Daily FX & Market Commentary

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Daily FX Commentary: (Morning Report)

EUR/USD

The near-term recovery stalls at 1.3020, as lack of bullish momentum prevented test of 1.3030, bear-trendline and 50% of 1.3138/1.2911. Subsequent easing under psychological 1.3000 support and 4h Ichimoku cloud base at 1.2980, weakens near-term structure, as the price dips to today’s opening levels. Loss of 1.2950, trendline support, would signal fresh lower top and return to initial 1.2900 support zone, as hourly studies are losing traction and price slides below 10/20 day EMA’s.

Res: 1.2980, 1.3000, 1.3013, 1.3030
Sup: 1.2950, 1.2919, 1.2900, 1.2891

GBP/USD

The pair’s surge through 1.6100 barrier, confirms near-term bullish stance off 1.5911 low, as rally penetrated main bear trendline off 1.6308 at 1.6133. Today’s close above here, would be additional signal for further recovery, with immediate upside barriers at 1.6156, Fib 61.8% of 1.6308/1.5911 downleg and 1.6178, 17 Oct high, to confirm recovery and near-term base at 1.5900 zone. With hourly studies being extremely overbought, corrective easing could be anticipated. Any dips should be contained above 1.6060, to keep bulls in play.

Res: 1.6156, 1.6178, 1.6200, 1.6216
Sup: 1.6125, 1.6100, 1.6087, 1.6066

USD/JPY

The pair resumes rally, following break above 80.00 barrier and brief 80.20/05 corrective phase. Fresh gains keep the upside target at 80.65 in focus, despite overextended conditions of both 1 and 4h chart studies. Break above 80.65 would also confirm base above 77.00 and possibly trigger further recovery towards 81.00 initially. Supports at 80.00 and 79.70, protect the downside for now..

Res: 80.32, 80.65, 81.00, 81.48
Sup: 80.20, 80.00, 79.70, 79.65

USD/CHF

The price bounces above 0.9300 barrier after reversal from yesterday’s high at 0.9360, finds footstep at 0.9290. Positive tone on 4h chart studies, sees more focus at the upside barriers, however, still weak hourly structure requires break above 0.9330/40 zone to confirm higher low and open way for test of 0.9260. Conversely, reversal and close below 0.9300, broken down trendline off 0.9970, would be bearish

Res: 0.9333, 0.9345, 0.9360, 0.9370
Sup: 0.9310, 0.9300, 0.9290, 0.9270

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Daily Market Commentary: (Evening Report)

London Market Report

Stocks finish flat despite decent data

Market Movers
techMARK 2,096.03 +0.20%
FTSE 100 5,805.05 0.00%
FTSE 250 11,972.15 +0.92%

Stocks pared gains to finish flat by the close on Thursday despite a barrage of better-than-expected data the world over – including UK gross domestic product (GDP) figures – and upbeat speculation about Asia’s largest economies, China and Japan.

Markets were initially given a lift this morning after it was announced that the UK economy expanded by 1.0% in the third quarter, compared with the 0.4% decline seen in the second quarter and well ahead of the 0.6% increase expected. That was the strongest reading since late 2007 and means that the economy exited from its double-dip recession.

Analysts at Barclays Research and Investec now expect quantitative easing (QE) to be off the table at the next Monetary Policy Committee (MPC) meeting. Having said that, a poll by Reuters out over the weekend placed the probability for further QE in November at 60%.

Barclays said: "We have changed our policy call and now expect the current round of asset purchases, due to be completed at the end of this month, to be the last (we had previously expected an additional £50bn of QE in November).”

China’s Ministry of Industry and Information Technology said today that the Chinese industry sector performance has shown “signs of stabilisation”. The Ministry said that fourth-quarter industrial output growth may be faster than that seen in the third “which will help the country to achieve its annual economic growth target of 7.5%”.

Meanwhile, reports from a Japanese newspaper that the Bank of Japan would boost stimulus were also helped to lift markets higher today. According to the Nikkei newspaper, Japan will up its asset purchase programme by 10trn yen to 90trn yen at its policy meeting on October 30th.

US jobless claims and durable goods orders came in better than forecasts today, a good sign ahead of the big one, the US gross domestic product report, due out tomorrow afternoon. Consensus forecasts are for an annualised expansion of 1.9% in the third quarter, an acceleration from the 1.3% growth in the preceding three months.

Europe Market Report 

European Markets Finished Mixed Thursday, Earnings In Focus

The European markets have ended Thursday's session with mixed results. Corporate earnings results from a number of major companies are continuing to roll in, as the busiest week of the reporting season nears its end. The better than expected U.K. GDP report provided a boost, as the country exited a double-dip recession. Economic news from the U.S. was also better than expected, with a sharp rebound in durable goods orders and a decline in weekly jobless claims.

Finance Minister Yiannis Stournaras said Wednesday that its international lenders have agreed to give Athens extended time and other concessions for meeting the terms of the country's bailout program.

Stournaras said a new package of austerity measures would be put to vote in the parliament next week. The finance minister, however, did not specify how much extra time Athens had been granted by its creditors. Nevertheless, media reports citing a leaked copy of the draft loan agreement suggested that Greece had been given until the end of 2016 to meet the bailout targets.

In March, Greece pledged a series of economic reforms and spending cuts worth 13.5 billion euros for 2013 and 2014 in exchange for a joint 130 billion euros bailout from the troika of lenders, consisting of the European Union, the European Central Bank and the International Monetary Fund.

Athens has long been seeking an extension of up to two years to implement the economic reforms and spending cuts agreed under the bailout deal. The Greek government had been negotiating with representatives of the troika for months for release of the next tranche of bailout loan, as well as more time and concessions for implementing the bailout conditions.

The Federal Reserve concluded its 2-day meeting on Wednesday and, as expected, made no change to its highly accommodative monetary policy. The Federal Reserve will continue to purchase $40 billion of mortgage-backed securities per month, and gave no indication they will expand their quantitative easing program before year's end.

"Unemployment rate remains elevated," the Fed said in a statement accompanying its decision. More encouraging, "Household spending has advanced a bit more quickly," and housing has "improved from a depressed level."

The Euro Stoxx 50 index of Eurozone bluechip stocks lost 0.30 percent, but the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.14 percent.

The DAX of Germany climbed by 0.10 percent and the FTSE 100 of the U.K. gained 0.00 percent. The CAC 40 of France declined by 0.44 percent and the SMI of Switzerland fell by 0.31 percent.

US Market Report

Stocks Pull Back Amid Fitch Downgrade Rumors

Mirroring the trend seen in the previous session, stocks have moved back to the downside over the course of the trading day on Thursday after failing to sustain a strong move to the upside at the open. Rumors of a possible downgrade of the U.S. credit rating contributed to the pullback by the markets.

The major averages are currently posting modest losses, extending a recent downward trend. The Dow is down 22.88 points or 0.2 percent at 13,054.46, the Nasdaq is down 1.16 points or less than a tenth of a percent at 2,980.54 and the S&P 500 is down 1.20 points or 0.1 percent at 1,407.55.

The initial strength on Wall Street was partly due to a positive reaction to a batch of largely upbeat economic data, including a report showing that the U.K. emerged from recession in the third quarter.

The report from the U.K. Office for National Statistics said the U.K. economy grew by 1 percent in the third quarter after contracting in each of the three previous quarters.

The U.S. Labor Department also released a report showing a bigger than expected drop by initial jobless claims in the week ended October 20th, while a report from the Commerce Department showed that durable goods orders rebounded by more than expected in September.

However, stocks gave back some ground following the release of a separate report from the National Association of Realtors showing a much smaller than expected increase in pending home sales.

NAR said its pending home sales index edged up by 0.3 percent to 99.5 in September after falling by 2.6 percent to 99.2 in August. Economists had been expecting a more substantial rebound by the index of about 2.5 percent.

Adding to the selling pressure were rumors that Fitch Ratings intended to release a statement regarding a downgrade of its AAA credit rating for the U.S.

While a Fitch spokesman later referred to the ratings agency's July statement indicating that its negative outlook on the AAA rating is unlikely to be resolved until late 2013, the downgrade worries continue to weigh on the markets.