5.8 after 5.7 in the month before.

Spanish retail sales fell by 10.7% year-on-year in December.

INSEE´s French consumer confidence index remained on an even keel in January, unchanged at 86 points, as expected.

Other asset clases steady

The euro/dollar is now falling by 0.01% to the 1.3450 dollar mark. 

Front month Brent crude futures are now lower by 0.071 dollars to the 113.40 dollar mark on the ICE.

US Market Report

Weaker than forecast consumer confidence numbers 
- Ford leads fallers on prediction of losses in Europe
- Oil stocks lead gains

Dow Jones Industrials: 0.43%
Nasdaq Comp.: -0.01%
S&P 500: 0.32%

The main US equity averages are trading in a mixed fashion following a similarly mixed string of corporate quarterly results.

Amongst the heavyweights whose earnings pleased investors were those from Valero, Peabody and US Steel.

Drugmaker Pfizer was also moving higher after forecasting a 2013 profit of up to $2.30 a share, higher than analyst estimates.

Poor guidance from the likes of International Paper and Lexmark, on the other hand, were weighing on stocks.

Ford plummeted after saying that it expects to lose about $2bn in Europe in 2013 as due to the recession afflicting the region.

From a sector stand-point the worst performers were: Automobiles (-3.72%), Recreational products (-2.63%) and Electronic Office Equipment (-2.06%).

House prices rose by 5.5% year-on-year in November according to the latest Case Shiller 20 city price index (Consensus: 5.6%).

The US Conference Board´s consumer confidence index for the month of January came in at 58.6 points, after an upwardly revised reading of 66.7 for the month before (Consensus: 64).

Front month West Texas crude futures rose by 1.18% to the 97.58 dollar per barrel mark on NYMEX.

10 year US Treasury yields gained 1 basis point, with yields at 1.97%. 

==================================================================== 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.

Daily FX & Market Commentary: US Durable goods orders ahead of forecasts

Daily FX Commentary: (Morning Report)

EUR/USD 

Corrective easing off fresh high at 1.3477, found support at 1.3425 today, also Fib 23.6% of 1.3264/1.3477 upleg, ahead of fresh strength that retested 1.3477 barrier. Lack of momentum is keeps 1.3500, 50% of 1.4938/1.2042 intact for now, However, overall positive tone keeps the upside favored. Break higher to face 1.3525/32, weekly 200 day MA / Fib 76.4% expansion of the wave c that commenced from 1.2660, 11 Nov 2012 low. However, 4h RSI at 70 and Stochastic reversing see risk of further congestion under 1.3500 barrier. The downside is for now protected at 1.3425/00, with any dip below here, to delay bulls and extend corrective / consolidative phase. 

Res: 1.3477, 1.3485, 1.3490, 1.3525 
Sup: 1.3450, 1.3425, 1.3400, 1.3370 

GBP/USD 

The pair extended weakness to our initial target at 1.5700, as overall negative structure and day’s gap-lower opening, keep the downside in focus. Today’s steady descend, interrupted by brief corrective bounces, sees risk of penetration through 1.5700, also Fib 61.8% of 1.5267/1.6380, to trigger fresh extension towards 1.5634 and 1.5600. Initial resistance lies at 1.5745, last Friday’s low and keeps the upside capped for now, while any rally above here, would required clearance of 1.5800/23, to ease immediate bear-pressure. 

Res: 1.5745, 1.5784, 1.5800, 1.5823 
Sup: 1.5700, 1.5660, 1.5634, 1.5600 

USD/JPY 

Near-term price action moves in a consolidative mode, holding between 91.24, today’s fresh high and 90.50, 55 day EMA, for now. With hourly studies attempting at centrelines and 4h indicators emerging from overbought territory, further corrective action is not ruled out. Further easing would face 90.23/00, previous high / 20 day EMA and Fib 38.2% of 88.05/91.24 upleg, ahead of 89.65, 50% retracement / ascending 55 day EMA, where any stronger pullbacks should find footstep. Overall bulls remain in play despite extended daily conditions, however, RSI / MACD bearish divergence, would be initial signal for stronger corrective action that requires confirmation on a break below 88.00 base. 

Res: 91.08, 91.24, 91.50, 92.00 
Sup: 90.55, 90.23, 90.00, 89.65 

USD/CHF 

Positive tone off 0.9220, last Friday’s fresh low is fading, as the price action remains capped under psychological / daily Ichimoku cloud top 0.9300 barrier, where 20/55 day EMA’s limit near-term recovery. With 4h indicators still in the negative territory and hourlies hovering around the midlines, risk of stall becomes more evident. Failure to clear 0.9300/23 resistance zone that is required to signal basing attempt and shift near-term focus higher, would risk return to 0.9220 and possible further retracement of 0.9109/0.9387 rally. 

Res: 0.9291, 0.9300, 0.9323, 0.9345 
Sup: 0.9255, 0.9220, 0.9200, 0.9175



====================================================================

Daily Market Commentary: (Evening Report)

London Market Report

London close: FTSE 100 edges closer to 6,300 after recent strong run

Market Movers

techMARK 2,257.04 -0.03%
FTSE 100 6,294.41 +0.16%
FTSE 250 13,132.49 -0.03%

Improving newsflow in China and some better-than-expected economic data from the US helped the FTSE 100 come close to the 6,300 barrier on Monday, a level not seen since mid-2008.

"What seems to be an unrelenting grind higher has continued today, with fund manager's chatter of the big rotation being matched by positive data points and the market's appetite for risk," said David White, a financial trader from Spreadex.

The impressive 6.8% rise for the Footsie so far this month puts it on course to record its best January in 13 years, according to the Financial Times. However, there are some concerns that this rally may be short-lived, with the index's relative strength indicator already at technically 'overbought' levels.

Nevertheless, markets were able to hold on to recent gains with confidence about China's industrial profit potential providing some support. Stephen Green, the head of research for Greater China at Standard Chartered, said that Chinese industrial profits should rise by 30% in 2013 on average as a result of investment in infrastructure and real estate, improvements in export demand and looser monetary conditions. Meanwhile, economist Lu Ting from Bank of America Merrill Lynch expects profits to grow by 25% in the first half of this year.

Meanwhile, US durable goods orders increased by 4.6% in December, above the 0.7% gain the month before and well ahead of the 2.0% consensus forecast.

Markets rallied on the back of the release, as traders shrugged off disappointing US pending home sales figures this afternoon. Earnings figures from Wall Street heavyweight Caterpillar also came in below estimates, though a bullish outlook for the second half saw the shares edge higher after the US opening bell.

Europe Market Report 

Europe midday: Nomura goes neutral on equities, although still bullish

- Nomura goes tactical neutral on equities
- Eurozone money supply data distorted by Spanish figures
- Italian long-term bonds slightly lower after debt auctions
- Deposits at Greek Banks rose by 4 per cent in December

FTSE-100: 0.01%
Dax-30: -0.11%
Cac-40: 0.02%
FTSE Mibtel 30: 0.45%
Ibex 35: -0.13%
Stoxx 600: -0.07%

The main European equity indices were still trading slightly lower at the midday point of the session despite the latest gains seen in equities on Wall Street and in Asia. That ahead of this afternoon´s economic data releases Stateside.

Of interest, inflows into equity funds – mostly into emerging markets, admittedly - sustained a seventh consecutive rise ahead of bond oriented ones last week although the rate of flows moderated, according to the latest data from EPFR.

The currently high levels of 'bullishness' reached by equity investors has prompted Nomura´s Global Quantitative Strategy Team to issue a short-term tactical neutral position on the market, although they remain fundamentally bullish on equities.

Just released Eurozone money supply data revealed an unexpected contraction, but they appear to have been distorted by the financial system restructuring in Spain. 

Eurozone money supply below forecasts

The growth rate of Eurozone money supply, as measured by its three month moving average, accelerated to 3.7% from 3.4% a year ago (Consensus: 3.8%). However, the monthly data for December actually slowed notably, falling to a 3.3% year-on-year pace after 3.8% in the previous month.

However, the ECB notes that the December 2012 figures were partly affected by the Spanish banking sector restructuring that that had a sizeable downward impact even on loan flows corrected for sales and securitisation, Barclays Research points out.

ISAE´s Italian business confidence index for the month of January slipped to 84.6 from 85.7 a month before (Consensus: 86.1).

Other asset classes lower

The euro/dollar is now falling by 0.12% to the 1.3440 dollar mark.

Front month Brent crude futures are now lower by 0.053% to the 113.22 dollar mark on the ICE.

US Market Report

US open: Yield curve steepening continues

- Durable goods orders ahead of forecasts
- Pending home sales figures misleading, NAR says
- Interest rate curve continues steepening, 10 year above 2 per cent

Dow Jones Industrials: -0.02%
Nasdaq Comp.: 0.33%
S&P 500: -0.16%

US equity benchmarks are now trading in a 'mixed' fashion. That follows the release of what at first glance might be taken – erroneously apparently – for similarly mixed economic indicators.

Also worth highlighting are the positive comments from ratings agency Fitch as regards the very short-term outlook for the United States´ AAA credit rating. The temporary suspension of the US federal government's debt limit removes the near-term risk to the AAA rating, Fitch said.

Of interest as well, the Financial Times reported today on how shale 'boom' is firing up opposition from environmental groups, but also investors, with US gas flaring nowadays clearly visible from outer space and with a luminosity rivalling that of cities such as Chicago.

Earth moving machinery giant Caterpillar said Monday it expects 2013 earnings per share of between $7 to $9, compared to the consensus estimate of $8.54 a share.

Goldman Sachs has lowered its recommendation on AK Steel to 'sell' from `neutral'.

Goldman Sachs is expected to raise $1bn from the sale of a stake in Chinese lender ICBC.

Durable goods orders ahead of expectations

US durable goods orders spiked higher in December, rising at a 4.6% month-on-month clip, versus the 2.0% increase which was forecast.

The critical 'core' series for durable goods, which excludes both Defense and civil aircraft, came in comfortably ahead of economists´ expectations, when revisions to November´s data are taken into account (although they are weak when compared with levels from a year ago).

US pending home sales fell by 4.3 per cent month-on-month in December, coming in far below the 0.0 per cent reading expected.

Lawrence Yun, the National Association of Realtors´s (NAR) Chief Economist, said there is an uneven uptrend. "The supply limitation appears to be the main factor holding back contract signings in the past month. Still, contract activity has risen for 20 straight months on a year-over-year basis," he said. "Buyer interest remains solid, as evidenced by a separate survey which shows that buyer foot traffic is easily outpacing seller traffic," Yun added.

"The broad trend in pending home sales mirrors that of the broader housing market and does not alter our view that the recovery in US housing has sustained momentum," commented analysts at Barclays Research chipped in.

Yield curve continues 'bull steepening'

10 year US Treasury yields are now rising by 4 basis points, to the 1.97% mark. 

Front month West Texas crude futures were moving higher by 0.27% to the 96,14 dollar per barrel mark on the NYMEX.

==================================================================== 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.

Weekly Market analysis - Immediate fears surrounding the Euro-zone as financial risks have eased

Weekly Market analysis

There has continued to be an important easing of immediate fears surrounding the Euro-zone as financial risks have eased, at least for now.  This has triggered an exodus of defensive capital flows from currencies such as Sterling and the Swiss franc. Confidence may remain stronger in the very short term, but there are still very important policy risks surrounding the Euro-zone. Key events for the forthcoming week Date Time (GMT) Data release/event Wednesday January30th 13.30 US GDP (Q4 advance) Wednesday January 30th 19.15 US Federal Reserve policy decision Friday February 1st 09.30 UK PMI index manufacturing Dollar:  The US labour-market data has remained generally encouraging and there should be solid growth in the short term, although sharp downward revisions to some regional indices will cause concern.  The Federal Reserve will maintain a very loose monetary policy in the short term with bond purchases continuing. The Fed will, however, be under pressure to moderate quantitative easing slightly or take a firmer verbal stance if growth conditions improve further. There are still important battles surrounding automatic spending cuts with congressional tensions liable to increase again.  The dollar will gain some defensive support if fears surrounding the Asian growth outlook increase again. The dollar was generally firm on a trade-weighted basis, but the US currency was weaker against the Euro which tended to over-shadow the impact to some extent. There was further discussion of the debt ceiling with House Republicans holding a vote on whether to suspend the debt ceiling issue until the end of May. Approval lessened the immediate default threat which had some impact on underpinning risk appetite. There was a downward revision to the Chicago PMI index, matching a sharp downward revision to the Philadelphia Fed index which caused some unease surrounding the US outlook. The latest US jobless claims registered another decline to 330,000 in the latest week from 335,000 the previous week. The decline to a fresh 5-year low may have been influenced to some extent by seasonal considerations, but here will still be optimism over growth trends. The Markit PMI manufacturing index also increased to 56.1 from 54.0. The BIS stated that quantitative easing would risk being increasingly ineffective and any comments from Fed officials will be watched closely. Euro Structural fears surrounding the Euro-zone will remain lower in the short term. There has been a continuing decline in peripheral bond yields with a series of strong bond auctions.  There will be some uncertainties over the impact of an early repayment of LTRO funds. The growth outlook in Germany has certainly improved, but conditions within the Euro-zone as a whole are still very difficult with peripheral recession continuing while the French economy is continuing to deteriorate. Overall confidence in the Euro could still falter quickly given the underlying growth vulnerability. The Euro pushed higher during the week with further support from gains on the crosses and it broke above the 1.34 level in early Europe on Friday. The Euro-zone data release offered important support with the German ZEW index rising sharply to 31.5 from 6.9 previously and this was the highest reading since May 2010. There was also a decline in yields for the latest Spanish bill auction and the government secured demand in excess of EUR20bn for the latest syndicated bond sale. There was, however, a further decline in Spanish house prices for the fourth quarter, maintaining fears over further losses in the banking sector. The Euro-zone data as a whole recorded an improvement in manufacturing and service-sector conditions according to the flash PMI data. There was a significant improvement in the German economy notably for services and there is likely to have been an improvement in peripheral economies, although still below the expansion threshold. In contrast, there was a further deterioration in the French readings, increasing fears surrounding the French outlook and competitiveness. There was also a rise in Spanish unemployment to 26% for the fourth quarter from 25% which will maintain unease over the Spanish outlook and potential social consequences. The Bank of Spain stated that there was a fourth-quarter GDP decline on 0.6%, confirming an annual decline of around 1.2%. There are likely to be some LTRO repayments over the next few weeks as banks look to repay funds that can now be accessed more cheaply in markets. There could be some positive impact on the Euro, although there will also be concerns that banks in peripheral economies will not be able to repay funds. Yen:  The Bank of Japan has introduced a 2% inflation target and will maintain an aggressive monetary easing. The open-ended commitment to bond purchases is not due to come into effect until 2014 and there will be further concerns whether the central bank will actually deliver on the more aggressive policies. The appointment of new Bank of Japan governor will be watched very closely over the next few weeks.  The underlying economic fundamentals remain weak with a substantial trade deficit undermining the yen directly and triggering demands for a more competitive currency as political pressures continue. The Bank of Japan confirmed another raft of measures to combat deflation. The bank will switch to an open-ended commitment to buying assets next year and will also increase the inflation target to 2% with a commitment to reaching the inflation goal at the earliest possible time. The dollar found support just above the 88 level and rallied steadily as there was solid yen selling on rallies with vulnerability on the crosses. There were further expectations that there would be aggressive capital flows out of Japan, especially into emerging markets through Toshin funds. The overall evidence, however, was still mixed with no evidence of substantial capital outflows at this stage. There was a further Japanese trade deficit for December which took the 2012 deficit to a record JPY6.9trn as exports remained under pressure.  The data tended to maintain negative underlying yen sentiment and Deputy Economy Minister Nishimura sated that the yen correction was not yet over. There were some cautious comments from German Chancellor Merkel who was uneasy over the Bank of Japan becoming so engaged in currency issues and there was some criticism of the government stance to promote a weaker currency. Japan’s core consumer inflation reading was in line with expectations at -0.2% which will reinforce pressure for more aggressive policy action to meet the 2% inflation target and the dollar held above 90. Sterling There will be further concerns surrounding the UK growth outlook which will reinforce fears surrounding the government finances.  There have been calls from the IMF for a change in policy and overall confidence in economic policies is liable to deteriorate sharply, especially after the GDP contraction for Q4. There will be expectations of much-reduced defensive Sterling support in the short term, especially with Euro-zone fears easing and this could have an important impact in undermining Sterling. Sterling was on the defensive during the week with further losses against the dollar and Euro with four-month lows near 1.5750 against the US dollar. The headline UK government borrowing data was broadly in line with expectations. There was an underlying increase of over GBP7bn for the first eight months of the year with generally weak tax receipts. The substantial structural deficit will maintain fears over the UK AAA credit rating. There was also a weak reading for the CBI industrial survey with orders at -20. Bank of England Governor King stated that the Monetary Policy Committee could consider further quantitative easing. There were comments surrounding the bank’s remit with King stating that it was time to review the situation. He was particularly concerned as to how the MPC should balance short-term inflation and growth risks.  The latest labour-market data was stronger than expected as the headline claimant count fell by 12,100 for December to an 18-month low following a revised drop of 8,900 the previous month while the unemployment rate declined to 7.7% from 7.8%. The Bank of England MPC minutes were broadly in line with expectations with a 9-0 vote for unchanged rates and an 8-1 vote not to adopt further quantitative easing.  Some members expressed doubts whether any further quantitative easing would be justified. In contrast, there were further concerns surrounding Sterling’s level. Prime Minister Cameron’s European speech did not have a major impact, although there were some underlying concerns over potential negative implications for the economy if there is a prolonged period of uncertainty. There were further underlying concerns surrounding economy as the IMF called for a shift in fiscal policies and there was also unease surrounding the fourth-quarter GDP release with expectations of a further contraction. Chancellor Osborne was generally very cautious over the outlook, but pledged no change in policies. GDP fell a provisional 0.3% for the fourth quarter. Swiss franc:  Given that the Swiss franc was a key beneficiary of defensive inflows during the Euro-zone crisis, there will be further speculation of a reversal in flows now that Euro-zone tensions have eased. There will be further debate over the merit of lifting the Euro minimum level, although the National Bank is certainly very reluctant to engage in a policy of fine tuning. The Euro was able to secure net gains against the Swiss franc despite seeing a sharp corrective decline from highs above 1.25 and the US currency was broadly resilient. National Bank member Danthine stated that there was no scope to fine-tune the Euro minimum level which continued to dampen speculation over a short-term move to a 1.25 minimum level. There was still expectations that there would be a decline in defensive inflows, especially after the Danish central bank increased interest rates. Australian dollar The Australian dollar was unable to make any impression on resistance levels towards the 1.06 area and dipped significantly weaker later in the week. There was further evidence of position adjustment and an unwinding of long Australian dollar positions Domestically, the consumer inflation data was weaker than expected with a headline 0.2%  increase and a core reading of 0.6% which fuelled expectations of further Reserve Bank interest rates. The Australian dollar is unlikely to make much headway, especially with further rate-cut expectations and the risk of fresh concerns surrounding the Chinese outlook. Canadian dollar:  The US dollar was able to find support at lower levels and rallied strongly during the week.  There was some further unwinding of long positions and the core retail sales data was weaker than expected. As expected, the Bank of Canada held interest rates on hold at 1.00%. In the statement, there was a more dovish tone with Governor Carney stating that, although there was still a case for an eventual policy tightening, the bank was not expecting to reach full capacity until the middle of 2014 which triggered a scaling back of rate expectations which undermined the Canadian dollar. With a more dovish Bank of Canada stance, the US currency broadly resilient on valuation grounds despite optimism surrounding Canadian fundamentals.

Daily FX & Market Commentary: European Markets Finished Mixed As Investors Await U.S. Vote

Daily FX Commentary: (Morning Report)

EUR/USD 

The single currency remains in a sideways mode after yesterday’s bumpy ride, with price hovering around 1.3300. Hourly structure, however, is still aligned towards the downside, as the price holds below MA’s and indicators are in the negative zone. While range floor t 1.3280 that proved to be solid support, stays intact, range-trading will remain in play, while break lower would signal a fresh direction and expose 1.3250 and 1.3200. On the upside, regain of yesterday’s spike high at 1.3370, would improve the near-term structure, but only clear break above 1.3400 to signal resumption of an uptrend from 1.2660, 2012 low. 

Res: 1.3331, 1.3370, 1.3400, 1.3485 
Sup: 1.3280, 1.3255, 1.3200, 1.3151 

GBP/USD 

Near-term structure maintains negative tone, as the pair, unable to regain initial barrier at 1.5900, returns to near-term base at 1.5800. Bears remain favored, with near-term studies in the negative territory, being supportive for possible slide below 1.5800 handle that will confirm break below 4-month range and open way for fresh leg lower, with 1.5750 and 1.5700 seen as next targets. Any bounce would be of corrective nature and facing strong resistance at 1.5900, 200 day MA, ahead of 1.6000, also 50% of 1.6380/1.5800, break of which is required to provide relief. 

Res: 1.5840, 1.5900, 1.5947, 1.6000 
Sup: 1.5805, 1.5753, 1.5700, 1.5675 

USD/JPY 

Yen continues to strengthen against the dollar, on a reversal from 90.23 peak, with initial targets at 88.00 zone being tested so far, just ahead of key near-term support at 87.78, 16 Jan low. As 87.78/90.23 rally has been nearly fully retraced, break lower remains favored for now, with notion being supported by negative near-term studies. However, corrective action may precede fresh bears, as hourly indicators reached oversold zone. Bounces are going to face good resistance at 88.90/89.00 area, where previous highs and Fib 38.2% lie, reinforced by descending 55 day EMA. Only break above 89.50 would delay immediate bears. 

Res: 88.36, 88.56, 88.78, 89.00 
Sup: 88.05, 87.78, 87.35, 87.00


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Daily Market Commentary: (Evening Report)

London Market Report

Stocks lifted by upbeat US earnings

    Market Movers
    techMARK 2,230.24 +0.32%
    FTSE 100 6,197.64 +0.30%
    FTSE 250 12,934.40 -0.18%

London’s FTSE 100 finished with moderate gains on Wednesday afternoon ahead of a key vote over the potential extension of the debt ceiling Stateside, as some decent results from US bellwethers Google, McDonald’s and IBM lifted sentiment across stock markets worldwide.

The US House of Representatives is to vote this evening on whether to extend the government's debt ceiling until May 19th. A White House spokesman said that President Barack Obama "won't stand in the way" of this short-term fix.

For the time being, traders will likely focus on tech giant Apple’s results after the closing bell this evening. Earnings are widely expected to fall year-on-year due to a drop in the gross margin, however the market’s attention will undoubtedly be on the company’s outlook for 2013 amid concerns over disappointing smartphone sales as of late.

In other news, the International Monetary Fund (IMF) has slashed its growth forecasts for the global economy, saying that the upturn is expected to be ‘more gradual’ than previously thought. The IMF expects world output in 2013 and 2014 to expand by 3.5% and 4.1%, respectively, down 0.1 percentage point from earlier forecasts.

Markets shrug off Cameron speech

UK Prime Minister David Cameron's much-anticipated 'in-or-out-case' speech on Britain's membership in the European Union didn't really move markets this morning.

He committed his party to holding a referendum on whether the UK should remain in the EU in the first half of the next parliament (by the end of 2017 at the latest). "It is time for the British people to have their say; it is time to settle this question over Britain and Europe," Cameron said.

Financial trader Shavaz Dhalla from Spreadex said this morning that Cameron's speech "proved futile". He said: "European markets took the speech in their stride and digested enough information to gauge that the speech was probably designed to build momentum for Cameron’s next campaign rather than mount a serious economic backing for whether remaining in the EU is worthwhile."

BoE in wait-and-see mode

Minutes from the latest Bank of England policy meeting showed that members voted eight-to-one in favour of leaving the asset purchase programme unchanged at £375bn. The Monetary Policy Committee (MPC) voted unanimously to keep the Bank Rate at 0.5%.

Analyst Chris Crowe from Barclays Research said that the MPC is "still content to wait and see" with the committee "likely to resist expanding QE as long as the economy shows signs of stabilisation and improvement."

Meanwhile, the UK jobless rate fell from 7.8% to 7.7% in the three months to November, better than the consensus estimate for no change. The UK claimant count fell by 12,100 in December to 1.56m, the lowest since June 2011.

Europe Market Report 

European Markets Finished Mixed As Investors Await U.S. Vote

The European markets ended Wednesday's session with mixed results. The markets received a boost from positive earnings results from European giants such as Unilever and Novartis, as well as results from Google and IBM in the United States. However, many investors were hesitant to take a position ahead of the vote to pass a short-term debt ceiling increase in the U.S. House of Representatives. President Barack Obama has stated that he would sign the bill if it clears Congress. Investors will also be watching for the earnings report from Apple later today.

European Central Bank President Mario Draghi observed Tuesday that the 'darkest clouds' over the euro area have subsided while countries reinforced their commitment to reforms. In a speech in Frankfurt, he said resolute actions by euro area governments and European institutions have made the year 2012 quite different than predicted.

Bank of England Governor Mervyn King said it would be sensible to review the arrangements for setting monetary policy. The inflation target was introduced in the U.K. almost 21 years ago, and it has now 'come of age', he noted.

In a speech in Belfast, King said late Tuesday that the economy needs more fundamental reforms to underpin a "gentle recovery." There are certainly aspects of the inflation targeting regime to consider, King added.

British Prime Minister David Cameron on Wednesday said that he is in favor of a referendum on the UK's membership of the European Union, but insisted that he does not want the country to drift towards an EU exit.

In a much-awaited speech in London, he promised to hold an in/out referendum on EU membership by the end of 2017, if re-elected. Cameron said the next Conservative manifesto in 2015 will ask for a mandate from the British people for a Conservative Government to negotiate a new settlement with the European partners in the next Parliament.

With a majority of 8, the Bank of England's policymakers voted to maintain quantitative easing unchanged at the start of the year, as they saw limited stimulus to the economy from further easing. Policymakers led by Governor Mervyn King unanimously decided to retain the record low 0.50 percent interest rate. The meeting was held on January 9 and 10.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.25 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.46 percent.

The DAX of Germany rose by 0.19 percent, but the CAC 40 of France fell by 0.40 percent. The SMI of Switzerland increased by 1.35 percent and the FTSE 100 of the U.K. climbed by 0.34 percent.

French business confidence deteriorated unexpectedly in January as manufacturers assessed sharp contraction in past production and forecast a deterioration on own production outlook. The business sentiment index came in at 86 in January, survey data from the statistical office Insee showed Wednesday. It was forecast to rise to 90 from 89 in December.

Spain's recession likely deepened during the three months ended December, with gross domestic product falling for the fifth consecutive quarter, the quarterly bulletin from the Bank of Spain said Wednesday.

Gross domestic product (GDP) is estimated to have dropped at a faster rate of 0.6 percent sequentially in the fourth quarter than 0.3 percent in the third quarter, signaling that the economy has slipped deeper into recession. GDP contracted for the fifth successive quarter.

Government debt in the Eurozone stayed broadly unchanged in the third quarter, data released by statistical office Eurostat showed Wednesday.

Total public debt in the single-currency bloc came in at 90 percent of gross domestic product at the end of the third quarter, little changed from 89.9 percent recorded in the second quarter. The latest figure was, however, higher than 86.8 percent recorded in the third quarter of 2011.

U.K. employment total increased to a record high during three months ended November after people out of work decreased, data from the Office for National Statistics revealed Wednesday.

There were 2.49 million unemployed people in the country during the three-month period, down by 37,000 from June-August. At the same time, the number of people in work increased by 90,000 to 29.7 million for three months to November, the highest since records began in 1971.

The employment rate edged up to 71.4 percent from 71.3 percent during June to August. But it was lower than the pre-recession peak of 73 percent logged for March to May 2008.

US Market Report

Stocks Give Back Ground But Remain Mostly Positive

After showing a strong move to the upside in early trading on Wednesday, stocks have given back some ground over the course of the trading day but remain mostly positive. The markets are benefiting from a positive reaction to the latest batch of earnings news.

The major averages have pulled back off their highs for the session but are currently all in positive territory. The Dow is up 59.85 points or 0.4 percent at 13,772.06, the Nasdaq is up 10.08 points or 0.3 percent at 3,153.26 and the S&P 500 is up 0.36 points or less than a tenth of a percent at 1,492.92.

The modest strength on Wall Street extends a recent upward move by stocks, with the Dow and the S&P 500 reaching new five-year highs earlier in the session.

Traders have largely reacted positively to the latest earnings news, with upbeat quarterly results from some big-name companies inspiring confidence that the markets can sustain some further upside.

Tech giants IBM Corp. (IBM) and Google (GOOG) are both posting notable gains after reporting fourth quarter earnings that exceeded analyst estimates.

McDonald's (MCD) is posting a more modest gain after the fast food giant reported fourth quarter earnings that rose year-over-year and came in above analyst estimates. The company also reported stronger than expected revenue growth.

Fellow Dow component United Technologies (UTX) reported fourth quarter earnings that fell compared to the year-ago quarter but still came in slightly above expectations. The diversified conglomerate also reaffirmed its guidance for 2013.

Shares of iPad and iPhone maker Apple (AAPL) are up by 0.8 percent ahead of the release of its fiscal first quarter results after the close of trading.

Nonetheless, buying interest has waned from earlier in the session, as traders remain somewhat reluctant to continue buying stocks following the recent strength.

Traders are also keeping an eye on developments in Washington, where the House is preparing to vote on a three-month extension of the U.S. debt limit.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in another mixed performance during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.1 percent, while China's Shanghai Composite Index rose by 0.3 percent.

In the bond market, treasuries are seeing modest strength, adding to the slim gains posted in the previous session. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 1.1 basis points at 1.824 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.

Weekly Market analysis - Fears Surrounding Euro-zone as financial risks have eased

Weekly Market analysis

There has been an important easing of immediate fears surrounding the Euro-zone as financial risks have eased, at least for now.  There will be some optimism surrounding risk appetite, although confidence could still prove to be very fragile, especially given important structural vulnerability.  There will also be further concerns surrounding the US debt-limit negotiations over the next few weeks. Key events for the forthcoming week Date Time (GMT) Data release/event Tuesday January 22nd Bank of Japan interest rate decision Wednesday January23rd 09.30 Bank of England MPC minutes Friday January 25th 09.30 UK GDP (Q4 first estimate) Dollar:  The US economic indicators have been mixed, but have generally indicated solid growth, especially with a further decline in jobless claims. The Federal Reserve has continued to emphasise the importance of unemployment to its policy decisions and will continue bond purchases in the short-term. If growth continues to improve, there will be pressure for at least a modest slowdown in quantitative easing and rising bond yields would also provide some net dollar support.  The US currency could gain on defensive demand if debt-ceiling talks create renewed animosity, although there would also be potentially important implications for the US credit rating. The dollar was resilient against most currencies during the week, although it did decline to lows around 1.34 against the Euro. The US retail sales data was slightly stronger than expected with a 0.5% headline increase for December and a core increase of 0.3% while there was also a generally optimistic tone surrounding the housing sector. The New York PMI index was much weaker than expected at -7.8, although this is an erratic data series. Regional Fed Governor Rosengren stated that there could be policy tightening if the unemployment rate fell to 6.5%. Ratings agency Fitch stated that the US would be subjected to a formal ratings view for a potential downgrade if there was no agreement to raise the debt ceiling and political comments will remain under close scrutiny. The inflation data was marginally lower than expected with a headline decline in prices of -0.1% which will maintain the scope for the Federal Reserve to maintain an expansionary policy. The Beige Book release was also broadly in line with recent reports with growth described as modest or moderate in all the Fed districts. Housing starts increased to a fresh four-year high of 954,000 for December. There was also a sharp decline in jobless claims in the latest week with a reading of 335,000 the lowest for five years. In contrast, the Philadelphia Fed index was sharply weaker than expected at -5.8 from +5.8 the previous month. The data overall helped maintain a confident tone surrounding the economy and there was a rise in US Treasury bond yields. The dollar failed to secure much in the way of support, especially with German yields also increasing during the day which prevented an improvement in yield spreads. Fed Chairman Bernanke’s comments surrounding the economy were broadly neutral as he insisted that the Fed was not out of policy options even with interest rates close to zero. He stated that growth was showing some signs of improvement with quantitative easing having a positive impact, although it was described as early days. He promised that the bond-purchase programme would be reviewed on a regular basis while he did not expect inflation to be a significant issue as he kept all options open.

Euro

Structural fears surrounding the Euro-zone will remain lower in the short-term. There has been a continuing easing of peripheral bond yields with investor sentiment also improving which could trigger renewed capital inflows. The ECB is much less willing to consider a further cut in interest rates which will provide some Euro support. Growth concerns will, however, remain a very important focus and the drop in financing costs will also deter political action on structural reform.  In this environment, confidence could quickly deteriorate again, especially if political tensions intensify. The Euro maintained a strong tone during the week, although the bulk of the gains were on the main crosses as the US currency was relatively resilient. The currency was cushioned buy a sharp decline in bond yields at the latest Spanish Treasury bill auction. Prime Minister Rajoy stated that Spain would not need a bailout and was confident that the banking sector would not need additional funds. Outgoing Eurogroup head Juncker stated that the Euro was dangerously high. Euro-zone officials have generally stayed quiet on currency issues over the past few months and the Juncker comments will be taken as indicating that there is now greater concern surrounding the exchange rate. There will also be some unease that this signals a new phase in potential global currency wars. ECB council member Nowotny stated that there was no cause for concern surrounding the Euro, contradicting Juncker’s comments. Nowotny also stated that he didn’t expect to see a long-term rise in the Euro against the dollar.  The ECB remains reluctant to get involved in exchange rates and will certainly not want to get in the business of targeting exchange rates. There will, however, be some speculation that the ECB will be more willing to consider a cut in interest rates if there are significant currency gains, especially as there will be a further deflationary impact. Yen: There will be intense pressure for the Bank of Japan to engage in further aggressive policy easing with widespread expectations that the central bank will introduce a revised 2% inflation target at the forthcoming meeting. There will also be scope for a further monetary easing. Comments from government officials will be watched very closely, but the net stance is likely to be to back further yen losses.  Markets have priced in substantial policy easing and there will be scope for a sharp correction, especially if risk appetite deteriorates. The yen briefly corrected strongly during the week before being subjected to renewed heavy selling pressure. There were significant comments from Finance Minister Amari who stated that excessive yen weakness could have a negative impact on the economy by pushing up import prices which suggested that the government would not push for further aggressive yen losses. Later in the week, Finance Minister Amari back-tracked from earlier comments warning against excessive yen depreciation and there will also be market confusion over government intent. There were still widespread expectations of further aggressive Bank of Japan monetary action next  week as underlying sentiment remained extremely weak.  There were some media reports that the central bank could consider dropping paying interest on excess reserves and would consider an open-ended commitment to bond purchases. The government and Bank of Japan are working on a joint statement and there were also comments from government officials that a rate of 100-110 would be appropriate  which triggered a test of yen support beyond the 90 level with fresh 29-month lows.

Sterling

There will be further uncertainty surrounding the UK growth outlook with speculation that there will be a fourth-quarter contraction which will reinforce fears surrounding the government finances. There will also be persistent unease surrounding the threat of a credit-rating downgrade.  Sterling has been an important beneficiary of defensive support during the Euro-zone crisis and there will be further suspicions that there will be sustained capital outflows given that Euro-zone fears have eased.  Given the underlying lack of confidence in the fundamentals, the UK currency is likely to be subjected to underlying selling. Sterling was firmly on the defensive against the Euro during the week as it retreated to nine-month lows beyond 0.8370. Sterling also retreated to six-week lows below 1.60 against the dollar. There were further concerns surrounding the AAA credit rating with Fitch warning that the downgrade risks were increasing. The headline UK consumer inflation rate was in line with expectations at 2.7% while the core rate edged down to 2.4% from 2.6% and the overall impact was limited with no implications for monetary policy. There was a slightly more optimistic tone surrounding the housing market as the official index recorded a 2.1% increase in the year to November. The latest RICS housing data was stronger than expected with a reading of zero for December from -8% previously which was the first time a negative figure had not been reported since July 2010. The other economic data was generally weaker than expected. There was only a small recovery in industrial production for November as a recovery in energy-sector output was offset by another decline in manufacturing production which reinforced unease surrounding the outlook. The NIESR estimated a 0.3% decline in GDP for the three months to December and there was another weak reading for construction output which reinforced fears surrounding a fourth-quarter GDP contraction. Swiss franc:  The Swiss franc was a key beneficiary of defensive inflows during the Euro-zone crisis and there will be further speculation that there will be a sharp reduction in defensive inflows. There will be scope for a reversal in speculative capital inflows which could trigger fresh selling on the Swiss currency. There will, however, be the potential for a reversal in trends if Euro-zone fears intensify again.  The Swiss currencycould also still gain support as an alternative save-haven asset, especially with the Japanese yen weakening sharply. The Swiss franc weakened sharply during the week with very sharp losses to beyond 1.25 against the Euro. The dollar was able to take advantage of the franc vulnerability and pushed to a peak near the 0.94 level. There was a decline in defensive demand for the franc given reduced fears surrounding the Euro-zone structural vulnerability. There was a rise in yields on the latest Swiss Treasury bill auction which suggested that defensive franc support had eased and there was also a shift in risk reversals which indicated that underlying Swiss currency demand had fallen. The latest retail sales data recorded a 2.9% annual increase  in the year to December which did not have a significant impact. There was a 0.2% decline in consumer prices for December to give a 0.4% annual decline which will reinforce potential deflation fears and a determination to prevent franc gains

Australian dollar

The Australian dollar was unable to break above the 1.06 area and weakened to lows just below the 1.05 level before consolidating in the middle of the range. The currency was unsettled by a weaker than expected labour-market report as there was a decline in employment fell by over 5,000 while the unemployment rate rose to 5.4%.  The other data also provided little in the way of support The currency was still cushioned by a generally solid tone towards risk appetite and a lack of interest in the US currency. Despite some support from greater optimism surrounding China, the Australian dollar is unlikely to make much headway, especially with further rate-cut expectations. Canadian dollar:  The US dollar was unable to push above the 0.99 level against the Canadian currency during the week before re-testing support below 0.9850, although the main feature was generally very narrow ranges. There was a recovery in gold and oil prices which provided some degree of support for the Canadian currency. Relatively narrow ranges are liable to continue for now with the US currency broadly resilient on valuation grounds despite optimism surrounding Canadian fundamentals.