Weekly Market analysis - currency policies remain in focus following FED decision on additional QE

Weekly Market analysis

Monetary and currency policies will remain a very important focus following the Federal Reserve decision to sanction additional quantitative easing during 2013 and further action by the Bank of Japan.  There will be further unease over the implications of currency gains and resistance is liable to increase which will risk fuelling a more aggressive phase of currency wars as central banks look to resist currency appreciation. Key events for the forthcoming week Date Time (GMT) Data release/event Thursday December 27th 15.00 US jobless claims Thursday December 27th 15.00 US consumer confidence Dollar: Fiscal policy will remain important in the short-term as fiscal talks continue and there is likely to be a deterioration in risk appetite which would support the dollar if there is no progress. The Federal Reserve stance will remain an important focus throughout the next few months and the dovish policies will have a negative impact on the US currency as the Fed continues its policies of bond purchases. There will still be expectations that the US economy will out-perform the Euro-zone which should provide some degree of dollar support. There has also been a retreat in precious metals prices which suggests that underlying dollar selling is likely to be contained. The dollar remained on the defensive for much of the week, but did find some respite as risk appetite faded again as the Euro retreated from the 1.33 area. Regional Fed Presidents Lacker and Fisher continued to voice opposition to the recent additional quantitative easing. There were, however, strong expectations that the dovish view would prevail, especially with the doves maintaining a strong position on the 2013 FOMC which will keep policy loose. The US current account deficit narrowed to US$107.5bn from a revised US$118.1bn the previous quarter. As a percentage of GDP the deficit was below 3.0% compared with a peak above 6% of GDP in 2005. There is the potential for a medium-term decline in the deficit as the energy deficit narrows and the US currency will be slightly less vulnerable to underlying selling. The US jobless claims data was slightly weaker than expected with an increase to 361,000 in the latest week from a revised 344,000 figure the previous week. The other releases were stronger than expected with the third-quarter GDP estimate revised up to 3.1% from 2.7%. In addition, there was a stronger than expected reading for existing home sales at 5.04mn from 4.76mn the previous month while the Philadelphia Fed index increased to 8.1 from -10.7 the previous month. US budget negotiations remained an important focus as the House of Representatives debated the so called ‘plan B’. Speaker Boehner insisted that the House had the votes to pass the bill while President Obama stated that it would be vetoed.  As the vote deadline approached, Boehner admitted that he did not have enough support and the vote was cancelled as some Republicans refused to back any tax increases. Further votes are not scheduled until at least December 27th which triggered a sharp deterioration in risk appetite on fears that the year-end deadline would be missed. Markets still expect that a compromise deal will be reached eventually which helped cushion the impact, but sentiment could deteriorate sharply if deadlock persists   Euro There will be further relief that the acute Euro-zone crisis phase has eased with the Greece debt buyback completed while there has been a further decline in peripheral bond yields.  There is a very heavy schedule of peripheral debt issuance during the first quarter of 2013 which will make it difficult for Spain to resist a bailout. The underlying growth outlook remains extremely weak which will maintain pressure for a more aggressive ECB policies. Political tensions will also intensify with Italian elections likely in February and the Euro will find it very difficult to make any sustained headway given the net economic risks.  The Euro advanced to 7-month highs against the dollar on an easing of Euro-zone fears and improved risk appetite and peaked at 1.33 before edging lower. ECB President Draghi was also cautiously optimistic surrounding the 2013 outlook as Euro-zone officials continued their attempts to play-up the economic prospects. Draghi expressed confidence that competitiveness in Spain was starting to improve and was optimistic over the benefits of a single bank supervisor. There was a further increase in bad debts within Spanish banking sector as the ratio rose to a fresh historic high of 11.2% in November from 10.7% previously which will maintain fears over the Spanish outlook.  For now, however, wider fears surrounding the Euro-zone have eased which has encouraged a further drop in speculative short positions against the currency and the Greek credit rating was revised to B- from selective default with a stable outlook. The German IFO index was slightly stronger than expected with a second successive monthly increase to 102.4 from 101.4. Although there was a lower than expected reading for current conditions, the data maintained a more favourable tone. There was a further decline in peripheral bond yields which helped underpin sentiment as Italian benchmark yields declined to a two-year low.  ECB member Asmussen stated that he would be very reluctant to cut the deposit rate to below zero which cast some doubt over the prospects for an ECB rate cut. Yen: The LDP won a huge victory in the recent lower-house elections and the strength of their majority should mean that they can over-ride any veto attempt from the Upper House. The government will push ahead with aggressive policies to combat deflation. There will also be intense pressure on the Bank of Japan to take an even more aggressive stance on monetary policy and the bank will consider an increased inflation target early in 2013.  These pressures will exert downward pressure on the yen, but the currency could still gain at times when there is a deterioration in global risk appetite. The Japanese election result recorded a major LDP victory as they won 294 of the 400 seats in the lower house with their partner winning a further 30. The results give the coalition a two-thirds majority and this is extremely important as the government can over-rule opposition from the Upper House The latest trade data recorded a headline deficit of JPY953bn from a revised JPY549bn previously as exports recorded a 4.1% annual decline. The data reinforced fears surrounding the export outlook and reinforced negative yen sentiment. The Bank of Japan announced a further JPY10trn in quantitative easing which was in line with market expectations. There is still a high degree of pressure on the central bank to take additional steps to boost the economy and sanction additional policy measures. Incoming Prime Minister Abe stated that the central bank was carrying out policy steps sought by the government one at a time in a clear reference to the government expecting further action. The administration is planning an emergency economic package in January and the yen remained under heavy selling pressure. The yen found support towards the 84.50 area against the dollar and recovered ground as risk appetite deteriorated sharply following the collapse in US fiscal cliff talks. The US currency moved back to the 84 area as the Euro retreated to below 111. Sterling There will be further unease surrounding the UK economic outlook with expectations of a weak fourth-quarter.  There will be major uncertainties surrounding Bank of England policies and there will certainly be pressure for the central bank to maintain an aggressive stimulus policy to underpin demand.  There will be speculation over a shift towards nominal GDP targeting when Carney takes over as Governor later next year.  The UK currency will continue to gain some protection from the aggressive policies pursued by other global central banks, but Sterling is unlikely to make significant headway. Sterling was resilient during the week and challenged 3-month highs around 1.63 against the dollar before consolidating slightly lower. There were further concerns surrounding the AAA credit-rating following the Standard & Poor’s decision to downgrade the outlook to negative and there was further speculation that the rating would be lost during 2013.  With the Federal Reserve increasing its bond purchases and the Bank of Japan expand policy further this week, there will be some initial Sterling support on relative grounds with expectations that the Bank of England will hold policy steady in the short-term.. The latest inflation data recorded an unchanged annual rate of 2.7% for November compared with expectations of a marginal decline. Although the RPI rate dipped to 3.0% from 3.2%, there were some expectations that the stickiness in inflation would curb any further quantitative easing by the Bank of England. The Bank of England minutes were broadly in line with expectations as the MPC voted 9-0 for unchanged interest rates while there was a 8-1 vote in favour of leaving quantitative easing on hold as Miles again voted for a further £25bn expansion in bond purchases. The bank was generally pessimistic over the growth outlook and warned over the stickiness of inflation. There were also further calls for a weaker exchange rate with Sterling’s gains described as unhelpful and a headwind for recovery and this is likely to be an important issue during 2013. The headline retail sales report was weaker than expected with sales unchanged for November following a revised 0.7% decline for October. There was also a sharp decline in the latest GfK consumer confidence reading from -22 to -29. Swiss franc: The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term, especially with a strong determination to resist franc appreciation to protect competitiveness. Aggressive policy relaxation elsewhere will maintain the risk that upward pressure on the franc will intensify again as investors look for a safe-haven, especially if the Japanese yen is subjected to further selling pressure. The dollar remained firmly on the defensive against the franc and dipped to fresh 7-month lows just below 0.91 before staging a weak corrective recovery. The Euro consolidated around the 1.2080 area with narrow ranges prevailing. With liquidity declining into the Christmas period there is likely to be an increased reluctance to take on the National Bank and the 1.20 minimum level and a potential for a further round of short Euro covering. There were wider concerns surrounding the risk of renewed tensions during 2013 and the franc also gained support from a lack of attractive safe-havens, especially with the yen under serious selling pressure. Australian dollar The Australian dollar continued to probe resistance above 1.05 against the dollar during the week, but it was unable to sustain the gains and retreated back to below the 1.05 level. The currency was unsettled to some extent by a decline in gold prices and dipped again when there was a deterioration in risk appetite. The monetary policy minutes suggested that the bank could be cautious over further interest rate cuts, but Reserve Bank Governor Stevens also continued to suggest that the currency was over-valued and that it should be weaker. There is likely to be resistance to currency gains with the Reserve Bank under pressure to push the currency weaker, especially if growth fears intensify. Canadian dollar: The Canadian dollar was unable to make further headway during the week and edged back to the 0.99 area as narrow ranges generally prevailed. The latest retail sales data was stronger than expected which provided some relief and oil prices were generally firm, but a decline in gold prices had some negative impact. Even with near-term resilience and optimism surrounding the fundamentals, the Canadian dollar will find it difficult to advance from current levels.

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.

Daily FX & Market Commentary - Worries over the ‘fiscal cliff’ resurfacing

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro continues to trend higher, extending the latest upleg from 1.2876, 07 Dec low. Break and close above psychological 1.3200 barrier, confirms the fresh bull-phase, following three-month congestion under 1.3170 peak. Larger picture bulls see room for fresh extension higher and test of initial targets at 1.3282, 01 May high and 1.3300, round-figure resistance, with strong resistance zone at 1.3500, yearly high / Fib 50% of 1.4938/1.2042, expected to come in near-term focus. Consolidative / corrective action on extremely overbought hourly studies, may precede fresh bulls, with initial static supports standing at 1.3220/00, reinforced by 20 day EMA and previous high at 1.3186. Any stronger reversal should be contained by 1.3100 zone, Fib 38.2% of 1.2876/1.3253 / 55 day EMA.

Res: 1.3253, 1.3282, 1.3300, 1.3350
Sup: 1.3220, 1.3200, 1.3186, 1.3142


GBP/USD

Near-term bulls remain fully in play for possible test of key barrier and multi-month range top at 1.6300, as yesterday’s strong rally reached 1.6286 high, just ahead of 1.6300/08, 30 Apr / 21 Sep yearly peaks. Overextended near-term studies suggest a pause in rally, however, no clear reversal signal seen yet. Overnight’s corrective low at 1.6244 offers immediate support, ahead of more significant higher platform and Fib 38.2% of 1.6084/1.6286 upleg at 1.6200 that is expected to contain any stronger pullback.

Res: 1.6286, 1.6300, 1.6308, 1.6388
Sup: 1.6244, 1.6200, 1.6190, 1.6175 


USD/JPY

The pair resumes near-term rally that was interrupted by two-day 84.32/83.60 corrective action. With fresh high posted just under our initial target at 84.50, scope is seen for possible stretch towards psychological barrier at 85.00, also weekly 200 day MA. However, overbought conditions on lower and larger timeframes, require caution, as failure to surpass 84.50, would result in stronger corrective action towards 83.80/60 support zone.

Res: 84.42, 84.50, 85.00, 85.51
Sup: 84.21, 84.00, 83.80, 83.60


USD/CHF

Bears remain unobstructed, as the pair continues to post fresh lows, following loss of important 0.9200 level. As the price approaches psychological 0.9100 support, bearish extension through here would eye 0.9041 and 0.9000, 01 May / 03 Apr lows. Near-term indicators in the oversold territory do not rule out bounce, with previous low at 0.9151, offering initial resistance, ahead of more significant 0.9200, round figure / near Fib 38.2% of 0.9381/0.9112 descend, break of which would provide temporary relief.

Res: 0.9136, 0.9151, 0.9192, 0.9215
Sup: 0.9112, 0.9100, 0.9080, 0.9041 

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Daily Market Commentary: (Evening Report)

London Market Report

Gains pared after White House comments on 'fiscal cliff'

    Market Movers
    techMARK 2,129.53 +0.41%
    FTSE 100 5,961.59 +0.43%
    FTSE 250 12,402.41 +0.89%

The UK stock market staged a slight ‘Santa rally’ on Wednesday, with risk appetite increasing before Christmas on the back of a Greek ratings upgrade and a better-than-expected reading of German confidence.

“Santa has returned to the markets, bringing some much needed cheer before the Christmas break – traders are feeling risky as such,” said market strategist Ishaq Siddiqi from ETX Capital.

However, gains across Europe were pared by the close after US stocks opened mixed on Wall Street with worries over the ‘fiscal cliff’ resurfacing. The White House Communications Director Dan Pfeiffer said that President Barack Obama would veto any ‘plan B’ from House Speaker John Boehner.

“This is a concern to anyone relying on a deal being done by the end of the year,” said market analyst Craig Erlam from Alpari.

“The fact that Republicans are preparing a plan B suggests they are not willing to meet Obama in the middle on spending and tax issues. Obama’s rejection of the plan therefore suggests going over the fiscal cliff is yet again a possibility. These negotiations are starting to become a bit of a rollercoaster ride and I’m sure there’s going to be many more ups and downs between now and the end of the year.”

Nevertheless, providing a lift to the markets early on was last night’s news that Standard & Poor’s had upgraded its rating for Greece from 'selective default' to 'B-minus' to reflect “our view of the strong determination of Eurozone member states to preserve Greek membership”, the ratings agency said. The yield on a 10-year Greek bond dropped to its lowest level since March 2011 this morning.

Meanwhile, the IFO institute reported that the German business climate index improved to 102.4 in December, above the 101.4 reading the month before and ahead of the 102.0 forecasts. Meanwhile, while the current assessment survey missed estimates, the expectations survey provided a beat.

In other news, the Bank of England's Monetary Policy Committee (MPC) voted eight-to-one in favour to keep its asset purchase programme at £375bn in this month's meeting. The MPC voted unanimously to keep the Bank Rate at 0.5%.

Europe Market Report 

European Markets Climbed After Greek Upgrade

The European markets ended Wednesday's trading session in the green, following an upgrade of Greece's credit rating by S&P. Investor sentiment also received a boost from the stronger than expected German Ifo business confidence result. Shares of banks turned in a solid performance, after Credit Suisse upgraded its rating on the European banking sector.

The continuing fiscal cliff negotiations between Democrats and Republicans has made investors optimistic that a deal can be reached before the end of the year. The White House threatened to veto the 'Plan B' presented by House Speaker John Boehner. Senate Majority Leader Harry Reid had already said that Boehner's plan could not pass the Senate. Plan B would extend tax cuts for people making up to $1 million.

Standard and Poor's on Tuesday upgraded Greece's credit rating from 'selective default' (SD), citing the successful completion of the country's debt buyback program and the subsequent decision by European leaders to disburse loan installment.

Greece's long and short-term foreign as well as local currency sovereign credit ratings were lifted to 'B-' from 'SD'. Further, the ratings on all the outstanding issues, including those guaranteed by Greece, were upgraded to 'B-/B'. The outlook is 'stable'.

Bank of England policymakers voted 8-1 to leave the stimulus programme unchanged at GBP 375 billion as seen in November, the minutes of the latest monetary policy meeting showed Wednesday.

David Miles was the only member to call for more quantitative easing. According to minutes, the Monetary Policy Committee members said the current size of the asset purchase programme seemed appropriate for the present.

Further, the nine-member MPC unanimously decided to hold the key interest rate at a record low 0.50 percent. The meeting was held on December 5 and 6.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.41 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.23 percent.

The DAX of Germany climbed by 0.25 percent and the CAC 40 of France gained 0.44 percent. The FTSE 100 of the U.K. rose by 0.43 percent and the SMI of Switzerland advanced by 0.71 percent.

Eurozone's current account surplus increased in October, but was lower than expected by economists, a report from the European Central Bank showed Wednesday. The seasonally adjusted current account surplus rose to EUR 3.9 billion in October from EUR 2.4 billion in September. Economists expected the surplus to rise to EUR 6.5 billion.

Euro area construction output in October declined at a faster annual rate again, data released by Eurostat, the statistical office of the European Union, revealed on Wednesday.

Construction output fell further by a seasonally adjusted 4.1 percent year-on-year in October, after recording a decline of 3.8 percent in September, which was revised from 2.6 percent reported earlier. In August, output decreased 1.5 percent.

German business confidence improved for the second straight month in December as expectations for next six months counteracted the deterioration in current assessment, survey results from the Ifo Institute showed Friday.

Surpassing economists' expectations, the headline business climate index rose to a five-month high of 102.4 from 101.4 in November. The reading was forecast to climb to 102.

Germany's leading economic indicator remained unchanged in October, ending the downward trend started in March, data from a survey by the Conference Board showed Wednesday. The leading economic index remained unchanged at 101.6 in October after dropping 0.6 percent in the previous month..

US Market Report

Stocks Continue To Show A Lack Of Direction

With traders taking a breather following the recent rally, stocks continue to show a lack of direction in mid-day trading on Wednesday. The major averages have spent the session bouncing back and forth across the unchanged line.

Currently, the major averages continue to turn in a mixed performance, with the tech-heavy Nasdaq posting a modest gain. While the Nasdaq is up 2.05 points or 0.1 percent at 3,056.58, the Dow is down 11.40 points or 0.1 percent at 13,339.56 and the S&P 500 is down 2.20 points or 0.2 percent at 1,444.59.

The choppy trading on Wall Street comes as traders seem reluctant to make any significant moves after the gains seen over the two previous sessions lifted the major averages to their best closing levels in about two months.

Traders are keeping a close eye on developments in Washington, as President Barack Obama and House Speaker John Boehner continue to work toward an agreement to avoid the looming fiscal cliff.

While signs of progress toward a compromise helped to drive stocks higher earlier in the week, traders may be waiting for more concrete signs of an agreement.

Earlier in the day, a statement from White House Communications Director Dan Pfeiffer indicated that Obama would veto Boehner's proposed "Plan B" legislation, which would extend tax cuts for people making up to $1 million.

Boehner unveiled the "Plan B" proposal on Tuesday as an alternative if lawmakers are unable to reach a broader budget agreement.

Pfeiffer claimed the legislation continues large tax cuts for the very wealthiest individuals while eliminating tax cuts that 25 million students and families struggling to make ends meet depend on and ending critical incentives for the nation's businesses.

On the economic front, the Commerce Department released a report before the start of trading showing that U.S. housing starts came in below economist estimates in November.

The report said housing starts fell 3.0 percent to an annual rate of 861,000 in November from the revised October estimate of 888,000. Economists had expected housing starts to fall to 865,000 from the 894,000 originally reported for the previous month.

At the same time, the Commerce Department said building permits rose 3.6 percent to an annual rate of 899,000 in November from the revised October rate of 868,000.


Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index surged up by 2.4 percent, while Hong Kong's Hang Seng Index rose by 0.6 percent.

In the bond market, treasuries are regaining ground following recent weakness. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by 3.8 basis points at 1.789 percent after ending the previous session at its highest closing level in well over a month

==================================================================== 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 - 'fiscal cliff' optimism

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro moves in a sideways consolidative mode, holding within 30-pips range, following yesterday’s failure on approach to 1.3200 barrier and Doji candle. As the latter proves to be tough barrier and the pair lacks momentum for push higher, stronger correction cannot be ruled out. The notion is supported by descending hourly and 4h studies emerging from overbought territory. Range lows at 1.3140 zone, reinforced by hourly Ichimoku cloud, offer initial support, ahead of more significant 1.3100, 13 Dec previous highs, loss of which to possibly expose psychological / Fibonacci 61.8% support at 1.3000.

Res: 1.3178, 1.3186, 1.3200, 1.3250
Sup: 1.3142, 1.3115, 1.3100, 1.3065


GBP/USD

The pair holds steady around 1.6200 handle, following yesterday’s break and close above the latter. Overall bulls remain intact for fresh extension higher that would focus key 1.6300 resistance zone. However, corrective easing may precede rally, as hourly indicators are reversing. Initial support lies at 1.6180/70 zone, previous tops and Fib 38.2% of 1.6084/1.6218 ascend, ahead of 1.6150, 50% retracement, where dips should be contained, otherwise, further delay and downside extension towards 1.6100/1.6085, would be likely.

Res: 1.6218, 1.6250, 1.6271, 1.6300
Sup: 1.6190, 1.6175, 1.6150, 1.6135 


USD/JPY

Near-term bears are running out of steam, after yesterday’s surge to fresh 1/ ½ year high, as the price slides below psychological 84.00 support, following repeated attempt at 84.32, yesterday’s high. With 4h studies starting to point lower, initial signal for corrective action is given, however, confirmation requires filling yesterday’s gap that will be seen on a dip to 83.50 and possible test of strong support at 83.30/20 zone, 13/14 Dec lows , Fib 61.8% of 82.09/84.32 ascend. Conversely, lift above 84.32, to open 84.50 and 85.00, weekly 200 day MA.

Res: 84.07, 84.15, 84.32, 84.50
Sup: 83.82, 83.50, 83.30, 83.20


USD/CHF

The pair consolidates recent losses, moving within narrow range above yesterday’s fresh low at 0.9151, with upside being capped under initial 0.9200 barrier for now. Overall bearish tone keeps the downside favored, with corrective bounce signaled by oversold 4h conditions. However, upside action requires clearance of strong 0.9200/40 resistance zone, previous lows and 20/55 day EMA’s, to avert immediate downside risk and allow for stronger retracement. Otherwise, risk of lower top under 0.9240 and fresh leg lower, would be the likely near-term scenario.

Res: 0.9192, 0.9210, 0.9213, 0.9240
Sup: 0.9165, 0.9151, 0.9100, 0.9080 

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


Daily Market Commentary: (Evening Report)

London Market Report


London close: FTSE 100 finishes strongly on 'fiscal cliff' optimism
Market Movers

• techMARK 2,120.84 +0.62%
• FTSE 100 5,935.90 +0.40%
• FTSE 250 12,293.25 +0.61%

- US budget negotiations lift hopes
- G4S up on renewed confidence
- FTSE 250 at all-time high

UK markets finished with strong gains on Tuesday afternoon as 'fiscal cliff' hopes spurred investors' appetites for riskier assets, such as mining stocks.

The second-tier FTSE 250 index was trading at a record high today, while Frankfurt's DAX was close to its best levels since 2008. However, as financial sales trader Toby Morris from CMC Markets pointed out this afternoon, "the FTSE 100 has once again underperformed finding progress above its recent highs somewhat problematic".

Eyes were kept firmly on budget negotiations Stateside today after President Barack Obama last night proposed raising taxes for those that earn over $400,000, a higher threshold than the $250,000 annual salary he had previously targeted.

Meanwhile, House Speaker John Boehner said that he is working on a "plan B" to "protect as many American taxpayers as we can". Under his new plan, tax increases will only be imposed on those earning over $1m a year.

"Markets feel that after days of slow progress, we are finally seeing a step-up in the pace of budget negotiations," said market strategist Ishaq Siddiqi from ETX Capital.

"Much work remains for US lawmakers however, who will have to endorse proposals but the last two days provides the market with a degree of confidence that we are seeing some constructive dialogue in Washington."

Economic news elsewhere was thin on the ground today, with Spanish and Greek bond auctions going smoothly and UK consumer price inflation staying unchanged at 2.7% in November. 

Europe Market Report 


Europe midday: Stocks steady ahead of US data
-Stock rose as US fiscal cliff fears diminished
-Core country bond yields increased slightly as haven demand receded
-Spanish banks´ bad loan ratio rose to 11.23 per cent for October
-Riksbank lowered benchmark policy rate
-Greek and Spanish bill auctions went off without a hitch

FTSE-100: 0.39%
Dax-30: 0.40%
Cac-40: -0.05%
FTSE Mibtel 30: 0.34%
Ibex 35: 0.82%
Stoxx 600: 0.3o%

The largest European equity benchmarks were still registering small gains by the midday mark following news overnight of concessions by US President Barack Obama on the fiscal front.

Worth noting – perhaps – there was some market chatter regarding pressure on core European bond yields, while on the periphery long-term interest rates were down a tad. The former seemed to be a result of diminished haven bids.

Acting as a backdrop, Sweden´s central bank opted on Tuesday to lower its benchmark policy rate by 25 basis points, to 1%, as expected.

Not to be missed, Spanish banks´ bad loan ratio rose to 11.23% in October, after a reading of 10.71% for the previous month.

Both the Greek and Spanish bill auctions went off without a hitch.

News that Chinese officials had again set a 7.5% target for their economy´s rate of expansion (in 2013), at their annual central economic work conference, buoyed mining and basic resource stocks.

Ireland´s economy grew more or less as was expected

Irish third quarter gross domestic product (GDP) expanded at a 0.2% quarter-on-quarter pace (Consensus: 0.7%). That disparity, however, was made up by an upwards revision to the prior month´s reading.

Italy´s current account deficit improved to €245m in October after a reading of €2.6bn for the previous month.

Moderate rise in crude futures

The euro/dollar was edging higher by 0.20% to the 1.3186 dollar mark.

Front month Brent crude futures were rising by 0.536 dollars, to the 108.26 dollar per barrel mark on the ICE.

US Market Report

US open: Homebuilder confidence back at levels from 2006
-Home builder confidence at 2006 levels
-Several M and A transactions in the news
-Single currency moving higher

Dow Jones Industrials: 0.42%
Nasdaq Comp.: 0.84%
S&P 500: 0.60%

The main US equity benchmarks are now registering moderate gains. That following yesterday´s late surge higher and as investors wait for Republicans´ reaction to Obama´s concessions yesterday. 

 

Home builder confidence back at April 2006 levels

The NAHB home builders´ confidence index for the month of December increased to 47 points after a reading of 45 points in the month before (down from a preliminary reading of 46).

The US third quarter current account deficit decreased to 107.5bn dollars, after a reading of 118.1bn dollars for the previous quarter (Consensus: 103bn dollars).

Same store weekly retail chain sales grew by 4.3% according to the latest ICSC survey data.

Month to date same-store retail sales have fallen by 0.2% according to Redbook.

Moderate rise in crude futures

Front month West Texas crude futures rose by 0.60% to the 87.70 dollar per barrel on the NYMEX.

10 year US Treasury yields are now rising by 2 basis points, at 1.78%.

==================================================================== 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: 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

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


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.

==================================================================== 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 - 'Fiscal cliff' concerns keep markets under pressure

Daily FX Commentary: (Morning Report)

EUR/USD

The Euro continues to travel higher, as bullish technicals were additionally underpinned by Euro-supportive fundamentals that resulted in a rally to psychological 1.3100 barrier so far. Key resistances at 1.3125/38/70, 05 Dec / 17 Oct / 17 Sep peaks, are in near-term focus, with bullish structure being supported by three white soldiers reversal pattern, formed from 1.2900 base. Corrective actions on overbought hourlies were so far contained by ascending 20 day EMA at 1.3055, with any stronger dips, expected to find ground above 1.3020/00 support zone.

Res: 1.3013, 1.3030, 1.3041, 1.3066
Sup: 1.2995, 1.2970, 1.2950, 1.2927


GBP/USD

Cable maintains positive structure, as yesterday’s break and close above strong 1.6127/29 barrier, keeps near-term bulls firmly in play. Immediate upside targets at 1.6175 and 1.6200 come under pressure, as the pair reached 1.6170 so far. With technical correction finding footstep at previous strong barrier, and near-term studies holding in the positive territory, fresh attack towards 1.6200 barriers is seen likely. Initial supports lie at 1.6125 and 1.6112, while violation of 1.6100, yesterday’s low, would delay bulls andsignal stronger corrective action.

Res: 1.6150, 1.6175, 1.6200, 1.6216
Sup: 1.6124, 1.6112, 1.6100, 1.6060 


USD/JPY

The dollar/yen, as top yesterday’s performer, eventually broke above range top and psychological barrier at 82.83/83.00, resuming larger uptrend from 77.12, 13 Sep low. With fresh gains reaching 83.66 high so far, keep the positive structure for attempt at our target and key barriers at 84.08/17, yearly highs. However, stronger corrective action could be anticipated, as both 1 and 4h studies are deeply in overbought zone, with hourly indicators starting to descend. Previous strong barrier at 82.80, now acts as initial support, with deeper reversal, expected to find ground at/above 81.90/70, Fib 38.2% of 79.06/83.66 / previous range floor.

Res: 83.66, 84.00, 84.08, 84.17
Sup: 83.46, 83.30, 83.10, 83.00


USD/CHF

Near-term bears took control, following recovery failure on approach to 0.9400 barrier and subsequent slide through psychological 0.9300 support that resulted in re-test of 0.9239, 03 Dec low. Completion of near-term corrective action, bring focus to the downside, as a part of larger downtrend from 0.9970, with immediate focus at 0.9213, 17 Oct low. Violation of the latter to resume the downtrend and expose 0.9150/00 zone next. With negative tone dominating on lower timeframes studies and brief corrective action being capped by 10 day EMA at 0.9270, the upside remains protected for now. Only lift above previous strong support zone at 0.9300/20, would provide temporary relief.

Res: 0.9270, 0.9292, 0.9300, 0.9320
Sup: 0.9255, 0.9239, 0.9213, 0.9200 

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


Daily Market Commentary: (Evening Report)

London Market Report

'Fiscal cliff' concerns keep markets under pressure

    Market Movers
    techMARK 2,123.48 -0.40%
    FTSE 100 5,929.61 -0.27%
    FTSE 250 12,211.57 -0.10%

Stocks markets across Europe took a breather on Thursday, following a strong performance over the last month, as investors digested stimulus plans by the Federal Reserve and ongoing developments in the Eurozone.

The Footsie finished the day slightly lower, pulling back after setting a new nine-month high at 5,946 the day on Wednesday (the last time the index closed higher was on March 19th at 5,961).

Market analyst Michael Hewson from CMC Markets said today that a “trifecta of positive factors” managed to underwhelm the market this afternoon:

“Three news items that ordinarily would have given markets a significant boost appear to have done anything but today, despite the Fed acting as expected by announcing a new round of asset purchases to the tune of $45bn, and EU leaders agreeing a framework towards a banking union inside their self-imposed deadline of year end, while Greece finally had its long awaited aid tranche finally approved by EU leaders,” Hewson said.

The Footsie staged a slight rally in afternoon trade following some better-than-expected jobless claims data Stateside.

However, as he often has done in the past few weeks, House Speaker John Boehner dampened market sentiment before the close after attacking the Obama administration, saying that the White House is not serious about cutting spending to avert the ‘fiscal cliff’.

“Unfortunately, the White House is so unserious about cutting spending that it appears willing to slow-walk our economy right up to - and over - the fiscal cliff,” Boehner said in a press conference this afternoon.

Europe Market Report 

European Markets Pulled Back On Fiscal Cliff Concerns

The European markets finished in the red on Thursday, as concerns over the looming fiscal cliff in the United States dominated trade. Comments made by Fed Chairman Ben Bernanke at the conclusion of the FOMC's 2-day meeting yesterday raised concerns regarding the potential damage that the stalemate over the issue is causing.

The U.S. Federal Reserve, at the end of the two-day meeting on Wednesday, said it would replace its "Operation Twist" program, which expires at the end of the year, with the purchase of longer-term Treasury securities at a pace of $45 billion per month. The central bank also said it would continue to purchase additional agency mortgage-backed securities at a pace of $40 billion per month.

In a departure from its earlier pledge to keep interest rates at historically low levels until mid-2015, the Fed will hold off on rate hikes until the unemployment rate falls to 6.5 percent. Policy makers do not see the unemployment rate falling to 6.5 percent until 2015.

Fed Chairman Ben Bernanke warned that Fed support cannot fully offset the downside risks presented by the so-called fiscal cliff. Bernanke expects Congress to reach a deal, but noted that inaction has already resulted in a troubling drop in business confidence.

Finance ministers from the 27 European Union states on Thursday finalized an agreement, giving the European Central Bank more powers to oversee the functioning of banks in the crisis-hit region. The decision came ahead of the two-day EU summit in Brussels starting today.

The ministers plan to make the supervisory system fully operational by March 2014 or 12 months after the entry into force of the legislation, whichever is later, according to statement issued after the meeting.

The Single Supervisory Mechanism (SSM) will be composed of the ECB and national competent authorities. As the chief watchdog, the ECB will be responsible for the overall functioning of the SSM and will have direct oversight of Eurozone banks, but "in a differentiated way and in close cooperation with national supervisory authorities," the ministers said in the statement.

Eurozone finance ministers, collectively known as the Eurogroup, finally approved the release of a second disbursement of bailout funds to Greece on the completion of the government's debt buyback operation.

At its meeting in Brussels on Thursday, Eurogroup authorized the bailout fund, the European Financial Stability Facility (EFSF), to release the next installment for a total amount of EUR 49.1 billion. The disbursement will be made in several tranches.

Greece will receive EUR 34.3 billion in the following days. The remaining amount will be disbursed in the first quarter of 2013.

Ernst & Young on Thursday said the euro area will enter 2013 with a brighter outlook than twelve months ago. The region is painfully progressing to stability, E&Y commented.

According to E&Y Eurozone Forecast, or EEF, the region will shrink 0.2 percent next year, but there will be a modest pickup from 2014 to 2016 of 1.3 percent a year. Similar growth rates are expected for the remainder of the decade.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.27 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.44 percent.

The DAX of Germany fell by 0.43 percent and the CAC 40 of France decreased by 0.10 percent. The FTSE 100 of the U.K. dropped by 0.27 percent and the SMI of Switzerland finished lower by 0.57 percent

US Market Report

Stocks Seeing Modest Weakness Amid Fiscal Cliff Worries

Stocks have moved modestly lower over the course of the trading day on Thursday after initially showing a lack of direction. Lingering concerns about the looming fiscal cliff are weighing on the markets despite a batch of largely upbeat economic data.

The major averages moved roughly sideways in recent trading, stuck modestly below the unchanged line. The Dow is down 24.96 points or 0.2 percent at 13,220.49, the Nasdaq is down 7.85 points or 0.3 percent at 3,005.96 and the S&P 500 is down 3.49 points or 0.2 percent at 1,424.99.

The modest weakness on Wall Street comes as lawmakers in Washington continue to struggle to reach an agreement to avoid the fiscal cliff.

House Speaker John Boehner, R-Ohio, once again accused President Barack Obama of failing to provide a serious offer, claiming that the White House is not offering enough in spending cuts.

Boehner has made similar remarks for several days, while Democrats continue to attack the GOP for being unwilling to accept higher tax rates on wealthy Americans.

The worries about the fiscal cliff have overshadowed some upbeat economic data, including a report from the Labor Department showing that weekly jobless claims pulled back near a four-year low.

The report showed that jobless claims fell to 343,000 in the week ended December 8th, a decrease of 29,000 from the previous week's revised figure of 372,000. Economists had expected jobless claims to come in unchanged compared to the 370,000 originally reported for the previous week.

With the unexpected decrease, jobless claims fell to their lowest level since dropping to a four-year low of 342,000 in the week ended October 6th.

A separate report from the Commerce Department showed weaker than expected retail sales growth in the month of November, although a sharp drop in sales by gas stations offset strength in other sectors.

The report showed that retail sales increased by 0.3 percent in November following a 0.3 percent decrease in October. Economists had been expecting retail sales to increase by about 0.6 percent.

Excluding a 4.0 percent drop in sales by gas stations, retail sales rose by 0.8 percent in November compared to a 0.5 percent drop in October.

Traders also continue to digest yesterday's news that the Federal Reserve plans to replace its "Operation Twist" program, which expires at the end of the year, with the purchase of longer-term Treasury securities at a pace of $45 billion per month.

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 Index surged up by 1.7 percent, Hong Kong's Hang Seng Index fell by 0.3 percent. In the bond market, treasuries are seeing modest weakness, extending the downward move seen following yesterday's Fed announcement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is up by 2.3 basis points at 1.72 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.

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 

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


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.

Daily FX/ Market Commentary - Silvio Berlusconi Makes Trouble For EURUSD Bulls

Daily FX Commentary: (Morning Report)

EUR/USD

The single currency bounces higher off today’s / last Friday’s lows at 1.2885/76, after consolidating at 1.2900 zone. Fresh gains filled the overnight’s gap, however, lacking strength to regain initial barrier and breakpoint at 1.2950, reinforced by 55 day EMA. Break here and 1.2970/80, Fib 38.2% of 1.3125/1.2876 / 20/55 day EMA’s bearish crossover, is needed to confirm recovery and signal near-term base, for possible attack at psychological 1.3000 barrier. However, 4h chart studies are still in the negative territory and would keep the downside favored as long as 1.2970/80 zone stays intact, with risk seen on slide below 1.2900/1.2880 that would open way for further retracement towards initial 1.2839, Fibonacci support.

Res: 1.2940, 1.2950, 1.2971, 1.3000
Sup: 1.2916, 1.2900, 1.2885, 1.2876


GBP/USD

Near-term outlook regains bullish tone, as the pair strongly bounced off today’s higher low at 1.6012 and approached 1.6100 barrier, also Fib 76.4% of 1.6127/1.6000 descend. This averts downside risk and turns near-term focus higher, however, pause in current rally would be seen on overbought hourly studies, with good support seen at 1.6060 zone, previous strong resistance and 4h Ichimoku cloud base that should contain dips in order to keep bullish structure intact. As 4h studies are approaching their midlines, further extension higher gets more credibility, with break through initial 1.6100 hurdle required to confirm and re-open recent double-top at 1.6127/29.

Res: 1.6095, 1.6100, 1.6119, 1.6129
Sup: 1.6060, 1.6042, 1.6012, 1.6000 


USD/JPY

Repeated failure at 82.80 range top, has triggered fresh pullback below 82.50/20 supports that weakened hourly structure. However, initial recovery signal is seen on hourly Stochastics bounce and RSI starting to point higher, along with 4h chart studies holding positive tone that may prevent the pair of testing initial 82.00 support and 81.70 range floor. Clearance of minimum 82.50 is seen as a trigger for possible fresh attack at 82.80/83.00, key near-term barriers.

Res: 82.36, 82.50, 82.63, 82.83
Sup: 82.10, 82.00, 81.68, 81.58


USD/CHF

The pair entered near-term corrective phase, signaled by overbought hourly conditions, retracing so far over 38.2% of 0.9254/0.9381 rally and testing important 0.9320 support. As hourly studies slid into negative territory, the downside remains vulnerable, however, while psychological 0.9300 support and bullish 20/55 day EMA’s crossover stays intact, hopes for fresh rally exist. Ideally, reversal at 0.9320/00 zone, would keep initial bulls off 0.9250 zone in play, with regain of important 0.9400 barrier, required to confirm and resume recovery. Otherwise, slide below 0.9300 would confirm bears are taking control for possible re-visit of 0.9239, 03 Dec low.

Res: 0.9350, 0.9368, 0.9381, 0.9400
Sup: 0.9325, 0.9315, 0.9300, 0.9284 

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

Daily Market Commentary: (Evening Report)

London Market Report

London close: Stocks rally on 'fiscal cliff' optimism
Market Movers

• techMARK 2,124.90 +0.09%
• FTSE 100 5,921.63 +0.12%
• FTSE 250 12,178.15 -0.08%

- Obama-Boehner meeting sparks optimistic mood
- Italian PM steps down
- Economic data from Asia comes in mixed

Optimism that US law-makers can agree over the impending 'fiscal cliff' managed to offset concerns regarding political uncertainty in Italy, with the FTSE 100 rallying to finish with small gains by the close.

Markets started Monday's session in the red after Mario Monti, Italy's current technocrat Prime Minister, announced this weekend that he would step down as soon as parliament passes a budget bill, paving the way for an early generation election in spring next year. Monti explained that he made the decision based on constant criticism from what had been his largest source of support in Parliament: Il Popolo della Libert party (PDL), run by ex-PM Silvio Berlusconi.

Market strategist Ishaq Siddiqi from ETX Capital said this afternoon that Monti's departure has sparked fears about who will lead the country next year - "pro-austerity government or anti-austerity government?"

He said: "The early general election remains a major event risk in 1Q 2013 and one that markets perhaps didn't expect so soon, but for now, the outcome seems supportive of a government that will continue Monti's work."

However, stocks on Wall Street started strongly this afternoon as investors reacted to the news that US President Barack Obama and House Speaker John Boehner had an unscheduled face-to-face meeting yesterday to discuss the 'fiscal cliff'.

"This is the first time that the pair have met at the White House in a couple of month's to discuss the fiscal cliff so naturally investors are a little more optimistic on the matter," said market analyst Craig Erlam from Alpari.

"This does not necessarily mean that any progress has been made however it shows that both are willing to enter serious negotiations on a deal, which can only be positive for the markets," he said.

Though there was little significant economic data out today in the UK and US, there was there was plenty from Asia for investors to sink their teeth into: Japan officially entered recession in the third quarter; while industrial production in China beat forecasts in October, though exports were weak.

Meanwhile, Greece has announced that it will extend its debt repurchase plan by one more day in order to receive additional offers from bond holders. "We have decided to extend the invitation to offer designated securities for exchange to 11 December 2012," Stelios Papadopoulos, the head of the Public Debt Management Agency, said in a statement. 

Europe Market Report 

Europe open: Italian political manouvering dents periphery stocks

-Italian 10 year bond yields up 27 basis points to 4.8 per cent

FTSE-100: -0.14%
Dax-30: -0.38%
Cac-40: -0.49%
FTSE Mibtel 30: -2.33%
Ibex 35: -2.15%
Stoxx 600; -0.36%

For the most part the main European equity benchmarks began the week with small losses, following some mixed economic reports out over the weekend and this morning in China.

On the periphery however it was a whole other matter, following Italian Prime Minister Mario Monti's unexpected announcement that he will hand in his resignation at year's end. That came after Silvio Berlusconi's party's which has lost a large part of its following - decision to withdraw support from the government last week, he said, which means that the next elections will have to be brought forward slightly.

While it may just be a case of political manouvering, even analysts who believe that stability will eventually be restored are warning that: "Overall, Italy should be very careful not to erode the credibility capital accumulated by PM Monti's government so far."

On a more positive note, speaking to The Wall Street Journal the head of the country's largest political formation, Pier Luigi Bersani, indicated that he would honour all of the commitments made by his predecessor, should he win. That may assuage worries of the reform-friendliness of any centre-left government or coalition that might coalesce.

Greece extended the deadline for its debt buy-back offer until tomorrow, so as to allow the country's banks time to make up for a small short-fall in the amount of debt offered. The government however is expected to be successful in its bid to lower the country's debt load by repurchasing the now cheaper debt on the secondary market. In turn, that will open the way for the Mediterranean nation to receive the next tranche of aid from its international lenders.

Meantime, and in Spain, reports indicate that the main business lobby CEOE- shifted its support in favour of the Prime Minister's cautiousness on formally asking the European Central Bank (ECB) for aid in lowering the country's financing costs. It is worried that in exchange for their help European governments may ask for an excessively rapid decline in borrowing. 

Larger than expected decline in French and Italian production

Italian industrial production contracted at a 1.1% month-on-month pace in October (Consensus: -0.3%).

French manufacturing output declined by 0.9% in October (Consensus: 0.2%).

The Eurozone Sentix index of investor confidence dropped to -16.8 in December (Consensus: -16.9), after a reading of -18.8 in the month before.

Germany's trade balance improved to 15.8bn in October (Consensus: 15.5bn). Small drop in single currency

The euro/dollar is now off by 0.15% to the 1.2907 dollar mark.

Front month Brent crude futures are rising by 0.53 dollars to the 107.59 dollar mark on the ICE.

 

US Market Report

US open: Obama and Boehner met over the weekend
- Both parties refuse to comment on weekend contacts
- Gap led falls on S&P 500

Dow Jones Industrials: 0.20%
Nasdaq Composite: 0.60%
S&P 500: 0.21%

The main US equity benchmarks were registering slight gains in the early going, as investors 'brushed off' the bad news out of Italy over the weekend.

Mario Monti's resignation as Italian Prime Minister initially dented market sentiment across the globe on Monday, and Wall Street was no exception at the start of the day, but it has since recovered.

Back in the US, markets were digesting news of an unscheduled face-to-face meeting yesterday between President Barack Obama and House Speaker John Boehner to discuss the 'fiscal cliff'. Yet both sides declined to comment on the result of those contacts.

"Negotiations over the fiscal cliff are going nowhere and with only three weeks now until the deadline, investors are getting jittery. While a deal is expected to be completed, it is entirely understandable that people are slowly but surely taking their money out of stocks," said market analyst Craig Erlam from Alpari. 

Front month West Texas crude futures are now rising by 0.64% to the 86.50 dollar mark on the NYMEX.

10 year US Treasury yields are now falling by 1 basis point to the 1.61% mark.

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