Mon, 18 Oct 2010 22:42:00 +0200

Forex: Stocks rise as earnings satisfy; The Greenback stalls rebounds

FXstreet.com (Barcelona) - The day comes to an end with US shares having taken back its shine on Monday, in a session dominated by upbeat earning reports. Investors were lightening up to intensify the bid tone as the repertoire of profits from Google, Citigroup and JP Morgan just to name a few came in beating expectations. An unexpected drop in US industrial production spooked longs in USD, yet causing little perturbation in stocks. The Dow Jones Industrial Average rose 0.73%, the S&P 500 stood at +0.72%, while the Nasdaq Composite gained 0.48%. After market close, Goggle took the spotlight, after smashing best estimated on iPhone sales.

In European trade, mounting tension over French strikes against an unpopular pension reform bill caused early jitters, yet stocks eventually managed its way through to end in positive territory. In the fundamental front, it was a free-news day, allowing investors to concentrate in earning results, with banks gaining solidly on US lender Citigroup paving the way towards a triumphal journey for the banking sector, after an upbeat earnings report. FTE 100 ended +0.69%, the French DAX rose 0.37%, while the French CAC-40 edged up 0.19%

On the flip side, Asian stocks lost upside momentum from last week ending lower as rock-solid confidence the Fed will implement new quantitative easing stimulus to the US economy were overshadowed by recent concerns over exposure from banks to the mortgage market. Another factor weighting down benchmark indexes, in particular the Nikkei 225, was a surging Yen which remained at a 15-yr high vs USD around 81.20. The Seoul Composite lost 1.40%, Hang Seng sank 1.20%, Nikkei pared solid gains to end flat, while Australian ASX-200 dropped below 0.50%.

In the FX market, the Euro began Monday losing steam against its main rivals, and pressured to the downside by strong rebounds in the USD, which aimed to trim sharp loses from recent weeks. EUR/USD was first taken to levels below 1.3900 to continue the fall in Europe, eventually finding support at 1.3830, 4-day low. That was the turning point of the day, as US bulls re-emerged to push the pair higher, paring the full extent of losses in the Euro, as price returned back previous close 1.3980.

Bears in GBP/USD enjoyed a relatively pleasant day up until mid-morning in Europe, where USD weakness appeared, denying the pair from going any lower than 1.5836, 3-day low. An upside correction through US trade targeted higher levels, allowing GBP to douse early losses towards 1.5925, still 0.31% below previous close, as UK media rumours the need for more QE in UK. Meanwhile, USD/JPY posted further losses to 81.20, down 0.25% from its previous close.

Other pairs were also impacted by general USD short-positioning, causing large-sized reversals. USD/CHF touched a 4-day high at 0.9659, but got snapped back down to 0.9580. AUD/USD slipped as low as 0.9800 only to recover just above 0.9900. EUR/JPY sank to 112.40, but the radiant performance from risky assets permitted the Euro to knock the price back up towards 113.50. Lastly, Gold also managed to regain the upside, and jumped above $1,370.00 following a previous drop capped by $1,351.00.