Daily Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The single currency starts the week with negative sentiment, as failure to sustain recent recovery and regain initial barrier at 1.2970, resulted in fresh slide under 1.2900, figure support. Weekly close below 1.2900 and extension to 1.2800, with 200 day MA and bull trendline support being penetrated, turns near-term outlook more negative and sees potential for further retracement of 1.2042/1.3170, July/Sep rally. Bounce on oversold hourly conditions, approaching 1.2900 barrier, is for now seen as corrective, as long as initial 1.2970 resistance stays intact. Only break here and psychological 1.3000 would provide relief. On the downside, 1.2820/00 zone offers strong support, break of which to open 1.2740 zone, mid-June highs / Fib 38.2% of 1.2042/1.3170. Daily close below 200 day MA is required to confirm negative near-term stance.

Res: 1.2880, 1.2900, 1.2926, 1.2958
Sup: 1.2860, 1.2828, 1.2800, 1.2740

GBP/USD

Cable breaks below near-term consolidative range as renewed attempt towards key 1.6300 barrier failed. Losses accelerated on a break below 1.6200, clearing previous support at 1.6136, to approach psychological 1.6100, also Fib 38.2% of 1.5769/1.6308 ascend. With 1.6200 zone offering good resistance and near-term studies in the negative territory, more focus is seen towards 1.6100 and 1.6077, trendline support initially.

Res: 1.6162, 1.6181, 1.6200, 1.6216
Sup: 1.6128, 1.6107, 1.6100, 1.6077

USD/JPY

Last Friday’s strong rally that regained initial 78.00 barrier, provided near-term relief and keeps the pair away from dangerous 77.00 zone. Overnight’s easing to 77.80, where 55 day EMA contained losses, is for now seen as corrective, with improving conditions on 4h chart, seeing potential for further recovery. Clearance of initial barrier at 78.10, last Friday’s high and Fib 38.2% of 79.21/77.42 descend, is required for further extension higher, with 78.31/53, 50% / 61.8%, seen as next targets. However, larger picture still keeps negative tone and as long as key near-term barriers at 79.00/30 zone stay intact, downside remains vulnerable.

Res: 78.00, 78.10, 78.31, 78.53
Sup: 77.78, 77.68, 77.42, 77.12

USD/CHF

The pair reverses from session’s fresh high at 0.9436, following brief break above important 0.9400 resistance zone, as hourly studies entered overbought territory. Near-term bulls remain in play while above trendline support at 0.9350, however, weakening hourly studies and loss of bullish momentum, see risk of further weakness, with break below 0.9350 and higher low at 0.9436, to sideline bulls. On the upside, 0.9400/36, offer initial resistance, with break above the latter to resume near-term recovery and open 0.9447 and 0.9482.

Res: 0.9400, 0.9416, 0.9436, 0.9447
Sup: 0.9373, 0.9350, 0.9334, 0.9326

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Daily Market Commentary: (Evening Report)

London Market Report

London close: Stocks surge after US data, Spanish stress tests
Market Movers

• techMARK 2,135.76 +0.96%
• FTSE 100 5,820.45 +1.36%
• FTSE 250 11,867.48 +1.14%

- US data beats forecasts in September
- Spanish stress tests lift sentiment
- Banks and miners rise strongly in London

Better-than-forecast manufacturing figures from the US and encouraging newsflow from Europe drove impressive gains on stock markets on Monday, with the FTSE 100 kicking off the fourth quarter with a bang and finishing up 1.4 per cent on the day.

Economic figures from the US came in above expectations this afternoon, driving strong gains on Wall Street from the off. The ISM's manufacturing guage rose from 49.6 to 51.5 in September, its best level since May and above the 49.7 consensus estimate.

"The number, at 51.5, shows significant growth compared to forecasts, potentially illustrating a forthcoming uptick in the broader US economy," said financial trade David White from Spreadex. "Not surprisingly, then, high beta stocks have diverged from their VWAPs [volume-weighted average prices], allowing the move to continue into the European close."

Investors were seemingly shrugging off the news that both UK and Chinese manufacturing purchasing managers' indices (PMIs) remained below the 50-point mark in the same month, the level which separates contraction with expansion.

Friday's release by Oliver Wyman on the Spanish financial sector was among the factors lifting sentiment on markets today. The independent auditor estimated that banks would need €59.3bn in funds in order to stay afloat, well within the €100bn limit given by the European Union.

Meanwhile, media reports this weekend suggested that Greece many receive a new tranche of international aid as European leaders attempt to keep the country in the Eurozone. German magazine Focus said that Greece will receive an additional round of aid valued at €31bn.

Europe Market Report 

European Markets Rally After Strong ISM Manufacturing Report
The European markets finished solidly in the green at the beginning of the new trading week. The markets began the session in positive territory, as they staged a recovery from Friday's losses. The markets received a tremendous boost in the afternoon, after the U.S. ISM manufacturing result came in much higher than expected.

The International Monetary Fund and the European Central Bank backed the Spanish bank stress test results, saying the publication of the results will strengthen the viability of confidence in the Spanish banking sector. Moody's Investors Service, however, said in its credit outlook today that the planned recapitalization of struggling Spanish banks may not restore market confidence fully.

The euro Stoxx 50 index of Eurozone bluechip stocks increased by 1.90 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 1.38 percent.
The DAX of Germany rose by 1.53 percent and the CAC 40 of France advanced by 2.39 percent. The FTSE 100 of the U.K. gained 1.37 percent and the SMI of Switzerland added 1.77 percent.

US Market Report

US mid-morning: ISM provides unexpected fillip for stocks -Williams (Fed) says far too many people out of wiork -Evans (Fed) has not seen inflation concerns Dow Jones: 1.05% Nasdaq Comp.: 0.41% S&P 500: 0.79% Wall Street is holding higher on the first trading day of the new quarter, following the release of a better than expected ISM manufacturing report which climbed back above the psychologically important 50 point mark. Worth highlighting, the ability of this economic report, in particular, to move markets. Significantly, as well, data out from China, overnight, is being described by some market commentary as stable albeit at low levels. Meanwhile, the Bank of Japan's quarterly Tankan survey for large manufacturers fell from -1 to -3 in September, its fourth negative reading. Nevertheless, it was 'in-line' with consensus expectations. SM manufacturing back above 50 The ISM manufacturing sector purchasing managers' index for the month of September has come in at 51.5 (Consensus: 49.7), following on from 49.6 for the month before. S&P 500 Uptrend still intact This is the way that technical analysts at Charles Stanley see things for the S&P 500: "(…) The weekly line chart for the index demonstrates that its long-term uptrend remains very much intact, but that its 14-week RSI has run into resistance in the form of the highs that were reached in March (and in April of 2011); such price action strongly suggests that prices are going to struggle to make much more headway in the near-term and that further weakness has become possible." However, they add that, "Given that the S&P is still less than 2% from the top it is clear that traders are going to require a strong signal that the rally is failing and, at the very least, they are probably going to need to see a retreat through the index's 50-day moving average (at 1411 or so)." Slight gains in other asset classes 10 year US Treasuries are now rising by 2/32 dollars with yields at 1.62%. The November contract for West Texas sweet light crude is up 68 cents at $92.87 a barrel.