Monday December 7, 2009 - 03:38:47 GMT
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Morning Briefing : 07-Dec-2009 - 0336 GMT
The Dow and the Nasdaq continued to trade sideways last week along the trendline Resistance on the weekly charts. The NFP numbers on Friday was way above expectations which led to a sharp rise initially on Friday which saw the Dow rise above 10500 for the first time since October 2008. It however closed with modest gains.
The Asian indices, too, are trading mixed. The Nikkei (10163.14) has been a star performer last week. It rose 10.36% last week and has risen 1.40% today as well. The Shanghai Composite Index (3323.99) rose 7% last week and is trading flattish today while the Hang Seng and All Ordinaries are trading weak.
The Sensex was up 2.82% last week and has struggled to rise above 17400. It will be interesting to see if it is able to break past that barrier this week. However, the markets may not intend to do anything extraordinary ahead of the holiday season and may possibly be ranged below 17500.
Crude (75.75) has fallen sharply on Friday from the high of 77.90 as the dollar strengthened following the better than expected US jobs data. Immediate Resistance is seen at 76.30, a break above which might see an upmove towards 77.50. However, if it holds, we might see a downmove towards 75-74 in the coming days.
Gold (1153.40) fell sharply on Friday breaking below 1200 as the dollar strengthend following the better than expected US jobs data. Immediate Support is seen at 1150, a break below which might pull it down towards 1120. However, the broader picture continue to remain bullish.
Basically, it is the end of the year and all asset-markets have come down on profit-booking on Friday. Whatever the NFP data might have turned out to be, the markets would have come down anyway. The fruits were all ripe and juicy. They would have fallen. The question now is, "Is the correction/ profit-taking over, or can the markets drop a little more?" The answer is, "We have to wait and see, chances are 50-50 at the moment." Fact is, most Traders would not want to take any aggressive positions now, neither Long nor Short.
The Euro (1.4889) has Support at 1.4825 but the Aussie (0.9165) could dip towards 0.9035. Dollar-Yen (89.85) saw a strong surge to 90.78 on Friday, which should be a relief to many asset-markets going forward. The next few weeks may see a range of 88.50-91.50, which is something the markets should be able to live with. The Euro-Yen Cross (133.78) has also risen strongly, alongwith Dollar-Yen and may now rise further towards 137-138 in the fullness of time.
The Pound (1.6490) sawa sharp fall on Friday. It now trades in the middle of its multi-month range of 1.60-70. There can be a danger of a dip towards the lower end of the range going forward if Support at 1.6335 breaks. Dollar-Swiss (1.0145) remains in a downtrend with Resistance at 1.0215 , despite the strong rise on Friday.
Range-trading should be the main story for Asian currencies as well in the run-up to X'mas and New Year now. USD-SGD (1.3885) should see a range of 1.3775-3935 while USD-KRW (1155.50) may be ranged between 1149-61, especially with the Bank of Korea buying Dollars near 1149. Dollar-Rupee had closed near 46.2850 on Friday and may range between 46.20-50 for some time.
3M USD LIBOR was unchanged at 0.26%. The yields on US Treasuries rose sharply after the NFP numbers brought with it some amount of risk appetite. The 2Y and 10Y Treasury yields are trading 12 and 9 bps higher at 0.84% and 3.47% respectively.
Post-NFP numbers, there would be a lurking suspicion of a rate increase by the Fed Reserve sooner than expected which may dry out liquidity though the Fed had earlier announced continuation of stimulus for an 'extended period'.
In India, the MIBOR has been trading low since the last 6 months. The markets are expecting a phased exit from the stimulus by the RBI soon owing to better GDP numbers annoucned a few days back.
Oct CA Labour Force
...Actual 79.1K...Previous -43.2K
Nov US NFP
...Actual -11K...Previous - 111K
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