Posted By: Ilan Levy-Mayer Vice President, Cannon Trading Futures Blog
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1. Market Commentary
2. Support and Resistance Levels – S&P, Nasdaq, Dow Jones, Russell 2000, Dollar Index
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4. Support and Resistance Levels – Corn, Wheat, Beans, Silver
5. Economic Reports for Thursday October 4, 2012
ECB rate decision tomorrow morning before the cash opens. Review of ECB Rate Announcement below:
|WHAT IS IT?|
|European Central Bank Rate Announcement|
|WHEN IS IT?|
|Thursday 4th October 2012, 12:45 BST|
|The European Central Bank’s decision to increase, decrease or maintain interest rates. Controlling interest rates is the key mechanism of monetary policy, and the ECB influences interest rates by first changing the “overnight rate” through the purchase or sale of government bonds. Lowering rates can spur economic growth but may incite inflationary pressures. On the other hand, increasing rates slows inflation but can hinder growth.The European Central Bank makes a concerted effort to be transparent in its policy. Frequent speeches by Bank Governors make policy goals clear and the Bank adheres to a stated inflation target of 2 percent, changing rates accordingly to meet that goal. Because of this, rate decisions are generally well anticipated, but very important nonetheless.
The ECB holds a press conference following the announcement where some rationale for their decision is offered. Market participants pay close attention to the press conference, hoping to clue in on the likelihood of further rate changes. Often, the language used in the press conference holds important signals to how the ECB feels about inflation and the economy.
|The market expects the ECB to cut rates before the year is out, but does not see them cutting at October’s meeting.CPI Data in the 17 countries that share the euro rose 2.7% year-on-year according to Eurostat. This marked a rise from the 2.6% seen in August, and was somewhat higher than the 2.5% expected. The breakdown showed that energy costs soared 9.2% after an 8.9% rise the previous month. Core inflation, however, fell to 1.7%, its lowest level in a year. Although the headline reading was higher, the weak data during the interim indicates that the euro area entered a recession in the 3rd quarter, thus cementing expectations that the ECB won’t wait long before cutting rates again.
Howard Archer, economist at HIS global insight says “It seems highly likely that the ECB will take interest rates down from 0.75% to 0.5% in the 4th quarter. While the ECB could act as soon as its October meeting, we lean towards the view that they will probably hold off till November.”
This viewpoint is backed up by the consensus reading of economists polled by Reuters. Only 14 of the 73 surveyed expect the ECB to cut rates at the October 4th meeting, but a majority expect them to do so by the end of the year.
Nick Matthews, a Senior European Economist at Nomura also expects no major policy announcements at the latest meeting. “We do not expect any movement on rates as the Governing Council continues to see no urgency to cut rates again” the Economist notes. Furthermore, “while the ECB is likely to continue to expect inflation to remain in line with price stability over the policy-relevant horizon, we expect the Council to continue to stress that renewed intensification of financial market tensions could affect the balance of risks for both growth and inflation.” He notes that recent comments from within the Executive Board, have reinforced this wait-and-see attitude on rates.
ECB executive board member Coeure speaking on September 23rd said as much when he stated that policy makers may not reduce interest rates further as confidence in the euro-area’s economic outlook improves and inflation stays high. “The jury is open as to whether there should be another rate cut,” Coeure told reporters in the West Bank City of Ramallah where he was attending a conference. “It’s not absolutely obvious that another rate cut would be necessary.”
What does the market expect?
After some fluctuation in Euribor rates at the start of the week, 3-month rates continued heading lower, hitting fresh record lows on Wednesday. Although a significant portion of the fall is due to expectations of further rate cuts, this is, generally speaking, not factored into this month’s meeting, and is more attributable to rate cuts down the line and the massive amount of excess liquidity in the banking system.
Trading Futures, Options on Futures, and retail off-exchange foreign currency transactions involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more of your initial investment. Opinions, market data, and recommendations are subject to change at any time.
|Contract Dec. 2012||SP500 (big & Mini)||Nasdaq100 (big & Mini)||Dow Jones (big & Mini)||Mini Russell||Dollar Index|
|Contract||Dec Gold||Dec. Silver||Nov. Crude Oil||Dec. Bonds||Dec. Euro|
|Resistance 3||1796.1||3528.7||94.75||150 22/32||1.3004|
|Resistance 2||1790.1||3510.8||93.28||150 10/32||1.2975|
|Resistance 1||1785.1||3487.2||90.63||150 2/32||1.2945|
|Support 1||1774.1||3445.7||86.51||149 14/32||1.2886|
|Support 2||1768.1||3427.8||85.04||149 2/32||1.2857|
|Support 3||1763.1||3404.2||82.39||148 26/32||1.2827|
|Contract||Dec. Corn||Dec. Wheat||Nov. Beans||Dec. SoyMeal||Dec. bean Oil|
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Minimum Bid Rate
ECB Press Conference
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FOMC Meeting Minutes
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