Daily FX Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The pair continues to head higher as sustained break above 1.2800 and penetration through 200 day MA and main bear-trendline at 1.2830, as well as daily close above this barrier, opens prospect for further extension higher. Immediate barrier at 1.2900, figure resistance, comes in near-term focus, as violation of the next one at 1.2964, Fib 61.8% of 1.3485/1.2042 descend, will expose psychological 1.3000 barrier. Short-term rally remains unobstructed by overbought conditions, on lower and higher timeframes studies for now. Initial supports lie at 1.2813/00, as 4h 20 day EMA, currently at 1.2785, underpins. Any pullback under 1.2760 higher platform and 1.2740, trendline support / Fib 38.2%, may signal a pause in the rally, in favor of stronger corrective action.

Res: 1.2882, 1.2900, 1.2964, 1.3000
Sup: 1.2845, 1.2813, 1.2800, 1.2760

GBP/USD

Cable continues to trend higher after corrective pullback off previous high at 1.6033, found footstep at 1.5958, contained by ascending 20 day EMA. As price surged through 1.6033, bullish extension approaches next upside target and round figure resistance at 1.6100, above which to focus 1.6181/1.6200. Positive sentiment keeps bulls fully in play, despite overbought readings of the near-term studies. Initial support zone at 1.6033/1.6000 is expected to hold any dips, in order to keep bulls intact, while slide under 1.6000 and 1.5960, would delay.

Res: 1.6100, 1.6150, 1.6181, 1.6200
Sup: 1.6063, 1.6033, 1.6000, 1.5981

USD/JPY

Bears remain fully in play, as violation of 78.00 base tested key support at 77.65, 01 June low. Break here is seen as a trigger for extension of larger downtrend from 84.17, with focus to come at 77.00 zone. Negative tone on near-term studies dominates, however, some corrective action on oversold conditions cannot be ruled out. Previous strong support at 78.00, now offers initial resistance, while regain of 78.30 zone is required to provide near-term relief.

Res: 78.00, 78.32, 78.53, 78.80
Sup: 77.65, 77.50, 77.00, 76.60

USD/CHF

The pair extends the downtrend off 0.9970, 24 July high, as break below very strong support at 0.9400, open fresh phase lower. Immediate focus moves towards 0.9333,, 15 Mar high and 0.9310/00, longer-term bull trendline off 0.8929 / round figure support. Corrective/consolidative action could be expected, as 4h chart indicators are their extremes. Initial resistances lie at 0.9400/30, reinforced by descending 55 day EMA, while only regain of 0.9480/0.9500 would avert immediate downside risk.

Res: 0.9400, 0.9430, 0.9451, 0.9482
Sup: 0.9377, 0.9366, 0.9333, 0.9310 

EUR/JPY The pair extends its week-long rally off 97.97, 05 Sep low, holding stable above psychological 100.00 barrier. Broader recovery from 94.10, 24 July low, has so far retraced exactly 38.2% of larger 111.42, yearly high to 94.10 yearly low, downmove, at 100.63. Positive structure on a daily chart keeps the upside favored, with figure resistance at 101.00 as initial target, ahead of more significant 101.37/61, end of June highs and 200 day MA at 101. Previous barrier at 100.00, now offers initial support, with 99.60/50 zone, Fib 38.2% of 97.97/100.63 / yesterday’s low and consolidation range floor, expected to contain any corrective dips. Res: 100.63, 101.00, 101.37, 101.61 Sup: 100.30, 100.00, 99.75, 99.51

EUR/GBP Upside acceleration was triggered on a break above 0.7960, previous highs and 90 day MA, with break above psychological 0.8000 level and Fib 61.8% of 0.8152/0.7755 downleg, extending seven-week corrective rally to 0.8027 so far. Short-term outlook remains supportive for further extension higher and test of next barrier at 0.8100, end of June highs, however, near-term studies are showing a signs of fatigue, as hourly MACD bearish divergence becomes evident and 4h chart indicators being extended that cannot rule out corrective action. As slide below 0.8000 handle would be the initial signal for reversal, any stronger dips should not exceed 0.7950, 50% retracement of 0.7886/0.8027 upleg / 55 day EMA / previous highs. Res: 0.8027, 0.8052, 0.8093, 0.8100 Sup: 0.8000, 0.7973, 0.7956, 0.7940 GBP/JPY The cross holds above 124.80, 200 day MA, following near-term pullback off 126.18, 07 Sep fresh high that also marks 50% retracement of med-term 133.46/118.77. Near-term, structure remains positive and being supported by 55 day EMA at 124.70, with lift above 125.50/80, to turn focus higher and expose 126.00/18 and confirm break above med-term congestion and resume larger recovery from 118.77, 01 June low. Res: 125.61, 125.80, 126.00, 126.18 Sup: 125.14, 125.00, 124.66, 124.00

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks sink late on ahead of Fed

Market Movers
techMARK 2,128.21 +0.92%
FTSE 100 5,782.08 -0.17%
FTSE 250 11,811.05 +0.26%

Following a stint in the blue after Germany’s decision to approve the Eurozone rescue fund, the Footsie had sunk firmly into the red by the close with ex-dividend stocks and mining companies providing a drag.

Stocks were lifted higher after the German Constitutional Court approved the European Stability Mechanism (ESM) this morning, the last major challenge before the ESM can replace the temporary European Financial Stability Facility (EFSF).

However, as market analyst Michael Hewson from CMC Markets explains: “Momentum soon started to wane as equity markets, led by the FTSE, started to drift off with the UK index struggling to make any ground at all as investors scrutinised the small print.”

First, Germany's contribution must be limited to €190bn unless there is parliamentary approval; and second, both chambers of Congress - the Bundestag and Bundesrat - must be informed of the ESM's decisions.

“The ruling clears the way for the German President to sign the agreement into law, but having overcome this particular hurdle it doesn't change the fact that economic data in Europe remains pretty woeful and the European leaders don't have anything resembling a growth plan,” Hewson said.

With one key ‘event-risk’ out of the way, the focus will undoubtedly turn to the upcoming Federal Open Market Committee (FOMC) two-day meeting in the US which kicks off today. Sluggish labour figures on Friday have increased hopes that the Fed may move to ease monetary policy further when the meeting concludes. However, figures for wholesale inventories were solid today “which causes uncertainties over tomorrow’s Fed outcome”, according to market strategist Ishaq Siddiqi from ETX Capital.

In domestic news, the number of people claiming jobless benefits in the UK fell by 15,000 in August, better than the consensus forecasts for a stable reading. The unemployment rate was 8.1% of the economically active population, down 0.1 percentage points on the quarter.

US Market Report

tocks Remain Mostly Positive In Mid-Day Trading While buying interest has waned from earlier in the session, stocks remain mostly positive in mid-day trading on Wednesday. The latest news out of Europe helped to drive stocks higher, but uncertainty about the U.S. Federal Reserve has limited the upside for the markets. The major averages are currently posting modest gains, well off their highs for the session. The Dow is up 29.64 points or 0.2 percent at 13,353.00, the Nasdaq is up 6.82 points or 0.2 percent at 3,111.35 and the S&P 500 is up 3.50 points or 0.2 percent at 1,437.06. News of the German Federal Constitutional Court's decision clearing the way for the ratification of the European Stability Mechanism helped to drive stocks higher in early trading, with the court rejecting temporary injunctions against the European bailout fund. At the same time, the court imposed certain conditions, including capping Germany's liability. The court said Germany must cap its bailout fund liability at 190 billion euros and said further expansion of the country's share needs to get the backing of Parliament. Peter Boockvar, managing director at Miller Tabak, said, "Buy the rumor, buy the news continues to be the market pattern as long as participants have their central bank beer goggles on which turns all news into good news." "The German Constitutional Court did what all expected them to do and blessed the ESM but did put a 190 billion euro limit on Germany's exposure that can only be exceeded with parliamentary approval," he added. "All the other 16 euro nations have approved the ESM." Buying interest waned not long after the open, however, with many traders reluctant to make any significant moves ahead of the Federal Reserve's monetary policy announcement on Thursday. Uncertainty about whether the central bank will announce another round of quantitative easing helped to keep many traders on the sidelines. Stocks have subsequently pulled back well off their best levels of the day but continue to see modest strength amid optimism about further stimulus.