Markets | 27/10/2014| US Pending Home Sales data and the efforts to avoid "a relapse into recession".

        Euro Wary Ahead of Banks' Stress Test Result. Euro turned higher versus the dollar after data showed weaker-than-expected US new home sales in September. The single currency's gain, however, still limited amid investors cautious ahead of the results on Sunday of stress tests on euro zone banks. The euro zone's 130 biggest banks received the European Central Bank's final verdict on their finances on Thursday after a review aimed at drawing a line under persistent doubts about the health of the region's banking sector. But they will not be made public until Sunday.

    Sterling Up as UK Growth Meets Estimates. Sterling rebounded against the greenback after figures showed the UK economy slowing but in line with forecasts and still growing at a healthy pace, a relief for those worried that weakness overseas could be a heavier drag on activity. Britain's economy grew by 0.7% in the third quarter, down from 0.9% the quarter before, preliminary figures showed on Friday. That put annual growth at 3.0%, also down slightly but among the fastest rates in the developed world.

    Yen Advances on Concerns of Ebola Case. The yen pulled away from 2-week lows against the dollar on Friday on safe-haven bids after news that a doctor had tested positive for the Ebola virus in New York City after returning from West Africa. The first confirmed case in the city worried investors because of the possible repercussions in the global financial centre, although some said the market focus could soon shift. The yen also helped by comments from Finance Minister Taro Aso, which said Japan isn’t trying to weaken its currency.

       ECB's Draghi Tells Euro Zone More Needed to Avoid Another Crisis. France and Italy renewed their commitment to reform their economies on Friday in the hope of winning more time to bring their public finances in order but the ECB's president warned more needed to be done to avoid "a relapse into recession". After the bloc's revival came to a halt in the second quarter, France and Italy want to shift course away from the spending cuts that marked the bloc's response to the 2009-2012 crisis. Germany says debt discipline must continue. Seated around a large oval table in the EU summit's red marble building, European Central Bank President Mario Draghi told euro zone leaders over lunch that more needed to be done. "We avoided the collapse of the euro with a joint effort. Now our focus should be to act jointly again to avoid a relapse into a recession," Draghi said, according to his spokesman, who quoted from his speech. "Hope is not a strategy." He said a coherent strategy for economic growth had to involve "concrete and credible" structural reforms.  

Technical Outlook     

• EUR/USD. The bias is neutral in nearest term with potential trading range seen between 1.2620 – 1.2900 area. Another consistent break above 1.2900 area would trigger further bullish correction scenario retesting 1.2940 region. On the downside, only a clear break back below 1.2620 area would continue the major bearish trend aiming 1.2520 key support area.

• GBP/USD. The bias is neutral in nearest term with potential trading range seen between 1.6020 – 1.6155 area, another consistent break above 1.6155 area would trigger further bullish correction scenario aiming 1.6220 region. On the downside, only a clear break back below 1.6020 area would continue the major bearish scenario retesting 1.5960 support area.

• USD/JPY. The bias is bullish in nearest term especially if price able to make a clear break above 108.50 area to trigger further bullish momentum targeting 109.00 resistance area. On the downside, only a clear break back below 107.20 area would trigger further bearish correction scenario retesting 106.75 area before recovery to the upside.

•  USD/CHF. The bias is bullish in nearest term especially if price able to make a clear break above 0.9555 area to trigger further bullish momentum aiming 0.9600 area. Immediate support is seen around 0.9480 area, another consistent break below that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.9440 region.

•  AUD/USD. The bias is bearish in nearest term but we need a clear breakdown below 0.8730 area to trigger further bearish pressure retesting 0.8660 support area. Immediate resistance is seen around 0.8835 area, another consistent break above that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.8865 area before turning lower.

•  XAU/USD. Gold managed to stay above 1228 support area on Friday, break below 1228 area is needed to trigger further bearish momentum targeting 1218 area before testing 1210 region. On the upside, only a break back to above 1238 area which should restore the bullish momentum to target 1250 area in nearest term.

•  Hang Seng Futures. The bias is neutral in the nearest term, immediate resistance is seen around 23540 area, while immediate support around 23245 area. A clear break above 23540 area should trigger bullish momentum to test 23710 area. On the other side, a consistent break and movement below 23245 area would add down pressure to test  23100 area.

•  Nikkei Futures. The bias bullish in the nearest term, a clear break above 15480 is needed to trigger further bullish momentum aiming 15600. On the downside, immediate support is seen around 15275 area, a consistent break below that area would bring the bias back into neutral as the direction become unclear, potentially testing 15170.

• Kospi Futures. The bias neutral in the nearest term, a clear break above 245.50 is needed to trigger bullish momentum testing 246.30 area, before aiming 247.40 area.  On the downside, a consistent break below support area around 242.80 would add more down pressure to the price testing 241.90 area.