DAX in new 2016 highs – USD-index in 9-month highs

Good morning,

This week started on a positive note with the majority of benchmark indices in developed countries trading in green.  In Europe, the German DAX took home 0.5% while the FTSEMIB in Italy took home 0.8% and the Spanish IBEX took home 1.3%. In the US, the S&P500 and the Dow Jones rose 0.5% and 0.4, respectively, with Consumer Non-cyclicals and Industrials performing well among the sub-indices.

Strongest data seen in 2016 from the Euro Zone PMI indices as well as positive notes from the US PMI Manufacturing supported risk taking, sending the DAX into new 2016 highs and made EURUSD rebound slightly after dropping four days in a row.  This morning, the DAX is pushing higher once again with key Fibo retracement acting as resistance in the 10,850-10,880-area.

GER30 Daily

20161025 - GER30Daily

In FX, the USD-index once again pushed higher, printing fresh 9-month highs on back of better the supportive data and the market pricing in a rate hike on the December meeting with the market pricing in a 68% chance of a rate hike, according to the implied probabilities on the futures market. Oil and gold sold off. JPY-pairs sold off as well and technically, USDJPY has managed to sustain above the daily Ichimoku cloud with the Tenkan-Sen and Chikou Span also suggesting a constructive setup for higher levels.


20161025 - USDJPYDaily

This morning, German IFO indices came out stronger than expected across the board and especially the ‘Expectations’-index came out in strongest territory since 2014, showing an optimistic and positively forward looking leading indicator from the IFO Institute, giving a good start for the German economy in Q4 and concerns over Brexit negotiations have diminished. The market has reacted by bidding up EUR-pairs which at the time of writing are performing relatively well on Tuesday with EURUSD up 0.1% and EURJPY up 0.3% – DAX is up 0.3%.

German IFO Expectations

20161025 - IFO Expectations

News from the Italian Bank Monte dei Paschi di Siena has announced Tuesday morning that it would end 2016 with a €4.83bn loss following higher write-downs on bad loans and the negative news contributing to sending the FTSEMIB down 0.3%. Also in Spain, the financials are pulling the IBEX lower, down 0.5% in time of writing.

On the macro front, we have a few interesting items in the US session with especially the US Consumer Confidence for October. Market Consensus points to a drop to 101 from 104.1 in September, showing same direction as in the earlier reported in the University of Michigan Consumer Sentiment report. A bigger drop in the data than expected should ease the pressure on rates and send risk on the bid on the backdrop of lower rates and a lower US dollar. This would call on a potential bottom to be formed in EURUSD, where key support is seen at the 1.0820-area.


20161025 - EURUSDDaily

20161025 - T1TB




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