Today’s highlights:
- German Unemployment Rate (Ger, 08:55 GMT)
- GDP (QoQ) (GB, 09:30 GMT)
- Italian 10-Year BTP Auction (Ita, Tentative)
- GDP (QoQ) + Initial Jobless Claims + Core Durable Goods Orders (MoM) (U.S, 13:30 GMT)
Federal Reserve Bank of Chicago President Charles Evans said policy makers must not be passive in the face of high U.S. unemployment, firing back at critics of the Fed’s decision this month to step up record stimulus. Evans has been among the most vocal proponents within the central bank for additional monetary stimulus. Reiterating a proposal, he urged policy makers to hold interest rates near zero until the unemployment rate falls to 7 percent or inflation rises to 3 percent. The Fed can further expand its balance sheet if progress toward reducing unemployment falters, Evans said. The FOMC currently anticipates keeping interest rates low through at least mid-2015.
The Eurozone is facing a lot of problems coming from Spain, Greece and some leaders quoting divergences in opinion. The debt costs in Spain have risen around 31 bps to break above the 6.0% level and close the day at 6.08% for the 10Y bonds, as a second night of violent protests loomed amid sparring over the police response to clashes in Madrid. Protesters started gathering in Madrid for a second day while workers staged a general strike in Athens to protest austerity measures at ground zero of Europe’s financial crisis. Police fired tear gas near the Greek Parliament after demonstrators threw fire bombs. Rajoy’s efforts to restore investor confidence suffered a new setback yesterday when Catalan President Artur Mas called early elections to push for “self-determination” for the country’s largest region. His gambit added a new front to Rajoy’s battles to push the deepest budget cuts on record with unemployment at 25 percent and the economy in recession.
EUR/USD: The EUR/USD was trading slightly higher at 1.28876 at the time of writing after new home sales data in the U.S. came below expectations. However, market sentiments remain fragile on the Euro as protests against European austerity measures added to obstacles for leaders seeking to stem the region’s debt crisis. Spanish Prime Minister Mariano Rajoy may submit a fifth package of budget cuts and protestors gathered near parliament in Madrid yesterday, while Greek police in Athens dispersed protesters with tear gas. Moreover, Spanish bonds dropped yesterday, sending the yield on 10- year securities above 6 percent for the first time since Sept. 18. Catalan President Artur Mas called early elections for Nov. 25, as Rajoy struggles to gain acceptance for austerity measures and faces criticism from European leaders for delaying a decision on a bailout to support the nation’s bond market. Investors should be very cautious when dealing with the Euro. Other events that investors should closely monitor today are; German Unemployment Rate and Italian 10-Year BTP Auction in the European session. Later in the day, the U.S will release its GDP (QoQ), Initial Jobless Claims and Core Durable Goods Orders (MoM), the key risk events for the USD. Orders for U.S. durable goods probably plunged in August and the U.S. might also be suffering from a slowdown in business investment according to economists. A report today may show the number 375,000 people filed claims for jobless benefits last week, little changed from 382,000 in the previous period, according to the median forecast of economists surveyed. On the other hand, an index of consumer confidence in the euro area probably dropped to minus 25.9 this month, the lowest since May 2009, according to economists surveyed by Bloomberg News. Investors should wait for news and data to come on market to better assess the movement of the pair. The resistance level is at 1.29336 and the support level is 1.28354. 
GBP/USD: The GBP/USD was trading higher at 1.61900 at the time of writing on weak new home sales data in the U.S. Markets seems bullish on the GBP ahead of the UK’s third and final GDP print for Q2, the key event risk for GBP, due for release at 09:30 GMT. Analysts expect the 0.5% contraction to remain unchanged. The other risk events for the pair will be the GDP (QoQ), Initial Jobless Claims and Core Durable Goods Orders (MoM) in the U.S. Durable goods in the U.S probably plunged in August, business investment probably slowed and the jobless benefits last week, probably registered little changed, according to economists. Investors should be very prudent and wait for data and news to come on market to get visibility. The latest developments in the Eurozone might also bring fluctuations in the market. Yesterday, Spain’s bonds dropped and the central bank said gross domestic product declined this quarter, stoking concern the region’s debt crisis is worsening. In addition, the Catalan President Artur Mas called early elections for Nov. 25, as Prime Minister Mariano Rajoy struggles to gain acceptance for austerity measures. The resistance level is at 1.62334 and the support level is at 1.61355.
Oil (WTI): Oil was trading slightly higher at 90.255 at the time of writing on market corrections, as investors speculated that recent losses were exaggerated. Prices fell yesterday as Spanish protesters marched for a second night in Madrid, calling on Prime Minister Mariano Rajoy to reverse austerity measures as his nine-month-old government prepared its fifth package of budget cuts. The nation’s 10-year bond yields rose above 6 percent, approaching the levels seen before European Central Bank President Mario Draghi offered to buy struggling nations’ debt. Meanwhile, the Census Bureau reported that U.S new home sales fell to a seasonally adjusted annual rate of 373,000 in August from 374,000 in July. Market sentiments remain weak on oil on signs that the global economy is slowing. Moreover, U.S. oil production surged last week to the highest level since January 1997, reducing the country’s dependence on imported fuels as new technology unlocks crude trapped in shale formations. Events that are likely to affect trend of the commodity on the European session are; German Unemployment Rate, U.K GDP (QoQ), and Italian 10-Year BTP Auction. While on the American session, the U.S will release its GDP (QoQ), Initial Jobless Claims, Core Durable Goods Orders (MoM). A wait and see approach would be a wise strategy. The resistance level is at 91.303 and the support level is at 88.898. 
Good luck in trading…