Markets | 05/12/2014 | Euro Rebounds After Draghi's Press Conference

      Euro Rebounds After Draghi's Press Conference. The euro rebounded from a more than 2-year low against the dollar on Thursday after European Central Bank President Mario Draghi didn't give a strong enough signal about injecting more stimulus into the eurozone economy. In addition, new forecasts by ECB staff sharply downgraded the eurozone's growth outlook for next year to 1.0% from the 1.6% predicted in September. Inflation expectations for 2015 were also reduced, to just 0.7% from a September forecast of 1.1% and well below the ECB's target of close to but below 2%.

        Sterling Weighed by U.K. Longer-Term Growth Forecast. Sterling traded a bit lower on Thursday as traders who had initially reacted positively to British finance minister George Osborne's latest fiscal statement looked more closely at negative aspects including a cut to longer-term growth forecasts. While Osborne, in his Autumn Statement, raised growth forecasts for Britain's economy for this year and 2015 and offered tax cuts, he also said the government would miss its budget deficit goals and the Office for Budget Responsibity lowered its economic growth forecasts for 2016-2018. Cable is also not much react to the BoE decision that still maintain monetary policy unchanged.

         Yen Reaches $120 First Time Since July 2007. The yen touched 120 per dollar for the first time since July 2007, as policy makers’ decisions to expand monetary stimulus and delay a consumption tax increase highlight the risks the economy is deteriorating. The yen also weighed by Japanese media projections showing that Prime Minister Shinzo Abe's Liberal Democratic Party may keep its two-thirds majority in the lower house of parliament in general elections on Dec. 14, giving him the go-ahead to maintain policies that have weakened the currency.

    ECB Leaves Key Interest Rates Unchanged. The European Central Bank left its key interest rates unchanged at record lows Thursday, reinforcing its position that borrowing costs cannot go any lower despite inflation weakening further below the bank's target. The ECB left its main interest rate, the cost of borrowing at the central bank's regular loans, at 0.05%. It also left its deposit rate at -0.2%, meaning that banks continue to pay for parking excess reserves at the central bank. According two euro-area central-bank officials the European Central Bank’s Governing Council expects to consider a proposal for broad-based asset purchases including sovereign debt next month

 

         Stimulus Hope Buoyed Asia Stocks. Asian shares rally after better US non-manufacturing index and optimist Fed's Beige Book reports signaled continuing US economy recovery. Nikkei gained as media projections suggesting a strong win for Japanese premier Shinzo Abe's coalition at the Dec. 14 election. Kospi edge higher amid optimism about US economy recovery. Hang Seng rally on hope that Beijing will implement further stimulus measures to support China's economy.

      European Stocks Drop After Draghi’s Comments. European stocks falls on Thursday after European Central Bank chief Mario Draghi dashed hopes of a full-blow quantitative-easing initiative launching this month. At a press conference, Draghi said the ECB’s Governing Council is preparing for the possibility of easing measures in early 2015, but added that time frame doesn’t imply any action will occur around the bank’s meeting in January. Germany’s DAX 30 fell 1.2% to 9,851.35, France’s CAC 40 index lost 1.6% to 4,323.89, and the U.K.’s FTSE 100 moved 0.6% lower to 6,679.37.

       U.S. Stocks Drop on ECB Stimulus Plans. U.S. stocks fell, after benchmark indexes reached records on Wednesday, as energy shares slumped and the European Central Bank said it will wait until next quarter before considering additional stimulus measures. ECB President Mario Draghi said policy makers will wait until next quarter before assessing if additional stimulus measures are needed. His comments damped speculation the central bank was poised to start a program of sovereign-debt purchases known as quantitative easing, or QE. The S&P 500 fell 2.41 points, or 0.1%, to close at 2,071.92. The Dow Jones Industrial Average dipped 12.52 points, or 0.1%, to 17,900.10, and the Nasdaq fell 5.04 points or 0.1 percent to 4769.44.

         Gold Slides After European Central Bank Statement. Gold futures dropped after the European Central Bank said it wouldn’t consider adding to bullion purchases. The ECB discussed buying all assets except the metal as it plans to reassess stimulus next quarter, President Mario Draghi said. But investors’ focus has also turned to Friday’s jobs report, where any disappointment could trigger more haven demand for the precious yellow metal.

        Oil Declines Amid Excess Supply. West Texas Intermediate declined amid concern that the global market will remain oversupplied followed OPEC’s decision to keep output unchanged. OPEC pumped 30.56 million barrels a day in November, exceeding its official target for a sixth straight month. U.S. crude production increased to 9.08 million barrels a day in the week ended Nov. 28, the highest since Energy Information Administration weekly data started in 1983.

 

     Microsoft Shares Rise as Nomura Lifts Price Target. Microsoft Corp. shares rose on Thursday, as Nomura Equity Research analyst Rick Sherlund raised his price target on the software giant to $56 a share from $50. Sherlund said Microsoft's gains in cloud-based services, the likelihood of the company's board returning more cash to shareholders and the outlook for gains in its flagship Office software suite among the reasons for his new view on Microsoft's stock price. "We think the company has passed the worst in the transition, and growth will be improving going forward for Office," Sherlund said.

         Sony Set To Sell PlayStation 4 Consoles in China. Sony Corp. is readying the launch of its PlayStation console in China, as the entertainment giant seeks to capture a growing market where such devices had long been banned. Sony Computer Entertainment Inc., has sent local media invitations to a conference next Thursday at the Mercedes-Benz Arena in Shanghai. The company plans to announce release dates and pricing information of latest-generation PlayStation 4. In January, China effectively lifted a 14-year-old prohibition on sales of videogame consoles as part of Shaghai's free-trade zone.

 Technical Outlook 

         EUR/USD. The bias is bearish in nearest term especially if price able to make a clear break back below 1.2390 area to trigger further bearish momentum aiming 1.2325 region. Immediate resistance is seen around 1.2470 area, another consistent break above that area would bring the price to neutral zone in nearest term perhaps retesting 1.2505 resistance area.

       GBP/USD. The bias is bearish in nearest term but we need a clear break below 1.5650 area to trigger further bearish pressure aiming at least 1.5600 area before retesting 1.5580 region. On the upside, only a clear break above 1.5730 area would trigger further bullish correction scenario aiming 1.5790 area before continue the major bearish scenario.

       USD/JPY. The bias is bullish in nearest term especially if price able to make a clear break above 119.90 area to trigger further bullish momentum aiming 120.60 resistance area. Immediate support is seen around 119.30 area, another consistent breakdown below that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 118.80 area before recovery to the upside.

         USD/CHF. The bias is bullish in nearest term but we need a clear break above 0.9720 area to trigger further bullish pressure retesting 0.9780 region. Immediate support is seen around 0.9640 area, another consistent break below that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.9575 region.

       AUD/USD. The bias is bearish in nearest term but we need a clear break below 0.8350 area to trigger further bearish momentum aiming 0.8300 area. Immediate resistance is seen around 0.8440 area, another consistent break above that area would bring the price to neutral zone as direction would become unclear in nearest term perhaps retesting 0.8510 region.

     XAU/USD. The bias is neutral in the nearest term, a clear break above 1214 area is needed to trigger bullish momentum testing 1222 area. On the downside, immediate support is seen around 1200 area, a consistent break below that area would bring the price down, furthermore testing 1190 area. 

       Hang Seng Futures. The bias is neutral in the nearest term, a clear break above 24000 is needed to trigger bullish momentum aiming 24160 area. On the down side, immediate support is seen around 23650 area. A consistent break and movement below that area would bring the price down, potentially testing 23500 area.

     Nikkei Futures. The bias is bullish in the nearest term potentially testing 17885 area. A consistent break and movement above that area should trigger further bullish momentum retesting 17940 area. On the down side, a clear break below 17640 area would bring the bias back into neutral, furthermore testing 17510 area.