20130925

Good morning,

European stocks snapped a two-day losing streak and ended Tuesday up around 0.5% on average on back of a solid German IFO report, where the Business Climate Index for Q3 finished at it's strongest level this year and despite it falling a tad short of expectations, showing the same picture as the PMI figures from Monday, the signal is still a decent momentum in the German economy, which is the main driver for keeping the EUR on track. DAX took home 0.3% to index 8,664.6 and EUR/USD lost for the third day in a row, pulling back towards the pre-FOMC break-out level at 1.3450-area.

Yesterday, US Consumer Confidence came out lower than expected, which send the markets on the offer initially, but Obama offset this tendency after calming the markets on the situation in the Middle East. However, the markets closed mixed with NASDAQ only managing to take home 0.1%, while S&P and DOW fell 0.4% and 0.3%, respectively and the USD appreciating in general. Asian markets were mixed with Nikkei down 0.1%, ASX up 0.8% and Hang Seng up 0.2% following an increase in commodities. The NZDUSD fell on back of weaker than expected trade figures, chasing the 200-day SMA at 0.8183.

Trading ranges have in general been compressed in the aftermath of the FOMC in USD-pairs and the market is in a state of uncertainty due to the significant amount of noise we currently have in the markets. Besides the Fed deciding not to taper, which in our view is making them lose credibility, the market is also faced with the German political situation and also the development in the US Congress, which will effect the markets in Q4.

For today, we expect volatility in the European session to be quite low as we don't have that many interesting items on the menu. Slightly better than expected German GfK Consumer Confidence figures could provide some positive mood from the beginning, but French Businss Climate at 06:45GMT could along with Italian Consumer Confidence at 08:00 GMT change the picture. Key macro data for today will be the US Durable Goods Orders for August at 12:30GMT and later the US will also post the August change in New Home Sales at 14:00 GMT. On the technical side, EUR/USD is still above the trend line projected from 2011 highs, but is struggling with the 50% in the long term wave from 2009 highs to 2010 lows at 1.3508. A weekly close above would open up for a test of 1.3711.

Have a nice day.