Forex research

Alpari_UK · February 21, 2013, 2:19am

[B]UK remains in the spotlight ahead of the unemployment data[/B]

Today’s UK opening call provides an update on:

• US stocks boosted by a surge in M&A activity;
• UK under the spotlight this morning as unemployment figures released;
• MPC minutes to shed light on decision to reinvest maturing Gilt funds;
• ECB rate cut could be near with German CPI expected to fall to 1.7%.

US stock markets ended the session higher on Tuesday, following news that Office Depot, the second largest US offices supplies retailer is due to merge with OfficeMax.

There has been a huge surge in M&A activity so far this year, which is an extremely positive sign that businesses are much more optimistic than they’ve been in a long time. The rally in the stock markets may have been driven by central bank stimulus up until this point, but this improvement in M&A activity is what’s going to keep them hitting new multi-year highs.

Asian stocks edged higher over night, boosted by data out of the eurozone that showed investors are much more optimistic about the next six months in the region than they were a couple of months ago.

Gains were limited in Japan though, as the countries trade deficit hit record highs of 1.629 trillion yen in January. On a more positive note though, exports rose for the first time since May, as did exports to China which have tumbled recently due to the dispute over a small group of islands.

Attention will be back on the UK this morning, after rumours circulated yesterday that S&P were set to be the first ratings agency to strip the country of its precious triple A rating. No such downgrade happened last night, with S&P refusing to comment on the rumours. The ratings agencies are likely to wait until after the budget next month now, before deciding on whether to follow through with a downgrade after they all placed the UK on negative outlook.

Today, the focus is going to be on the unemployment figures, which have actually been a surprising bright spot in otherwise pretty awful data out the UK in recent months. The unemployment rate is expected to remain at 7.7% in December, down 0.7% from the same month a year earlier, which isn’t bad considering the zero growth seen during those 12 months.

Jobless claims are expected to have fallen for a third consecutive month in January, which suggests we could see further drops in the unemployment figures in the months ahead. The minutes from the recent MPC meeting will also be released this morning, with investors wanting to know if there’s been any change of heart among policy makers in respect to the asset purchase program.

There has been clear opposition to it in recent months, although the decision at the last meeting to reinvest £6.6 billion from maturing Gilts suggests attitudes may be changing, especially with the economy potentially facing yet another recession. It will also be interesting to see how many, if any, members opposed reinvesting the cash, which could also provide insight into the decision making at future meetings.

The German CPI figure will also be closely watched this morning. Head of the Bundesbank, Jens Weidmann, has openly opposed a rate cut for a long time due to impact it could have on inflation in the region.
However, with the stronger euro expected to push inflation lower in the months ahead and the German CPI figure expected to fall to 1.7%, from a year earlier, Weidmann may reluctantly give the green light to a rate cut in one of the upcoming meetings.

The euro is trading higher against the dollar this morning. The pair found support over the last few days around 1.3350, where the ascending trend line dating back to 13 November crosses with the 50 fib level, of the move from this year’s lows to highs. If it continues to edge higher over the next few days, it should find strong resistance around 1.3490 and 1.3530, from the 50 fib level, of the longer term move from May 2011 highs to July 2012 lows, and the 200 week moving average respectively.

Sterling is trading higher against the dollar this morning. The pair found strong support yesterday around 1.5425, which has previously bee a key level of support, and is now starting to edge higher. I’m still quite bearish in the longer term, however we may now see some form of retracement, with the pair potentially testing the trend line as a new level of resistance. However, it looks unlikely at this stage that the retracement will be so big. Instead we could see it edge higher towards 1.55, a previous level of support, before continuing its move lower, with the next target being 1.5350, based on the size of the head and shoulders that formed between August and January.

The dollar is trading lower against the yen this morning. The pair entered a period of consolidation over the past couple of weeks after reaching a key resistance level around 94.75. I expect to see it continue to trade in the range for a few more sessions yet, potentially finding support in the coming days from the ascending trend line, dating back to 11 December. I remain bullish in the long term, with a break above 94.75, prompting a move towards 97.6.

The euro is trading higher against the pound this morning. The pair is finding resistance again around 0.87, from the ascending trend line, dating back to January 2009. A break above here would be very bullish for the pair, prompting a move towards 0.9082 in the longer term. In the short term, it should find further resistance around 0.875, followed by 0.88. If the pair fails to break above this level of resistance, then it could form a double top over the coming weeks if it falls back towards 0.8440, which would be quite a bearish signal if it broke the neckline.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 21, 2013, 2:33am

[B]BoE minutes hint at more stimulus, Fed minutes up next[/B]

Today’s US opening call provides an update on:

[ul]
[li]Three MPC members vote in favour of additional QE in February;
[/li][li]Sterling tumbles to eight month lows against the dollar following the release of the minutes;
[/li][li]ECB rate cut may now get Weidmann backing as German inflation falls to 1.7%;
[/li][li]FOMC minutes released this afternoon may shed light on asset purchase program.[/ul]
[/li]
An increase in the asset purchase program is back on the table in the UK, as minutes from the meeting earlier this month shows three members voted in favour of more QE.

One of those who voted in favour was outgoing Governor Sir Mervyn King, who has clearly decided to go out with a bang. The minutes were much more dovish than the markets had priced in, as seen by the reaction shortly after with the pound tumbling to eight month lows against the dollar and 16-month lows against the euro.

The FTSE recovered some earlier losses following the minutes to trade around 10 points higher, while UK Gilt yields dropped around 6 basis points immediately following the release. While these minutes are much more dovish than the markets expected, it’s far from a foregone conclusion that we’ll therefore see additional stimulus in the months ahead.

Clearly, despite the downturn seen over the last five months, there are still six members who aren’t convinced that the positives associated with QE outweigh the inflation risk, with inflation now at 2.7%. I don’t expect two more members to climb on board by the next meeting, so we could wait a couple more months yet for additional stimulus.

Staying on the subject of central banks, people will be watching the ECB even more closely in the coming months, after the German CPI figure for January fell to 1.7%, curbing inflation fears for the Bundesbank should the ECB decide to cut interest rates.

If anything, this drop in inflation could get Jens Weidmann on board a rate cut, although given that would take the pressure off those countries who need to regain competitiveness through austerity and reforms, that may be too much to ask.

Looking ahead to the rest of the day and we have some key economic releases out of the US, including PPI data which is expected to show inflation fell in the first month of this year, compared to the same month in 2012.

There’s also housing data which has been a real strong point in the US economy in recent months. Building permits and housing starts are expected to remain at high levels in January, rising by 0.915 million and 0.925 million respectively, with the former rising for a fourth consecutive month.

The main release in the US though is going to be the FOMC minutes, which could provide insight on policy makers views on the open-ended asset purchase program. There have been discussions in recent months over when the Fed will start to reduce the asset purchase program, so there’s likely to be a reaction in the markets to any change of timeframe.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 21, 2013, 2:38am

James Hughes looks at the market reaction to today’s unemployment news and the BOE meeting minutes, and also discusses the recent fall in the pound and gains in UK equity markets.

Forex research: Global markets daily

Alpari_UK · February 21, 2013, 2:45am

[B]Europe lower on hawkish Fed minutes, Euro PMI’s up next[/B]

Today’s UK opening call provides an update on:

• US stocks plummet as Fed minutes show unease among Fed members over asset purchases;
• Torrid couple of days for the UK could end on a positive note with the first negative borrowing figure in six months;
• German services expected to return to growth after 12 months of contraction;
• US CPI expected to fall, easing fears of inflation risks of QE.

European stock indices are expected to open lower on Thursday, tracking the US indices which recorded decent losses over night after the Fed minutes from this month suggested a number of members were looking for an alternative to $85 billion of asset purchases per month.

There’s due to be a larger discussion at the next meeting in March, which many people are now seeing a sign that the program is going to be reduced at the very least. There were a number of other suggestions as well, although anything
other than the continuation of the program is likely to rejected by the markets which have been rising under the assumption that the purchases would continue until we see a significant improvement in the labour market.

Yesterday there was a lot of negativity surrounding the UK, after minutes from the BoE meeting showed more members, including Sir Mervyn King, voting in favour of more QE. This would suggest the economy is in a worse state than has been suggested, and followed rumours the day before that S&P were preparing to strip the country of its triple A rating. Hopefully we’ll see some better news today when the public sector net borrowing figure is released, which is expected to be negative for the first time in six months.

The eurozone will be back in focus today, with the release of the manufacturing and services PMI’s this morning. The German and eurozone figures are expected to be largely positive once again, with the German manufacturing PMI actually returning to growth territory for the first time in a year.

The eurozone PMI’s are also expected to be much improved, with both forecast to be within touching distance of growth territory. The data has been improving at a good pace over the last few months, adding weight to suggestions that we could see the region pull itself out of recession later this year.

The French figures have been the most concerning in recent months, with figures in both manufacturing and services dropping so low that both industries are currently contracting at a faster rate than both Spain and Italy.

The figures are likely to improve slightly in February, however a small increase is unlikely to ease concerns that the country is falling behind in its austerity and reform efforts, which will ultimately lead to it losing competitiveness in the future, something we’re already seeing signs of.

There’s plenty more data out of the US as well this afternoon, including the January CPI figure which is expected to fall to 1.6% from a year earlier, while the core CPI figure is also expected to fall to 1.8%. This should go some way to easing fears among members of the Fed about the inflation risks associated with its open-ended QE program.

There’s also a couple of pieces of manufacturing data out for February, the Market PMI which is expected to fall slightly to 55.5 and the Philly Fed index which is expected to recover following its dip back into negative territory in January, with a reading of 1.1. All in all, they’re both decent figures which is a positive sign for the industry following a tough 2012.

Finally we have some more housing data in the form of existing home sales, which are expected to remain strong at 4.89 million, and the weekly jobless claims which are expected to rise slightly to 355,000. We may also get a revision to last week’s number after it unexpectedly dropped to 341,000 so it’s worth keeping an eye on that.

[B]The euro is trading lower against the dollar[/B] this morning.The pair closed below the ascending trend line yesterday, dating back to 13 November, and is now trading below the 61.8 fib level which is very bearish. A close below here today should prompt a move back towards 1.30, with the pair finding support along the way around 1.3135 and 1.30. At the moment the pair is finding support around 1.3250, previously a key level of resistance, and if this holds we could see it move back above the 61.8 fib level before the end of the day.

[B]Sterling is trading lower against the dollar[/B] this morning. The pair took an absolute beating yesterday, falling almost 200 basis points, and is still continuing in the same direction this morning. The pair took out a number of support levels yesterday, including the 1.5350 target from when the pair broke below the double top formation. This morining though, it’s now finding support around 1.5150. The next big support levels below here are 1.50 and 1.49, however I expect to see some form of retracement before we hit these.

[B]The dollar is trading flat against the yen[/B] this morning. The pair has been consolidating for a couple of weeks now, which given the rapid appreciation of the dollar before this is quite a bullish signal. A break above here over the next couple of weeks should push the pair through 94.75, which has been a key resistance level so far. The next target after this will be 97.6, followed by 100.45.

[B]The euro is trading higher against the pound[/B] this morning. The pair is currently finding resistance around 0.8725, from the descending trend line, dating back to January 2009. A break above here would be very bullish for the pair, potentially prompting a move towards June 2011 highs of 0.9082. The next levels of resistance though will come around 0.875, 0.88 and 0.89.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 21, 2013, 8:15am

Today’s US opening call provides an update on:

[ul]
[li]Fed minutes weigh on stock indices;
[/li][li]Gold a major casualty of Fed tightening, death cross signals further selling;
[/li][li]Eurozone PMI’s miss across the board;
[/li][li]Jam packed economic calendar for the US this afternoon.
[/li][/ul]

Stock markets have plummeted on Thursday in reaction to February’s hawkish Fed minutes and worse than expected eurozone PMI’s.

The Fed minutes have been particularly disappointing, given that the Fed previously gave the impression that as long as inflation remains under control, which it is, the ultra loose monetary policy would continue until we see a big improvement in the labour market, which we haven’t seen.

The markets have priced in another 12 months or so of highly accommodative policy from the Fed, so if they pull the plug at this early stage you can wave goodbye to the S&P 500 and Dow 30 hitting those all time highs. The interesting thing now will be to see how much of the rally has been supported by central bank stimulus and how much by an actual improvement in the economic outlook.

Gold has been one of the biggest casualties of the Fed minutes, falling more than $37 dollars yesterday before hitting a technical support level at $1,565. With the Fed now looking increasingly likely to start wrapping up the $85 billion of asset purchases every month, probably gradually over the next 10 months or so, I expect Gold to break through this level now, with the next big support levels coming around $1,485 and $1,430.

The fact that we’re now seeing a death cross, 50 day simple moving average crossing below the 200 day simple moving average, also suggests we could still see further downside yet.

The eurozone manufacturing and services PMI’s this morning did little to improve sentiment this morning. The German PMI’s, despite missing expectations, were both in growth territory for the first time since February last year, which is a positive.

Unfortunately though, the run of monthly improvements in the eurozone PMI’s came to an end, with both missing expectations. We have still seen an improvement in recent months so we shouldn’t get too down about the February figures, although if we don’t see an improvement next month there may be cause for concern.

The most concerning figures continue to come from France though. We did see a slight improvement in the manufacturing figure, rising to 43.6, however the services PMI fell one again. What this means is that both industries have now contracted at a faster rate than those in Spain and Italy for a second month, which suggests that we’re already seeing signs of the French losing competitiveness compared to those reducing spending and adopting reforms more aggressively.

Looking ahead to this afternoon and the focus is going to be entirely on the US. There’s plenty of economic data to get stuck into, including the CPI figure, which is expected to fall to 1.6%, from a year earlier, which suggests this isn’t one of the risks that certain members of the Fed referred to.

This will be followed by the weekly jobless claims which are expected to return closer to the average, around 355,000, after a big drop last week back to 341,000. We also have more housing data today, with existing home sales expected to remain solid at 4.9m and finally two pieces of manufacturing data, both of which are expected to point to further growth in February.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 21, 2013, 9:10am

0:09 Reaction in the markets to the hawkish tone in the Fed minutes;
1:40 The disappointing PMI’s from the eurozone, in particular France;
4:07 CHART – EUR/USD analysis.

Forex research: Global markets daily

Alpari_UK · February 22, 2013, 2:56am

[B]Investors turn to FOMC members for clarity on Fed minutes[/B]

Today’s UK opening call provides an update on:

• Pull back expected later ahead of Italian elections;
• German fourth quarter GDP expected to remain deep in contraction territory;
• Businesses economic outlook expected to rise for a fifth month;
• EU forecasts facing early downward revision;
• Fed voting members to shed more light on the FOMC minutes.

We’re likely to see an element of caution return to the markets later on Friday, particularly in Europe, ahead of the Italian elections this weekend.

A lack of information recently, due to the fact that polls aren’t allowed to be conducted in the two weeks leading up to the vote, has created a fair bit of uncertainty, especially when you consider the fact that the last poll conducted showed Berlusconi’s PdL party had closed the gap on the leading Democratic party to within the margin of error.

So far this morning, stock index futures are pointing to a higher open, but I would be surprised to see these pull back towards the end of the session, with traders opting to stay on the side lines ahead of the election.

It’s going to be a quieter day in terms of the economic calendar, compared to Thursday, with the main focus being on Germany this morning. The second estimate of the fourth quarter GDP will come first and is expected to remain at -0.6%. Any revision to this is unlikely to stoke too much of a reaction on this occasion, given how far the original figure was from growth territory. Also, early signs suggest the economy has performed relatively well so far this quarter meaning there’s no real threat of recession.

More likely to get a reaction will be the Ifo business climate figure, released shortly after. This is expected to rise for a fifth consecutive month, to 105.0, so its no surprise that the threat of recession is all but gone. If businesses are confident then that’s good for both job creation and the economic outlook.

The EU economic forecast is unlikely to provide any surprises when released this morning. The markets have become numb to forecasts being revised lower, so barring anything significant, the reaction to this is likely to be relatively muted.

The US session will be much quieter on Friday, following a flurry of data the day before. To cap the week off, we’ll here from two voting FOMC members, Jerome Powell and Daniel Tarullo, and following the Fed minutes which were released on Wednesday, their comments will undoubtedly be heavily scrutinised. Any suggestion that the Fed’s bond buying will be scaled back at the next meeting, or even in the next few months will be very bullish for the dollar, but bearish for stocks.

[B]The euro is trading higher against the dollar [/B]this morning. The pair broke below the ascending trend line, dating back to 13 November, over the past couple of days, before finding strong support around 1.3150, the 38.2% retracement of the move from May 2011 highs to July 2012 lows. It also broke below a longer term ascending trend line, dating back to July last year. A weekly close below here would be quite a bearish signal for the pair, prompting a move back towards 1.3050, followed by 1.29. In the longer term I remain bullish on this pair, so don’t see it falling below 1.29.

[B]Sterling is trading higher against the dollar[/B] this morning. The pair broke below 1.53 on Wednesday, which is a very bearish signal given a strong a support level this has been over the last two and a half years. A weekly close below here would essentially provide confirmation of the break, and could therefore prompt a significant move lower. The next target in this case would be 1.49, which is a previous level of support, however the pair would probably find support first around 1.5150, followed by 1.4950. However, if the pair closes above 1.53 today, this could prompt a move back towards 1.57 in the shorter term, with the pair testing the ascending trend line that it broke below last week as a new area of resistance.

[B]The dollar is trading higher against the yen[/B] this morning. The pair has entered a period of consolidation over the past couple of weeks, following a strong move higher over the past few months, resulting in a pennant formation, which is typically a bullish signal. We could see a break above this in the next few sessions, with the ascending trend line, dating back to 12 December starting to provide support for the pair again. If the pair breaks above 94.75, this would be a very bullish signal, prompting a move towards 97.60.

[B]The euro is trading lower against the pound [/B]this morning. The pair found firm resistance 0.8725 over the past couple of days, from the descending trend line, dating back to January 2009. If the pair breaks above here it would be a very bullish move, prompting a move towards 0.9082 over the coming months, and maybe beyond that in the longer term. For now though, we may see a brief pull back before the bulls have another go at breaking above this resistance level.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 22, 2013, 10:50am

0:12 Market rallies on back of positive German Ifo business climate figure
0:57 Markets quieten ahead of Italian elections over the weekend
1:42 Looking ahead to comments from members of the FOMC

Forex research: Global markets daily

Alpari_UK · February 25, 2013, 2:42am

[B]Elections dominate the markets, whilst UK downgrade is also expected to effect sentiment[/B]

Today’s UK opening call provides an update on:

[ul]
[li]Sterling expected to continue feeling the effect of Friday’s downgrade;
[/li][li]Cypriot conservative Nicos Anastasiades’ victory in Sunday’s presidential vote boosts market hopes;
[/li][li]Italian election vote concludes today, unsettling markets;
[/li][li]Rumours suggest Japan likely to nominate Kuroda for BoJ position;
[/li][/ul]
Credit rating Moody’s stripped the UK economy of its highly prized AAA credit rating late on Friday, much to the surprise of many within the markets. This downgrade to AA1 represents the first time since 1978 that the UK has lost its top credit rating and the financial markets barely had time to digest the news before the weekend. Therefore there is likely to be a substantial degree of impact still reserved for today, especially within the UK equity markets which were closed at the time.
Moody’s cited a poor growth outlook for the medium term, coupled with a high debt burden and will be seen by many as a push towards increased quantitative easing in the not so distant future. This is particularly so given the recent MPC minutes which disclosed an increased propensity for monetary easing, most notably from Sir Mervyn King. The clear negative connotations associated with UK growth and economic success, along coupled with the increased likeliness of easing measures is likely to increase pressure upon the sterling in the forex markets.

Nicos Anastasiades has won the Cypriot election held on Sunday, bringing a positive resolution to at least one of the two key votes within Europe this week. The conservative is widely expected to push to a quick resolution to the financial rescue required for the beleaguered state, thus allowing for some form of closure on the issue in the near term. This is widely anticipated owing to the impact that this may have had on the fragile eurozone and represents just one in a seemingly endless line of struggling states seeking a form of financial bailout.

Today sees the resolution of the Italian election, where Pier Luigi Bersani’s centre-left alliance attempts to take control of the beleaguered economy over the centre-right bloc led by ex-Prime Minister Silvio Berlusconi. For the markets, this is essential given the historically inept leadership of the latter, who has already promised tax cuts should he get into power. Subsequently this would be likely to set back any of the austerity measures put into place under Mario Monti. Voting finishes at 15:00 GMT and initial results will emerge within hours of this.

Rumours are surfacing that point to a emergence of a final suitor to the Bank of Japan position, with Haru Kuroda looking increasingly likely to take the role. Prime Minister Shinzo Abe has apparently instructed negotiations to begin to bring the head of the Asian Development Bank into the role. Most notably, Kuroda is seen to be highly dovish and is likely to bring about a much more tough stance to bring about an end to the current deflation and poor growth in the Asian nation.

Eurodollar is trading flat in early hours, having finished Friday in a similar position. The current price of 1.3215 represents a significant pullback from the previous 13 months high of 1.371, set around three weeks ago. The current level coincides with the 50.0 Fibonacci retracement level which appears to be providing support and could form the basis of a move to the upside. The 100 day moving average is also expected to provide support given the proximity to the current price level. Both the RSI and stochastics are around oversold territory, which would signal a potential reversal back towards the upside; a theory which would be back up should the Italian election to favorably now the Cypriot vote has gone to plan.

Sterling is trading higher against the dollar today, despite the influence of the Moody’s downgrade on Friday. The current price of 1.5135 is only really back to where Friday’s closing price was and therefore the weekend brought about a gap open owing to the sentiment brought by that decision. This pair has seen significant losses over recent weeks after a double top formation led to a break below a highly significant long term trend-line dating back to 2009.

Both the RSI and stochastic point to a potential reversal, however the negative sentiment provided by the UK downgrade, coupled with the potential effect this could have on future QE brings about the possibility for further losses in the near term.

The dollar is trading lower against the yen today, currently priced at 94.24. The opening price of the pair saw a jump to 94.52, which looked to be signifying that there could be some upside movement on the cards and subsequently a shift out of the recent consolidation phase. However, the pair are now trading around the top of that range and we are looking to see whether this is going to turn resistance into support or if the price is set to push back into that range again. Should 94.2 turn into support, this would be bullish for the pair and there could be a further significant push to the upside.

The markets are expected to…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 25, 2013, 8:17am

[B]European elections take the stage as equities rally despite impending sequester[/B]

Today’s US opening call provides an update on:

[ul]
[li]Italian election results expected to filter through around time of US open;
[/li][li]Cypriot vote brings financial reform minded conservative, boosting markets;
[/li][li]Sequester nears, yet markets seem to be willing to ignore it, for now;
[/li][li]Ultra dovish Kuroda favourite to take BoJ role, boosting markets;
[/li][/ul]

Today marks the second of a two day election process within Italy, the results of which are expected to filter through around the time that the US markets open. Now this has a significant impact upon the strength of the eurozone going forward given the size and significant of the Italian economy. The ability of the Italians to appoint an alternative to Silvio Berlusconi could signify a push towards the long term resolution of the eurozone crisis, allowing the austerity measures put in place by technocrat Mario Monti to take full effect. Should Berlusconi regain power, this would be seen as a major setback to the progress seen in the eurozone recently and could signify a halt to the equity rally seen over the recent months.

Cyprus voted in a new president over the weekend, with Nicos Anastasiades winning by a landslide. As with most european election victories, this is notable for the stance of the President-elect with regards to austerity and in this case a financial bailout. Conservative Anastasiades has promised to seek a swift resolution by engaging foreign lenders to bring Cyprus closer to Europe. This is a shift from the outgoing communist party, whom initially sought financing from Russia before turning to the European Union.

In a boost to European stability, a jubilant Anastasiades declared that “We want Europe on our side. We will be absolutely consistent and meet our promises. Cyprus belongs to Europe.” He promised to “restore the credibility of Cyprus in Europe and internationally.” This has seen European markets rally in early Monday trading, with the FTSE, CAC and DAX all higher.

We are now just a few days away from the impending spending cuts of the US sequester, with many expecting it to bring about the same sort of hysteria within the markets that the fiscal cliff resulted in. However, the effects seem to be very muted, with many concentrating on the positive sides of the economy regardless of falling GDP and a potential fall in investment. This current bull run in the equity markets has brought about some of the highest levels since the economic crisis begun in 2007, yet whether this is justified remains to be seen given the economic strife and instability still evident within the global economy.

Japan took one step closer to appointing a new governor for the Bank of Japan, with Haruhiko Kuroda taking the lead according to reports. Shinzo Abe has reportedly called upon his aides to initiate the negotiations required to bring about this ultra dovish president of the Asian Development Bank into the top financial role. This sent the yen even lower in early trading, yet this has recovered somewhat, currently trading around the price of Friday’s close.

US equities are expected to…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 25, 2013, 8:56am

0:16 Moody’s downgrades UK credit rating to AA1;
0:40 Cyprus elect new conservative democrat to office, boosting hopes of financial bailout;
1:24 Italian elections draw to close, with markets hoping centre left take victory over Silvio Berlusconi’s centre right;
2:53 US sequester draws closer, with little resolution in sight;
3:49 CHARTS - GBP/USD and USD/JPY analysis

Forex research: Global markets daily

Alpari_UK · February 26, 2013, 2:46am

[B]Political uncertainty in Italy weighs on stock markets[/B]

Today’s UK opening call provides an update on:

• Democratic party takes the most votes, but political deadlock may force more elections;
• MPC testimony before Treasury Committee likely to bring increased volatility this morning;
• US consumer confidence expected to recover slightly in February;
• Bernanke to wrap things up as he testifies before the Senate Banking Committee.

Stock markets are expected to open much lower this morning after more Italians voted against austerity than for it over the weekend, making the job of governing the country virtually impossible.

The Italian public’s vote on austerity and reform did not go to plan over the weekend, after the pro-austerity Democratic party secured its majority in the lower house by a fine margin but failed to gain a majority in the Senate, making the job of passing legislation an extremely difficult one. This could leave the country ungovernable and will most likely lead to another election shortly down the line.

The Bank of England will be back in the spotlight this morning, following the release of the minutes last week which showed three members, including Sir Mervyn King, voted in favour of more asset purchases this month. King, along with other MPC members, will testify before the Treasury Committee on inflation and the economic outlook so we’re likely to see plenty of volatility in the markets during this time.

The comments made here could provide crucial insight into whether any other members are likely to vote in favour of additional stimulus at the next meeting. Any justification of looser monetary policy from members of the MPC, despite the higher inflation outlook for the next two years, could help reduce the FTSEs losses, while pushing the pound lower.

This afternoon, the focus will be back on the US, with the release of the CB consumer confidence figure, which is expected to rise to 61.0 following the brief drop in January. I expect to see this figure return to the levels seen at the end of 2012 in the coming months, as people in the US adjust following the introduction of the new payroll tax, which came in on 1 January.

We also have some housing data out today, with the S&P/Case Shiller home price index and new homes sales both released shortly after the opening bell in the US. Both are expected to show a slight improvement, which is consistent with what we’ve seen in US housing data since the second half of last year.

Finally, we’ll hear from Fed Chairman Ben Bernanke, who is due to testify on the semi-annual monetary policy report before the Senate Banking Committee. Bernanke’s comments usually stoke big swings in the markets, especially when there’s uncertainty surrounding the future policy of the Fed, so it’s worth keeping an eye on his comments today.

[B]The euro is trading flat against the dollar [/B]this morning. The pair found support yesterday around 1.3060, the 61.8% retracement of the move from 13 November lows to this month’s highs, and a previous level of support and resistance. I expect to see it drop below here in the coming days, with the next target being 1.29. A break below here looks unlikely at this stage, however if we do see a break, it should prompt a move towards 1.27.

[B]Sterling is trading higher against the dollar[/B] this morning. The pair broke below 1.53 last week, a key area of support, which could now prompt a move towards 1.49 in the coming weeks. Given how big a support level 1.53 has been since the middle of 2010, we could now see the pair test it as a new area of resistance, which would act as confirmation of the break. In the longer term, I remain bearish, with first target being 1.49, followed by 1.44 if this level is broken.

[B]The dollar is trading flat against the yen[/B] this morning, after falling significantly yesterday. The pair broke below an ascending trend line, dating back to 12 December, as well as the pennant formation, which is usually a bullish signal following a major uptrend. The pair is currently finding support around 91.80, which suggests the bearish move may already be over, however if it continues to trade lower, we could see it target 89.0. In the longer term, I remain bullish, with a break above 94.75 prompting a move towards 97.6, followed by 100.45.

[B]The euro is trading lower against the pound[/B] this morning. The pair broke above the descending trend line yesterday, dating back to 4 January 2009, before plummeting back towards 0.8575, where it found support from the 61.8 fib level. In the shorter term, we could see some further consolidation, however in the longer term I remain quite bullish. A break above 0.88 should prompt a move towards 0.89 followed by 0.9082, June 2011 highs.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 26, 2013, 8:06am

[B]Investors turn to Bernanke testimony as Italian elections weigh on sentiment[/B]

Today’s US opening call provides an update on:

[ul]
[li]Political uncertainty in Italy weighs on European stocks as FTSE MIB falls 5%;
[/li][li]Bond investors sell peripheral debt in favour of German Bunds;
[/li][li]US consumer confidence watched closely this afternoon;
[/li][li]Bernanke to testify on the semi-annual monetary policy report this afternoon.
[/li][/ul]
European stock markets tumbled on Tuesday, after elections in Italy failed to leave a coalition government with a majority in the Senate.

If this is confirmed once all the votes are counted, we’re likely to see another election at some point this year. The Senate would make life very difficult for a coalition led by Pier Luigi Bersani, who would need to pass legislation through both the upper and lower houses in order to continue with the austerity and reforms started by Mario Monti.

The political uncertainty now surrounding these elections is taking its toll on investors who held on for as long as they could in the interest of keeping the rally going. The message this morning is clear though, it’s time to leave the party.

The FTSE MIB has unsurprisingly been the worst hit early in the session, trading almost 5% lower, while the IBEX isn’t far behind, down by around 3%. The elections could weigh on European stocks for a while yet, with people already now claiming that this result looks to have sparked the revival of the eurozone debt crisis.

Investors in government bonds reacted in much the same way, selling Italian and Spanish debt in favour of the safe haven Bunds. Yields on Italian debt rose almost 30 basis points this morning, while Bund yields are eight basis points lower at 1.47%. The spread between these bonds are likely to widen in the coming weeks, putting an end to more than six months of tightening. It will be very interesting to see what the investor reaction is to these elections when the government auctions 10-year debt tomorrow.

Looking ahead to the rest of today, the focus is likely to be on the US, with some key economic releases shortly after the opening bell. The CB consumer confidence figure is expected to improve slightly, following the sharp drop in January in reaction to the introduction of the payroll tax. A negative longer term reaction to this tax will be detrimental to the US economy this year, given that consumer spending accounts for around 70% of GDP. If we start to see a return to the levels seen at the end of 2012 in the coming months, it would suggest the long term impact will be minimal.

Finally, Ben Bernanke’s testimony in front of the Senate Banking Committee will attract a lot of attention. The “Bernanke effect” as it has become known in the markets, refers to the surge in volatility whenever the Fed Chairman speaks about monetary policy. Given the topic of today’s testimony and the uncertainty surrounding Fed policy at the moment, this is exactly what we’re likely to get today.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 26, 2013, 9:02am

0:08 Italian elections and the impact on investor sentiment;
1:54 The potential scenarios if no party gets a majority in the Senate;
3:33 Bernanke’s testimony in front of the Senate Banking Committee;
4:43 February’s consumer confidence data out of the US.

Forex research: Global markets daily

Alpari_UK · February 27, 2013, 3:21am

[B]Italian elections continue to weigh on risk appetite[/B]

Today’s UK opening call provides an update on:

• Risk appetite to remain low as political uncertainty in Italy continues to weigh on sentiment;
• German consumer confidence expected to rise for a third month in February;
• Draghi to face tough questions over the impact of the Italian election on eurozone stability;
• Bernanke faces another day of tough questions, this time from the Republican ruled House.

Risk appetite is expected to remain quite low again today, as politicians in Italy attempt to resolve the political stalemate that could threaten the country’s economic stability.

European stock markets are expected to edge higher this morning, paring some of yesterday’s heavy losses, while the euro appears to have found temporary support around 1.3060 against the dollar. Both will remain under pressure in the coming weeks though, until we see some stability return to Italian politics.

Both US and Asian stocks were given a helping hand higher yesterday by Ben Bernanke’s testimony in front of the Senate Banking Committee. In his speech, Bernanke was very clear that the Fed are not looking to scale back the QE program in the coming months, stating that the positive effects of the program still far outweigh the negatives.

It’s going to be another busy day in terms of economic data, starting with the release of the German Gfk consumer confidence for February. A small rise to 5.9 is expected, which would be consistent with the improvement seen in other surveys seen so far this year, all of which point to a comfortable return to growth in the first quarter of this year.

Shortly after this, the second estimate of the UK fourth quarter GDP is expected to show the country contracted by 0.3%, with no change expected from the first estimate a month ago. A downward revision here would pile further pressure on the pound which has fallen close to 1.50 against the dollar, hitting fresh 31-month lows this week, following the downgrade from Moody’s on Friday night.

ECB President Mario Draghi will face some difficult questions at the Katholische Akademie this afternoon, after the Italian elections over the weekend threatened the fragile eurozone economy. Support for anti-austerity parties has grown rapidly in recent months and Draghi is likely to face questions on whether OMT’s would be used to support the country if one of these parties is elected.

This could be very negative for Italy’s borrowing costs given that yields have been broadly supported by the backstop that the OMT program provides. Yields have already slipped quite a bit this week, which was reflected in yesterday’s auction of short term debt, where the cost of borrowing rose substantially. We will probably see a similar response at the auction of five and 10 year debt today.

Fed Chairman Ben Bernanke will face another morning of grueling questions early in the US session, when he faces the House Financial Services Committee. Yesterday’s questioning from the Senate Banking Committee proved difficult at times, but that’s likely to be nothing compared to facing the Republican ruled House. Once again, we’re likely to see a surge in volatility during the testimony, as is normal when Bernanke answers questions on the Fed’s monetary policy, especially in times of uncertainty.

[B]The euro is trading flat against the dollar[/B] this morning. The pair has found support over the past few days around 1.3060, the 61.8% retracement of the move from 13 November lows to this months highs. A break below here would be quite a bearish move, with the next support level coming around 1.3030, followed by 1.2970 and 1.29. At this point the pair should find support from the neckline of the inverse head and shoulders so I don’t expect to see a break below here, although if the uncertainty surrounding the Italian elections continues, this could easily push it below.

[B]Sterling is trading lower against the dollar[/B] this morning. The pair continues to look quite bearish since breaking below 1.53, the only question now is whether we’ll see a retest of that previous support level, as a new level of resistance, or a brief period of consolidation, before a continuation of the downward trend. Once it does break below Monday’s support around 1.5075, it should target 1.49, which is the next major support level.

[B]The dollar is trading lower against the yen [/B]this morning. The pair broke below the pennant formation and the ascending trend line, dating back to 10 December, on Monday, which technically speaking is quite a bearish move. However, given the fundamental outlook in Japan, I remain quite bullish on the pair, with 94.75 continuing to be a key level. A break above here should prompt a move towards 97.60, followed by 100.45. For now, the pair appears to have found support around 91.75, however we could see it pull back towards 90.0, where it should find support from the 50 day simple moving average before continuing its move higher.

[B]The euro is trading higher against the pound[/B] this morning. The pair found support yesterday around 0.8575, the 61.8% retracement of the move from July 2011 highs to July 2012 lows, which suggests it remains bullish despite the political issues in Italy. A break above the descending trend line, dating back to January 2009, should then prompt a move towards 0.875, followed by 0.88 and 0.89. A weekly close above the trend line would also be quite a bullish signal as it would suggest it has changed from a level of resistance to support.

Ahead of the open we expect the…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 27, 2013, 7:49am

[B]Bernanke facing another grilling, this time from the House[/B]

Today’s US opening call provides an update on:

[ul]
[li]Italian elections continue to hit risk appetite, although risk assets show surprising resilience;
[/li][li]Bernanke comments on Tuesday help limit the sell-off in equities;
[/li][li]Gold benefiting from uncertainty, trading more than 3% higher since hitting seven month lows on Thursday;
[/li][li]Italian yields rise at debt auction, although things could have been worse.
[/li][/ul]

European stock markets are trading slightly higher on Wednesday, but still remain under pressure as the political uncertainty in Italy drags on.

This is likely to be the case for a while yet, with any agreement between parties to form a majority in the Senate looking a million miles away. On a more positive note, the negative reaction to the election, particularly in the bond market has not been quite as strong as I expected.

This is the first real test of the OMT backstop put in place by the ECB back in August and early indications suggest it’s working, for now. The sell-off of Italian debt has not been too extreme at this stage, although a growing unwillingness to accept further austerity from the Italian public could test it further in the coming months, given that one of the conditions of the OMT’s is further cuts to government spending.

Ben Bernanke’s comments yesterday, in front of the Senate Banking Committee, have helped calm the markets. I think at this stage, a combination of political uncertainty in Italy and the Fed scaling back on bond purchases would be disastrous for sentiment.

We’ll probably hear more of the same again today when Bernanke speaks in front of the House Financial Services Committee, although it’s always worth paying attention to these sessions. Bernanke’s comments usually create spikes in volatility in the markets, especially in times of uncertainty. On top of this, given that the Republicans have a majority in the House, Bernanke is likely to face more of a grilling than yesterday, which may lead to more clarity on future Fed policy.

Gold prices appear to be benefitting from the uncertainty over the past few days. The traditional safe haven has rallied since hitting seven month lows last week, rising back above $1600 which could now act as a new support level. The precious metal found resistance yesterday around $1620 and could find further resistance in the coming days just above here around $1630, a previous level of support and resistance. In the longer term I remain quite bearish on Gold though, especially if we see a break below $1560, which has been a key support level since June 2011.

Italy’s auction of five and 10-year debt this morning went largely as expected, if not slightly better. Yields rose by 0.66% and 0.65% on 10 and five year debt, respectively, compared to auctions last month, however this could have been much worse under the circumstances. The bid to cover on both of above 1.5 suggests there’s still demand here, although Italian banks tend to be major participants of these auctions so this could be deceiving.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 27, 2013, 8:45am

0:08 Impact of Italian elections on the financial markets
2:26 Second estimate of the UK fourth quarter GDP figure;
3:25 Ben Bernanke’s testimony in front of the House Financial Services Committee ;
4:28 CHART – EURUSD analysis.

Forex research: Global markets daily

Alpari_UK · February 28, 2013, 2:43am

Today’s UK opening call provides an update on:

• Investors unconcerned about the sequester as long as the Fed keeps its foot on the gas;
• The gap between Germany and the eurozone widens, with unemployment in the former falling again in February;
• Eurozone CPI could fall below 2% in January, opening the door to a rate cut from the ECB next week;
• US fourth quarter GDP to be revised up by around 0.6% from the first estimate.

It would appear that investors in the US are more concerned about the Fed’s policy than both the political uncertainty in Italy and the sequester, which is due to come in to play tomorrow.

US stocks had their best day since the start of the year on Thursday as investors were boosted by comments from Ben Bernanke over the last couple of days, when he has made it perfectly clear that those who fear that the Fed will start scaling back QE in the coming months can relax. Bernanke said on numerous occasions that the program will continued to be linked to the labour market and suggested that the minutes did not suggest there would be any change in the
short term, as people in the markets believed.

The surprising thing about the reaction yesterday was the very relaxed attitude towards the sequester, with big spending cuts due to begin tomorrow. Especially with the eurozone starting to look shaky again, I would expect there to be more traders opting to wait on the sidelines and see how it plays out, but instead what we saw was the exact opposite. I expect the approach today to be a much more cautious one, and with little hope now of avoiding the sequester, we may see investors shield themselves from a short term pull back in the stock markets.

It’s going to be another busy one in terms of economic releases on Thursday. It kicks off this morning with the release of fourth quarter GDP figures from Switzerland and Spain, which are expected at 0% and -0.7% respectively. No surprises are expected from the latter, with it being a second estimate, however any major shift in the former will probably be felt in the swissy pairs.

German unemployment is expected to continue in the right direction in February, falling by 5,000, a third consecutive monthly drop. The overall rate is expected to remain at 6.8%, following the surprise drop last month. This data clearly highlights the divide between Germany and the rest of the eurozone at the moment, with unemployment in the region as a whole not seeing a drop since March 2011 and currently at its highest ever level at 11.7%.

With the next ECB meeting taking place next Thursday, the release of the eurozone’s CPI figure for January will be watched closely, with a drop below 2% opening the door to the first rate cut since July. Mario Draghi has previously stated that the ECB cannot cut interest rates in order to combat the strong euro, however he did mention that it may begin to affect price stability, with a strong currency having a deflationary effect, which is within the ECB’s mandate.

The CPI figure is expected to remain at 2% in January, however if we do see it creep below this level, it will increase the probability of a rate cut at the next meeting which could therefore push the euro lower today. Especially when you consider that the ECB recently cut its growth forecast for the region, which suggests it’s currently expected to remain in recession until early 2014.

Finally, in the US, we have the second estimate of the fourth quarter GDP figure which is expected to be revised much higher, from -0.1% to 0.5%. At the same time, the weekly jobless claims will be released and are expected to remain around their longer term average of around 360,000.

[B]The euro is trading flat against the dollar [/B]this morning. The pair is looking quite bullish in the short term, after finding strong support over the last three days around 1.3060, the 61.8% retracement of the move from 13 November lows to this year’s highs. Tuesday’s candle is particularly bullish as it’s a perfect doji which indicates a trend reversal. The break back above the 100 day simple moving average is another major bullish signal given that it has previously acted as support for the pair. Confirmation of the bullish outlook will come if today’s candle closes above Monday’s candle.

[B]Sterling is trading higher against the dollar[/B] this morning. The pair looks to have entered a period of consolidation following a big move lower over the past couple of months, which is typically quite a bearish signal. We could now see it come back to test 1.53 as a new area of resistance. This is a very key level for the pair, given how strong a support level it was previously. If the pair fails to break back above here when tested, it would suggest that it is bearish in the short term, with the next target being 1.49. However, it’s worth noting that we may not necessarily see 1.53 tested, there doesn’t appear to be many buyers at the moment which could just lead to further consolidation, followed by a breakout.

[B]The dollar is trading higher against the yen [/B]this morning. The pair has been edging higher for a few days now but has failed to make any real strides, which suggests we may see some more downside in the short term. The weekly chart looks particularly bearish, with the stochastic now crossing in overbought territory and breaking below here and the RSI looking like breaking out of overbought territory in the coming days. This weeks candle is also quite bearish, having found firm resistance around 94.75. If we see a further drop in the pair, it could target 88.80, which was previously a key level of support and resistance. In the shorter term, the pair should find further support around 92.0, 91.75 and 91.25.

[B]The euro is trading flat against the pound[/B] this morning. The pair has lost momentum in its move to the upside, however the fact that it found support once again from the 61.8 fib level is quite a bullish signal. A break back above the descending trend line would act as confirmation of this bullish move, with the next target then being 0.9082. First though, the pair will probably find further resistance around 0.875, 0.88 and 0.89. In the shorter term, given the uncertainty in the euro area at the moment, we the pair could continue to consolidate for a while yet, before we see a breakout again.

Ahead of the open we expected…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 28, 2013, 8:41am

[B]Stock markets boosted by dovish central bank comments[/B]

Today’s US opening call provides an update on:

[ul]
[li]European indices higher on dovish central bank comments;
[/li][li]Looming sequester failing to deter investors joining the rally;
[/li][li]US fourth quarter GDP to be revised much higher;
[/li][li]Voting FOMC member Sarah Raskin speaks this afternoon.
[/li][/ul]
Dovish comments from Ben Bernanke and Mario Draghi on Wednesday have gone some way to distracting investors from the sequester and the Italian elections that have threatened the rally this week.

European stock indices are trading more or less where they closed on Friday, which suggests investors are still more concerned about the monetary policy of the major central banks than they are about the fundamental problems. As long as the Fed and the ECB continue with loose monetary policy, the rally is only heading in one direction.

Not even the threat of instability in Italy has had a major impact, despite more than half of the voters voting against austerity, which all but negates the benefit of having the OMT backstop. Any OMT program would come with conditionality attached, including much harsher austerity, so any new government is unlikely to accept these conditions, which essentially removes the backstop.

The sequester which, assuming no late deal is done, will come in to play tomorrow is also doing very little to put investors off. Given the late deals we’ve seen in the past, this could be due to high expectations of a late deal, or alternatively, it may just be that compared to the fiscal cliff at the end of last year, the impact will be minor, equating to only half a percentage point of GDP this year.

The US fourth quarter GDP figure is expected to be revised significantly higher shortly after the opening bell in the US, from -0.1% to 0.5%. A revision was expected, given how surprised investors were when the first estimate was released, but this is a higher revision than had been priced in so we could see a positive reaction if it comes in as forecast.

At the same time, US weekly jobless claims will be released and are expected at 360,000, close to the average figure seen over the last few months.

Finally today we’ll hear from a voting member of the FOMC, although this may attract less attention now that Bernanke has eased fears that QE will be scaled back in the short term. That being said, if Sarah Raskin sheds any more light on what was discussed at the last meeting and offers alternative explanations to Bernanke that are seen as more hawkish, I wouldn’t be surprised to see some kind of a reaction.

Ahead of the open we expect to see…

[U][B]Read the full report at Alpari News Room[/B][/U]

Alpari_UK · February 28, 2013, 8:49am

0:09 Dovish comments from Ben Bernanke and Mario Draghi;
2:18 The sequestration which comes into effect tomorrow;
3:16 Shinzo’s Abe’s nomination for the new BoJ Governor;
4:02 CHART – EURUSD analysis

Forex research: Global markets daily