Market Movers of the Day
Europe
*Swiss SVME PMI worse than expected at 54.6
*German PMI Manufacturing worse than forecasted at 52.7
*UK PMI Manufacturing better than expected at 54.1
*EU PMI Manufacturing in line with market expectations at 51.6
Americas
*US ISM Manufacturing better than estimated at 55.9
The Overall Sentiment
Equities
US stock markets rallied to 15-month highs in the first trading day of 2010 as the ISM Manufacturing figures exceeded market forecasts. The ISM report on manufacturing climbed to 55.9 in December, its highest level in over three years. Markets were still vibrating with Bernanke’s remarks when referring to the housing bubble that led to the recent recession at the American economic Association’s annual meeting on Sunday. The Fed Chairman stated that the central bank must remain open to using interest rates as an instrument for preventing and addressing buildups of financial risk. The S&P 500 advanced 1.60% and the Dow Jones added 1.5%. In Europe, positive manufacturing data led main indices higher as well. The British FTSE 100 added 1.6%, climbing to a 16-month high, and the German DAX rose 1.5%. On an upbeat day for manufacturing worldwide, a report coming from China showed the strongest expansion in over five years for the country’s manufacturing sector.
Forex
The Dollar weakened across the board on a surge of risk appetite in the first trading day of the year. EUR/USD posted its biggest daily advance in about a month, driven by positive manufacturing data for the EU. The pound was the worst performer against the US currency, failing to capitalize on the surprisingly strong UK manufacturing figures. After rising to 1.6240 mid-day, sterling erased the gains against its US peer to end around 1.61. Commodity-linked currencies soared as oil and gold rallied for the day. The Aussie dollar climbed to 0.9125 against the greenback in its biggest advance in two months. The Yen weakened against the majors, strengthening only against the Dollar. USD/JPY topped at 93.20 and retreated to close around 92.40.
Commodities
Crude Oil rose to $81.60, extending the rally towards its highest level in over 14 months. Gold posted a healthy advance as the Dollar weakened, climbing from $1100 to close above $1120. Silver rose as well, ending around $17.55.
The Day Ahead
In the European session, the German Unemployment Rate is expected to remain unchanged at 8.10%, and the EU CPI for December is likely to show a 0.9% increase. During the US session, the main economic data releases are due at 15:00 GMT. Factory Orders are forecasted to show a 0.5% rise in November, while a 2.0% decrease is predicted for Pending Home Sales.
Technical Analysis
EUR/GBP DAILY
Bullish Scenario– A daily closing above 0.9060 will send the cross north towards the next reliable resistance.
Target A– 0.9150
Target B– 0.9240
Bearish scenario– A break below 0.8850 will push the cross down to lower levels last seen on Q3 of 2009.
Target A- 0.8700
Target B– 0.8550
Daily Forex Market Analysis provided by eToro
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