Daily Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The single currency recovered all overnight losses on a bounce from day’s low at 1.2834, reaching 1.2900 barrier, where 4h Ichimoku cloud base capped gains for now. As overall picture remains bearish, the latest rally could be seen as corrective wave 4 of downmove from 1.3070 and should ideally end at 1.2900 area, before the wave 5 commences, with projected target at 1.2770 that will include break below strong 1.2820/00 support. Conversely, extension of wave 4 through initial 1.2920 barrier, Fib 38.2% / trendline resistance and 1.2960, yesterday’s intraday high, near 50% retracement, would question bears, while regain of psychological 1.3000 is required to turn near-term focus higher.

Res: 1.2900, 1.2920, 1.2936, 1.2960
Sup: 1.2878, 1.2850, 1.2834, 1.2820

GBP/USD

The pair remains in near-term consolidative / corrective action from fresh one-month low at 1.5975, posted yesterday. Brief break above 1.6000 handle, brings more positive tone in the hourly studies, with additional support provided by hourly MACD bullish divergence. However, failure to clear initial resistance at 1.6045 and more significant 1.6066, previous low / Fib 38.2% of 1.6216/1.5975 descend, would risk further acceleration lower, as larger picture outlook remains negative and risk extension towards 1.5910/00, 23 Aug high / Fib 38.2% of 1.5267/1.6308 / daily 55 day MA. On the other hand, break above 1.6066 and psychological 1.6100 barrier, would delay bears and allow for stronger correction.

Res: 1.6000, 1.6045, 1.6066, 1.6100
Sup: 1.6000, 1.5975, 1.5958, 1.5910

USD/JPY

The pair remains in a narrow-range sideways mode, with slight improvement on hourly studies, seen on a bounce off day’s low at 78.18. However, no significant changes could be expected while initial barrier and range top at 78.40 stays intact, with further extension through 78.56, Fib 61.8% of 78.86/78.07, required to signal stronger recovery and open key near-term barrier at 78.86. On the downside, loss of 78.20 higher platform, will risk test of 78.00 base.

Res: 78.36, 78.40, 78.59, 78.75
Sup: 78.18, 78.07, 78.00, 77.78

USD/CHF

Corrective pullback from day’s high at 0.9430 is attempting to base 0.9390 zone, ahead of our reversal point at 0.9370. Overall positive structure, keeps the upside favored, with break above 0.9430/36 required to confirm break above near-term congestion and confirm base at 0.9237, to trigger stronger recovery towards 0.9461, 29 June low and 0.9500, 31 Aug low / round figure resistance. Bullish 20/55 EMA’s crossover at 0.9350, underpins the rally.

Res: 0.9417, 0.9430, 0.9436, 0.9461
Sup: 0.9387, 0.9370, 0.9350, 0.9320

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Daily Market Commentary: (Evening Report)

London Market Report

Global slowdown concerns weigh on stocks

Market Movers
techMARK 2,101.76 -1.26%
FTSE 100 5,776.71 -0.58%
FTSE 250 11,828.32 -0.70%

London’s FTSE 100 index registered its third consecutive day in negative territory as uncertainty surrounding the outlook for the global economy continued to weigh on investors sentiment.

“Financial markets struggled to find direction today, drifting into the red as persistent fears over slowing global growth combined with a worrying outlook in US aluminium giant Alcoa’s 3Q results prompted investors to book some profits,” said market strategist Ishaq Siddiqi from ETX Capital.

Following Monday’s decision by the World Bank to lower its growth estimates for East Asia warning of a deceleration in the Chinese economy, stocks slipped yesterday after the International Monetary Fund (IMF) cut its global growth forecasts for this year and the next.

Meanwhile, the IMF said that risks to global financial stability have increased and financial markets have been volatile as European policymakers grapple with the ongoing crisis. The Fund notes that failing to deal with the current issues could end up forcing Eurozone banks into an asset shrinkage of anywhere from $2.8tn to $4.5tn by the end of next year.

To make matters worse, David Riley, the global head of sovereign ratings at Fitch Ratings, has warned of the possibility of additional rating cuts for Eurozone members. Riley indicated that the recession in Spain and Italy appears to be intensifying and stated that the European sovereign debt crisis in tandem with the US fiscal cliff and a Chinese 'hard landing' pose the biggest risks for the global economy.

Siddiqi said: “That’s three days of constant warnings about downside risks facing the global economy, so it isn’t a surprise that investors’ enthusiasm has been whacked. Moreover, the warnings are not so much new news to traders, but more a reconfirmation that more needs to be done by global policymakers to avert another major crisis.”

On a more positive note, following his meetings yesterday with the German Chancellor Angela Merkel, the Greek Prime Minister Antonis Samaras has said that he is confident that the next tranche of Greece's bailout will arrive on time. Meanwhile, public- and private-sector labour unions in Greece have called for a 24-hour general strike on October 18th as a result of the harsh austerity measures tied with the bailout, according to reports.

Europe Market Report 

European Markets Unable To Escape Growth Concerns & Finished In The Red

The European markets continued to be pressured by investor concerns over the situation in Greece and Spain. Spanish Prime Minister Mariano Rajoy is due to meet French President Francois Hollande today, a week after he played down reports of a potential Spanish bailout. The decision by the IMF on Tuesday to cut its global growth estimate for this year and next continued to weigh on the markets.

Chancellor Angela Merkel has pledged her country's continuing support to Greece amid lingering concerns about Europe's debt crisis. The German leader, who arrived in Athens on Tuesday to meet with Greek leaders regarding the ongoing debt crisis, said Greece had made significant progress in dealing with its huge debt but that it was a "difficult path."

In the absence of decisive and urgent policy measures, banks in Europe may need to sell as much as $2.8 trillion to $4.5 trillion worth of assets through the end of 2013, the International Monetary Fund warned in its latest Global Financial Stability Report, published Wednesday.

The largest burden of credit supply contraction will fall on the euro area periphery, today's report pointed out. Faltering market confidence has led to capital flight from countries on the 'periphery' to the core of the euro area.

"This has meant higher borrowing costs and a growing wedge between the economic and financial 'haves' and 'have-nots'," it added. The report found that risks to global financial stability have increased.

The European Union's proposal of imposing a tax on financial transactions found more supporters at Tuesday's Ecofin meeting in Luxembourg, signaling that a decision on the project may come after the EU finance ministers' November meeting.

Nine states are needed to push forward the initiative of "enhanced co-operation," and so far, 11 EU members have agreed to support it. UK Prime Minister David Cameron on Wednesday said the deficit reduction plan is not an alternative to a growth plan and the economic recovery is taking longer than expected.

In his keynote address at the Conservative party conference, Cameron said the weaker-than expected activity in Eurozone is hurting U.K. trade, and in turn making it harder to pay off debts.

Italy's borrowing costs increased at its treasury bill auction on Wednesday as investor confidence underpinned by European Central Bank's promise to buy bonds weakened gradually in the face of new uncertainty about Spain's bailout request.

The yield on 3-month bill rose to 0.765 percent from 0.7 percent at the prior auction in September. Likewise, it sold 12-month bills at 1.941 percent, higher than the 1.692 percent yield on September 12.

The Euro Stoxx 50 index of eurozone bluechip stocks declined by 0.48 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.37 percent.

The DAX of Germany fell by 0.40 percent and the CAC 40 of France decreased by 0.50 percent. The FTSE 100 of the U.K. dropped by 0.38 percent and the SMI of Switzerland finished down by 0.30 percent

US Market Report

Stocks Mostly Lower After Disappointing Outlook From Alcoa Stocks have moved mostly lower over the course of the trading day on Wednesday, extending a recent downward move. Concerns about the outlook for the global economy continue to weigh on the markets, although selling pressure is relatively subdued. The major averages have edged up off their lows for the session in recent trading but remain firmly in negative territory. The Dow is down 71.88 points or 0.5 percent at 13,401.65, the Nasdaq is down 7.22 points or 0.2 percent at 3,057.80 and the S&P 500 is down 4.99 points or 0.4 percent at 1,436.49. The weakness on Wall Street is partly due to a negative reaction to quarterly results from aluminum giant Alcoa (AA), which kicked off the earnings season after the close of trading on Tuesday.