Financial Markets Daily Review

Financial Markets Daily Review August 23, 2012 MARKET OVERVIEW European stocks dropped sharply Wednesday, as binary options investors proffered to lock in gains and book profits from past sessions' rally ahead of major fundamental events including Fed's minutes and Eurozone's finance ministers meeting. The markets shifted their focus from ECB's easing rumors to the Greek drama which is expected to flare up in the coming days. Greek Prime Minister Antonis Samaras held a meeting yesterday with Luxembourg prime minister Juncker, who chairs the Eurozone finance ministers' to persuade him, and other European leaders later, to give his country a "breathing space". Samaras is going to meet German Merkel and French Hollande over the weekend for talks about getting the approval for releasing next bailout branch of 31 billion euro to avoid a default in September. Also, Greece needs an extension for carrying out the harsh austerity measures imposed by its lenders to revive the economic growth and ease the public oppositions. The highly anticipated FOMC minutes also fueled cautious trades Wednesday as binary traders awaited what the policymakers in the world's biggest economy are going to do. Asian Stocks fell yesterday, as negative trade data out of Japan combined with broad caution ahead of EU meetings to weigh on equities sentiment. Earlier Wednesday, Japan , Asian second largest economy, reported a wider-than-expected trade deficit which widened slightly to -0.33T in July as a result of the third consecutive drop in exports and a second decline of the nation's imports. A raft of disappointing earnings results fueled selling interest as well. Elsewhere, investors in Asian binary stocks preferred to stay on the sidelines as binary markets grew jittery ahead of a series of key meetings between European leaders this week to discuss details of the bailout package for Greece which seeks a two-year extension for its harsh austerity program. American Stocks ended on fractional changes but managed to erase bulk of early losses after Fed's members revealed a readiness to deliver a fresh round of monetary stimulus ‘fairly soon’ unless the economy improves considerably. Wall Street opened on a weaker note, tracking lower their counterparts in Asia and Europe after disappointing trade data out of Japan lifted worries about global economic recovery coupled with growing uncertainty surrounding Greece. Even though, the FOMC announcement was supportive somewhat for equities sentiment but binary traders noted that it didn't carry enough momentum to convince bulls to return the sideways markets. Many binary options analysts mentioned that since the last meeting, a batch of economic indicators showed some improvement in the US recovery. Thus, Fed's hints over adding further stimulus unless the economy shows signs of a durable pickup, could weaken such an optimism. Oil Prices settled solidly higher yesterday, buoyed by a higher than anticipated decline in the U.S. crude stockpiles as well as the release of FOMC minutes which showed Fed's officials are ready to launch the third round of large-scale assets purchases, known colloquially as QE3. Binary options of oil soared higher after the Energy Information Administration data saw that U.S. crude oil inventories fell more than 5 million barrels in the week ended August 17, versus forecasts for a decline of 2 million barrels and also leaving the stockpiles to stand at its lowest level since late March. The minutes from the Federal Open Market Committee's July 31-Aug. 1 meeting showed that "many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery". The news was bullish for oil markets as monetary easing measures typically suggest a stronger economic recovery which in turn a great plus for future demand outlook. Moreover, the potential ultra-accommodative approach weakened the US dollar broadly, allowing dollar-dominated commodities to shot higher on Wednesday. WTI Crude Oil for October delivery added 42 cents, or 0.4%, to $97.26 a barrel on the New York Mercantile Exchange. In the Forex Markets, The US Dollar fell sharply in the wake of release of FOMC minutes which gave a strong catalyst for greenback bears in North America Wednesday after Fed's members prepared to launch additional easing 'fairly soon'. The American currency experienced a selloff against all majors, with the euro topping 1.2500 handle for the first time since early July while took the British pound to its highest levels in more than three months. Also, FOMC-inspired drop pared much of last week's gains against the Japanese yen while allowed commodities to ground sharply higher with gold prices settled at levels not seen since April. TECHNICAL HIGHLIGHTS Oil : The binary options of crude oil stabilized somewhat on overnight trades after Wednesday's fundamentals allowed bulls to contain the past session's corrective setback at $96.50 . FOMC minutes which heightened QE prospects allowed the underlying asset price to halt bearish action but provided little inspiration for upside outlook as recent strength ceiling at $97.80 stayed intact so far. The mentioned resistance factor represents 61.8% retracement of broad weakness off yearly highs $110.55, down to 2012 low at $77.26. On the other hand, the 20 4H-MA along with rising trendline off $86.90 monthly lows serve currently as short-term supports at $96.60 and $96.30 respectively. A break here would likely suggest near-term topping for a bearish correction and should expose $95.20 major pivot low and 61.8% retracement of a recent downtrend off May's high around $106. A violation of the latter key base would indicate fading bullish momentum in the near-term and revives a stronger bearish scenario. Otherwise, holding above the mentioned supports would indicate that latest bullish breakout is still developing and limits the downside possibility. We might favor the last assumption as RSI reading shows overbought conditions hence it makes sense to see some stalling below recent highs and even some corrective moves.