Daily FX & Market Commentary - tocks Turning In Mixed Performance

Daily FX Commentary: (Morning Report)

EUR/USD 

The euro remains at the back foot after repeated attempts at 1.3400 failed and subsequent easing broke below important 1.3300 support, previous resistance and 4h 20 day EMA. This opens prospect for further correction, as hourly structure is negative and 4h indicators continue to slide. The reversal so far retraced 38.2% of 1.3037/1.3401 upleg, bringing immediate risk at 1.3247 higher platform, reinforced by 4h 55 day EMA, loss of which would prompt extension towards psychological 1.3200 support. Hourly 20/55 EMA’s bearish crossover at 1.3325, pressures the price and offers solid resistance, along with 1.3335, previous range floor. 

Res: 1.3300, 1.3325, 1.3335, 1.3356 
Sup: 1.3262, 1.3247, 1.3220, 1.3200 

GBP/USD 

Cable lost ground again, following repeated attempt at 1.6100 barrier failure, to return back to 1.6030 support and risk test of more significant 1.6000/1.5990 near-term base, reinforced by daily Ichimoku cloud base.. Studies on 4h chart turned negative and see potential for further weakness, as the price holds below 20/55 day EMA’s, with break below 1.5990 to expose 1.5960, Fib 76.4% of 1.5826/1.6380 and 1.5900, 200 day MA. Only lift above 1.6100 would provide near-term relief. 

Res: 1.6044, 1.6079, 1.6100, 1.6121 
Sup: 1.6006, 1.5991, 1.5960, 1.5900 

USD/JPY 

The pair continues to move lower for the third day, on corrective pullback from 89.66. Loss of strong support at 88.40 is seen as a trigger, as the price dents next one at 88.00, retracing 61.8% of 86.81/89.66 upleg at 87.90. Dominating negative tone on hourly chart and 4h studies breaking into negative territory, keep the downside favored, with daily indicators starting to point lower, of overbought zone that additionally supports near-term bears. Holding below 88.00 handle, would likely open way towards 87.00 and more significant 86.81, 09 Jan low. Any bounce higher is seen capped at 89.00 zone for now. 

Res: 88.28, 88.74, 88.90, 89.08 
Sup: 87.90, 87.48, 87.00, 86.81 

USD/CHF 

The pair extends recovery rally, clearing key near-term barrier at 0.9300, 04 Jan high that confirm near-term base at 0.9100 and opens way for stronger gains. With gains reaching 0.9330 so far, immediate focus lies at 0.9345, Fib 61.8% of 0.9511/0.9077 descend and 0.9381, 07 Dec 2012 high, to possibly look for test of psychological 0.9400 barrier. Overbought near-term studies, however, see pause in recent gains, with corrective easing facing support at 0.9272 and dips expected to hold at/above 0.9250, Fib 38.2% / 55 day EMA, to keep the bullish bias. 

Res: 0.9330, 0.9345, 0.9381, 0.9400 
Sup: 0.9293, 0.9372, 0.9246, 0.9220 

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Daily Market Commentary: (Evening Report)

London Market Report

Markets finish lower, but TUI Travel surges late on

The FTSE 100 ended moderately lower on Wednesday as markets trimmed losses by the close, though the mood was still cautious after both the World Bank and Germany government downgraded growth forecasts.

Concerns about ongoing conflicts in North Africa were also likely to be on investors’ minds today. As the French military intervention in Mali intensifies, there was news of an Islamist militant attack at a BPgas field in neighbouring Algeria which has resulted in a number of deaths and a hostage situation.

Markets are becoming increasingly concerned about the wider implications that these conflicts could have, as a number of neighbouring countries are large suppliers of key petrochemicals and minerals.

The World Bank has cut its global growth forecast for 2013 due to the difficult recovery that economies worldwide are currently undergoing despite the improvement in financial markets. It now expects growth of 2.4% this year, down from its prior forecast of 3%.

Meanwhile, Germany expects its economy to grow by a mere 0.4% this year, well below the 1% growth forecast in October and the 0.7% expansion in 2012.

“Given the news flow today it’s hard to fathom why markets aren’t lower than they are, given the continued stream of bad news from the retail sector,” said market analyst Michael Hewson from CMC Markets.

Nevertheless, markets picked up from their intraday lows in afternoon trade after US banking heavyweights JPMorgan Chase and Goldman Sachs beat consensus estimates with fourth-quarter profits. The latter reported earnings per share of $5.60 for the last three months of 2012, smashing the $3.64 consensus estimate. This was Goldman’s most profitable quarter since the first three months of 2010.

"We’re used to seeing Goldman Sachs beating earnings forecasts, but today’s results caught everyone off-guard," said market analyst Craig Erlam from Alpari.

Europe Market Report 

European Markets Finished Mostly Higher On Positive U.S. Earnings

The majority of the European markets ended Wednesday's trading session in positive territory. Several better than expected earnings reports from U.S. banks provided a boost to investor sentiment. Economic data from the U.S. was mixed and investors are awaiting a slew of Chinese economic reports. Automakers were weak after the decline in new auto sales and banks also turned in a negative performance.

The euro's exchange rate is "alarmingly high" and is likely to affect the Eurozone economy which is showing signs of stability, Eurogroup President Jean-Claude Juncker said Tuesday.

While speaking at the annual gathering of business leaders in Luxemberg, Junker warned that an overvalued euro is likely to threaten the economy that is reemerging from financial crisis.

Junker's comments came just few days after European Central Bank President Mario Draghi'sstatement that the euro area may see a gradual recovery later in the year as there are some modest signs of stabilization.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.05 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, lost 0.01 percent.

The DAX of Germany climbed by 0.20 percent and the CAC 40 of France advanced by 0.30 percent. The SMI of Switzerland gained 0.45 percent, but the FTSE 100 of the U.K. fell by 0.22 percent.

In Frankfurt, Metro dipped by 0.17 percent. The department store operator reported a marginal rise in fourth-quarter sales despite challenging market conditions, especially in Southern Europe. The company also reaffirmed its full-year profit forecast.

Deutsche Wohnen increased by 0.15 percent, after it resolved on a capital increase against cash contributions and under exclusion of shareholders' subscription rights.

Automakers were weak after data released by the European Automobile Manufacturers' Association showed Europe's new car sales declined sharply in December, continuing a downward trend started fifteen months ago. Sales plunged 16.3 percent from a year ago, while demand for new cars reached the lowest level recorded since 1995. Daimler declined by 0.16 percent and Porsche decreased by 0.68 percent. BMW finished up by 0.80 percent and Volkswagen gained 0.80 percent.

Eurozone inflation remained unchanged at 2.2 percent in December as initially estimated, final data released by Eurostat showed Wednesday. The latest figure is the lowest since November 2010. Inflation has been hovering above the central bank's threshold limit of 2 percent for many months.

The number of people worked in local manufacturing units in Germany rose by about 79,000 or 1.5 percent in November from a year ago, Destatis reported Wednesday. Around 5.2 million people were employed in manufacturing.

Germany's general government debt increased from last year in the third quarter, data released by the Federal Statistical Office showed Wednesday. Total federal debt, including those of governments, states, and municipalities/associations, increased 1.6 percent from last year to EUR 2064.1 billion at the end to the third quarter.

Consumer prices in the U.S. came in unchanged in the month of December, according to a report released by the Labor Department on Wednesday, with a sharp drop in gasoline prices offsetting higher prices for food and shelter.

The Labor Department said its consumer price index was unchanged in December after falling by 0.3 percent in November. The unchanged reading matched economist estimates.

Industrial production in the U.S. increased by slightly more than expected in the month of December, the Federal Reserve revealed in a report on Wednesday, with increased manufacturing and mining output more than offsetting a sharp drop in utilities output.

The report showed that industrial production increased by 0.3 percent in December following a revised 1.0 percent jump in November. Economists had expected production to edge up by 0.2 percent compared to the 1.1 percent growth originally reported for the previous month.

Following eight consecutive monthly gains, homebuilder confidence in the U.S. held steady in January, according to a report released by the National Association of Home Builders on Wednesday. The report showed that the NAHB/Wells Fargo Housing Market Index came in at 47 in January, unchanged from December. Economist had expected the index to inch up to 48.

US Market Report

Stocks Turning In Mixed Performance In Mid-Day Trading

After moving mostly lower in early trading on Wednesday, stocks have turned mixed over the course of the trading day as traders digest a slew of economic data as well as the release of earnings news from some big-name companies.

The major averages are currently turning in a mixed performance, with the Nasdaq posting a modest gain. While the Nasdaq is up 6.50 points or 0.2 percent at 3,117.28, the Dow is down 26.24 points or 0.2 percent at 13,508.65 and the S&P 500 is down 0.47 points or less than a tenth of a percent at 1,471.87.

The early weakness on Wall Street was partly due to renewed concerns about the outlook for the global economy after the World Bank cut its forecast for global economic growth in 2013.

The World Bank said it now expects the global economy to expand by 2.4 percent in 2013 compared to its June forecast for 3 percent growth. Estimates suggest the global economy grew 2.3 in 2012.

However, selling pressure was somewhat subdued following the release of a report from the Federal Reserve showing a slightly bigger than expected increase in U.S. industrial production in the month of December.

The report showed that industrial production increased by 0.3 percent in December following a revised 1.0 percent jump in November. Economists had expected production to edge up by 0.2 percent.

The increase in production came as increased manufacturing and mining output more than offset a sharp drop in utilities output.

A separate report from the National Association of Home Builders showed that homebuilder confidence held steady at a six-year high in January, while the Labor Department said consumer prices were unchanged in December.

Meanwhile, traders are also digesting quarterly results from JP Morgan (JPM) and Goldman Sachs (GS), with both financial giants reporting better than expected earnings.

Shares of Goldman Sachs have risen by 2.8 percent on the news, reaching their best intraday level in well over a year. JP Morgan initially moved lower but has climbed back near the unchanged line since then.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2.6 percent, while China's Shanghai Composite Index fell by 0.7 percent.

In the bond market, treasuries have pulled back near the unchanged line after moving modestly higher in early trading. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, is down by less than a basis point at 1.825 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.

Weekly FX & Market Analysis

Weekly Market analysis

Monetary policy will remain a very important focus following the Federal Reserve decision to sanction additional quantitative easing during 2013.  There will be further resistance to currency gains by Japanese and also potentially the Euro-zone and this will increase the risk for further more aggressive monetary policy action by the Bank of Japan and ECB. Overall, the dollar will find it difficult to make much headway unless there is a serious deterioration in international risk appetite. Key events for the forthcoming week Date Time (GMT) Data release/event Sunday December 16th Japan general election Wednesday December 19th 09.00 Germany IFO index Wednesday December 19th 09.30 Bank of England MPC minutes Thursday December 20th Bank of Japan interest rate decision Dollar: The Federal Reserve policies will remain an extremely important focus in the short-term. The decision to expand quantitative easing will tend to have a negative impact on the dollar.  The Fed is also committed to maintaining a highly expansionary monetary policy until there is a further marked improvement in the unemployment rate with a decline to at least 6.5%.  In this context, the dollar will find it difficult to gain any strong traction, but there will be some reward in terms of pro-growth policies and likely US growth out-performance. This will be a particularly significant factor if Euro-zone conditions deteriorate further. The dollar weakened against European currencies during the week on additional Fed action, but did show some degree of resilience.   The headline US employment data was stronger than expected with an increase of 146,000 for November from a revised 138,000 gain the previous month while the unemployment rate dipped to 7.7% from 7.9% the previous month. There was a downward revision to October’s payroll gain while the participation rate fell. The US trade deficit widened to US$42.2bn for October from US$40.3bn the previous month as exports were slightly weaker, although there may have been data distortions. The Federal Reserve left interest rates on hold at below 0.25%  following the latest policy meeting. The Fed announced that it would buy an additional US$45bn in Treasuries per month to replace Operation Twist which was in line with market expectations. As has been the case throughout the year, regional Fed President Lacker dissented and voted against further quantitative easing. The Fed downgraded its 2013 growth forecasts slightly. There was an important shift in forward policy guidance as the FOMC dropped the reference to a specific timeframe for keeping interest rates at extremely low levels until 2015. Instead, the Fed announced that it would introduce economic targets for keeping policy extremely expansionary. In particular, the threshold for a policy change would be an unemployment rate of 6.5% and policy would remain extremely expansionary provided the inflation rate did not rise to above  2.5%. There were no significant progress in the US budget talks and concerns surrounding the risk that no agreement would be reached before the year-end deadline. Euro There will be further relief surrounding the ability to defuse the acute Euro-zone crisis phase with agreement secured on the next Greek loan tranche while peripheral bond yields have fallen. There will still be a high degree of unease surrounding the underlying economic outlook, especially with recession conditions persisting.  Political tensions will also be very important with unease surrounding Italian elections early in 2013.  The underlying peripheral situation also remains extremely fragile and longer-term fears will continue.  There will also be speculation over a cut in ECB interest rates which will sap Euro support.  The Euro recovered some ground although this primarily reflected general dollar weakness rather than any great enthusiasm for the currency. Interest rate remained an important focus following Thursday’s ECB press conference where Draghi indicated that a rate cut had been discussed. There were unofficial briefings from ECB officials during the day, an unusual event in itself. There were suggestions that a majority of Council members had either proposed a rate cut or not been opposed and that a decision to cut rates had been blocked by Draghi and the German representatives. The overall impression was that rates could well be cut during the first quarter of 2013 which also had a negative Euro impact. Italian political tensions remained an important focus following Prime Minster Monti’s announcement that he would resign once the 2013 budget has been approved. The most likely outcome is that elections will be held in February which fuelled the mood of uncertainty. There were concerns that reforms could be in doubt with former Prime Minister Berlusconi’s intention to stand contributing to the mood of uncertainty. Stock markets fell sharply and there was a surge in bond yields with Spanish yields also rising sharply. Tensions did subside later in the day as Monti looked to offer reassurance over reforms. The German ZEW index was stronger than expected with a rise to 6.9 for November from -15.7 previously which was the strongest reading for seven months. The ZEW also stated that it considered the recent Bundesbank and ECB forecasts to be on the pessimistic end of the spectrum. There was some positive sentiment surrounding the Greek debt buyback, although the Greek government did have to pay more than expected which means that the decline in debt/GDP ratio will be slightly below target. There was a slightly more cautious outlook on the potential for a cut in ECB interest rates and there was some speculation that former Prime Minister Berlusconi would not stand in forthcoming elections.  The Euro-zone agreed on a framework for the new banking supervisor. Yen: The LDP, continues to hold a comfortable opinion-poll lead ahead of the December 16th General Election, maintaining expectations that there will be a much more aggressive monetary policy and potential changes to the Bank of Japan mandate next year. These expectations will undermine the yen, but there will still be the possibility of political deadlock which could delay additional policy measures. The yen will also gain defensive support at times when risk appetite deteriorates, but the underlying fundamentals will remain weak. The yen was firmly on the defensive during the week and weakened to fresh nine-month lows near 84 against the US currency while the Japanese currency also weakened sharply against the Euro. There were media reports that the Bank of Japan would sanction a further JPY5-10trn in quantitative easing at next week’s policy meeting which contributed to a negative yen tone There were further expectations that the LDP would win the forthcoming election and would also put additional pressure on the central bank to take more aggressive action. A slightly weaker than expected monthly increase of 2.6% for core machinery orders did not have a major market impact while the Tankan index was weaker than expected. A North Korean missile launch had some negative impact on the yen. Sterling There will be further doubts surrounding the UK economic outlook, especially with evidence that industrial output weakened sharply at the beginning of the fourth quarter.  The weak outlook will increase concerns surrounding the underlying fiscal outlook and also maintain pressure for the Bank of England to boost quantitative easing further.  Sterling will gain some degree of support on relative grounds given the aggressive Federal Reserve policy and the prospect of further ECB action. Nevertheless, Sterling is likely to be generally vulnerable given the UK fundamentals and credit-rating downgrade fears. Sterling was resilient against the US currency during the week, but struggled to break above the 1.6150 area and edged weaker against the Euro. The latest industrial data was sharply weaker than expected with a 0.8% decline in industrial production for October compared with expectations of a monthly rebound following the 2.1% drop seen in September. The data increased unease surrounding the fourth-quarter outlook and reinforced fears surrounding the economy as a whole. The NIESR estimated a growth rate of 0.1% in the three months to November with the October reading revised down sharply to 0.1% from 0.5%. The latest labour-market report was stronger than expected as the jobless claimant count fell by 3,000 compared with a revised gain of 6,000 the previous month.  The unemployment rate also held steady at 7.8% for October, in contrast to expectations of a small increase. Earnings growth was capped below 2.0% which maintained concerns surrounding the outlook for consumer spending. The prospect of further quantitative easing by the Federal Reserve, allied with speculation that the ECB would relax monetary policy further, had an impact in underpinning Sterling despite unease surrounding the growth outlook. There will be additional pressure on the Bank of England to take additional action. There was a warning from Standard & Poor’s that it was revising the AAA credit rating to negative from stable, reinforcing fears that one or more of the main rating agencies would downgrade the UK sometime during 2013. Swiss franc: The National Bank will remain strongly committed to maintaining the 1.20 minimum Euro level in the short-term. There will be further concerns surrounding the build-up of reserves, but there will also be a very strong determination to resist franc appreciation, especially with competitiveness still a key issue. Aggressive policy relaxation elsewhere will maintain the risk that upward pressure on the franc will intensify again. The dollar was on the defensive against the franc and retreated to lows below 0.9250. There were no surprises from the Swiss National Bank policy meeting with interest rates left on hold below 0.25% while the minimum 1.20 Euro level was also maintained. The central bank continued to insist that franc gains would be resisted with all necessary force. The latest producer prices data recorded no change in prices with a 1.2% annual increase which may ease deflationary pressure slightly.  The Euro retreated to lows in the 1.2080 area with disappointment that there was no suggestions of additional measures to weaken the franc and the dollar dipped to lows below 0.9250. There was a small recovery in the Swiss ZEW index to -15.5 the previous month Australian dollar The Australian dollar pushed higher with a move above the 1.05 level against the US currency. There were expectations that the Australian currency would gain support from international reserves diversification although there was also pressure for the central bank to act to restrain the currency as it remains substantially overvalued. The domestic data releases did not provide any support for the currency with a sharp decline in business confidence and consumer sentiment according to the latest surveys. A decline in gold prices was also a negative factor for the currency. The Australian dollar will gain support from reserve diversification, but there will still be resistance to gains with the Reserve Bank under pressure to intervene. Canadian dollar: The Canadian dollar was able to resist any significant weakness and strengthened to highs near the 0.9820 region against the US currency. The trade account was slightly stronger than expected, although the overall impact was very limited and there was some decline in gold prices which took the edge of the currency performance. Even with near-term resilience and optimism surrounding the fundamentals, the Canadian dollar will find it difficult to advance from current levels. ==================================================================== 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 

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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 replaces Twist & sets explicit targets

Daily FX Commentary: (Morning Report)

EUR/USD

The single currency sustains break above 1.3000 barrier, as clearance of Fib 61.8% at 1.3030, tested 1.3050 so far. Strong bullish posture of 4h studies, sees bulls in play for test of 1.3085/1.3100 barriers, above which the way will be opened for test of key barriers at 1.3125/38, 05 Dec / 17 Oct peaks. Gains would be delayed by corrective action on overbought hourly studies, with strong support and higher platform at 1.3000, reinforced by ascending 55 day EMA at 1.2990, expected to contain. Daily close above 1.3030 to confirm bullish structure off 1.2900 base and confirm daily three white soldiers reversal pattern.

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

GBP/USD

The pair resumes rally from 1.6000 base, clearing 1.6127/29 double-top and Fib 61.8%, extending gains to 1.6150 zone so far. Subsequent pullback on overbought hourlies, sees good support at 1.6100, near Fib 38.2% of 1.6000/1.6150 / 55 day EMA, however, caution is required, as 4h indicators are reversing that would trigger stronger correction. Below 1.6100, supports lie at 1.6070/50, loss of which would delay bulls. Larger picture outlook remains firmly bullish and favors near-term extension towards 1.6175/1.6200 barriers.

Res: 1.6129, 1.6150, 1.6175, 1.6200
Sup: 1.6100, 1.6090, 1.6060, 1.6050


USD/JPY

The pair cracked three-week barrier and range top at 82.83, to approach psychological 83.00 barrier. Gains were limited by overextended hourly studies, however, strong bullish tone on 4h chart, suggests that extension through 83.00 is likely. Immediate upside target lies at 83.26, 02 Apr high, ahead of yearly highs at 84.08/17, posted in March. Any dips should be contained at 82.50 zone.

Res: 83.00, 83.29, 84.08, 84.17
Sup: 82.79, 82.63, 82.52, 82.32 


USD/CHF

The pair has lost ground, as strong support at 0.9320/00 zone gave way and dips reached levels close to Fib 76.4% retracement of corrective 0.9239/0.9381 rally. Failure to regain important 0.9400 resistance zone, stalling at 50% of 0.9511/0.9239 descend and subsequent reversal that accelerated on a loss of 0.9320/00, revived bears for possible re-visit of 0.9239, 03 Dec low. With hourly studies deep in negative zone and 4h indicators breaking below the midlines, downside remains in near-term focus. Previous strong supports now act as resistance and only clear break and close above 0.9320/30 zone, would avert immediate downside risk.

Res: 0.9300, 0.9320, 0.9335, 0.9367
Sup: 0.9275, 0.9254, 0.9239, 0.9213

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


Daily Market Commentary: (Evening Report)

London Market Report

Stocks rise as investors await the FOMC

Market Movers
techMARK 2,132.04 +0.18%
FTSE 100 5,945.85 +0.35%
FTSE 250 12,224.31 +0.28%

UK stocks finished Wednesday's session with decent gains, extending its recent winning streak into its sixth day, with investors widely expecting the US Federal Reserve to reveal more stimulus measures in the coming hours.

The Footsie closed at its highest level since March 19th when it finished the session at 5,961.

It is predicted that the Federal Open Market Committee (FOMC) meeting will culminate with the announcement of a new long-term bond purchase programme valued at $45bn per month as 'Operation Twist' comes to an end.

Some 48 out of 49 analysts surveyed by Bloomberg are expecting new stimulus on top of the $40bn monthly mortgage-bond buying programme announced in September, commonly referred to as QE3 (third round of quantitative easing).

While optimism over the 'fiscal cliff' has increased slightly over the last few days, House Speaker John Boehner, who has talked this week with President Barack Obama, said that their two parties still have “serious differences" on resolving the issue.

“His remarks, although not enough to send markets spiral downward, do reinforce the discord between Republicans and the White House. The focus is now on the US Fed’s policy to see if it could provide some joy – due out after the European closing bell,” said market strategist Ishaq Siddiqi from ETX Capital.

Helping provide a lift to sentiment this morning was positive employment data in the UK (jobless claims fell 3,000 in November, better than the 6,000 increase expected), while a bond auction in Italy went relatively ‘smoothly’ in spite of the current political uncertainty.

Europe Market Report 

European Markets Exercised Caution Ahead Of Fed Announcement

The European markets largely ended Wednesday's session with modest gains, as investors played it cautious ahead of the impending announcement from the Federal Reserve in the U.S. European finance ministers are also meeting today to discuss bank supervision and financial reform.

The Federal Open Market Committee will conclude its 2-day meeting after the European close. The Fed is expected to announce further stimulus, as Operation Twist is set to expire after 2012. Investors will be watching what the Fed will say regarding its forecast for economic growth, unemployment, inflation and interest rates.

North Korea successfully launched a satellite carrying rocket early Wednesday, which the West and several other countries believe was aimed at testing a long-range missile. The U.S., Japan and South Korea have called for a meeting of the U.N. Security Council to discuss North Korea's defiance in launching the rocket despite the international community's request to desist from the move.

The stickiness in U.K. inflation may persist for a while, Bank of England Chief Economist Spencer Dale said Wednesday. In a speech in London, he said the stickiness of inflation is a by-product of the real adjustment that economy has been forced to make and there is no easy fixes to such real adjustments.

The Euro Stoxx 50 index of eurozone bluechip stocks increased by 0.23 percent, while the Stoxx Europe 50 index, which includes some major U.K. companies, added 0.16 percent.

The DAX of Germany climbed by 0.31 percent and the FTSE 100 of the U.K. rose by 0.33 percent. The CAC 40 of France gained 0.01 percent, but the SMI of Switzerland lost 0.21 percent.

Industrial production in Eurozone declined for a second consecutive month in October, but at a slower pace compared to the previous month, data released by Eurostat showed Wednesday. Production dropped 1.4 percent month-on-month in October after a 2.3 percent fall in September. Economists expected no change in production volume.

Germany's harmonized index of consumer prices rose less than estimated in the preliminary report in November, final figures published by the Federal Statistical Office showed Wednesday. The HICP inflation was 1.9 percent in November, a tad below 2 percent reported initially. On a monthly basis, HICP fell 0.2 percent compared with 0.1 percent fall reported earlier.

France's harmonized inflation eased more than expected in November on a renewed drop in petroleum product prices, the statistical office Insee said Wednesday. Inflation fell to 1.6 percent from 2.1 percent in October. The inflation rate was forecast to ease to 1.8 percent.

France's current account deficit narrowed in October, mainly due to increase in surplus on trade in services, data from Bank of France showed Wednesday.

The deficit fell to EUR 2.8 billion in October from EUR 3.4 billion in September. According to the central bank, the improvement is mainly due to an increase in surplus on services trade to EUR 2.8 billion from EUR 2.1 billion.

U.K. claimant count declined unexpectedly in November and employment reached a record through the three months to October, confounding the weakness in economic activity.

Claimant count dropped by 3,000 month-on-month to 1.58 million in November, the Office for National Statistics said Wednesday. Economists had forecast the figure to rise by 7,000. Claims rose by 6,000 in October, instead of the initially reported 10,100.
 

US Market Report

Stocks Turning In Lackluster Performance Ahead Of Fed

With traders reluctant to make any significant moves ahead of the Federal Reserve's monetary policy announcement, stocks are turning in a lackluster performance in mid-day trading on Wednesday after failing to sustain an initial upward move.

The major averages currently continue to linger near the unchanged line, turning in a mixed performance. While the Nasdaq is down 3.21 points or 0.1 percent at 3,019.09, the Dow is up 4.23 points or less than a tenth of a percent at 13,252.67 and the S&P 500 is up 1.98 points or 0.1 percent at 1,429.82.

The choppy trading on Wall Street comes ahead of the Federal Reserve's latest decision on monetary policy, which is due to be announced at about 12:30 pm ET.

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.

Following the announcement, traders are likely to keep an eye on Fed Chairman Ben Bernanke's accompanying press conference.

Peter Boockvar, managing director at Miller Tabak, said, "We'll hear again from the 4th branch of government today, the Federal Reserve, to tell us their plan to replace the upcoming expiration of Smother the Yield Curve."

"Between Fed speeches and WSJ articles, it seems likely that we'll get $45 billion per month of unsterilized Treasury purchases, thus bringing the monthly dose of electronically printed money to $85 billion including the ongoing MBS program."

Traders are also keeping an eye on developments in Washington, as lawmakers continue to struggle to reach an agreement to avoid the looming fiscal cliff.

House Speaker John Boehner, R-Ohio, accused President Barack Obama of failing to put forth a "balanced" plan, while Senate Majority Leader Harry Reid, D-Nev., warned that the U.S. will go over the cliff unless Republicans agree to raise tax rates on wealthy Americans.

On the economic front, the Labor Department released a report showing that U.S. import prices fell by much more than anticipated in the month of November, with the decrease largely due to a drop by fuel import prices.

Other Markets In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Wednesday. Japan's Nikkei 225 Index rose by 0.6 percent, while Hong Kong's Hang Seng Index advanced by 0.8 percent. In the bond market, treasuries are lingering near the unchanged ahead of the Fed announcement. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, is up by less than a basis point at 1.657 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.