Wednesday December 16, 2009 - 03:40:52 GMT
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Morning Briefing : 16-Dec-2009 - 0336 GMT
The American equities fell yesterday after the wholesale inflation index rose thus fuelling expectations of an increase in interest rates by the Fed Reserve. The FOMC interest rate announcement is scheduled today. Technically, the Resistance at 10500 on the Dow has held. It has continued to trade in a band of 10250-10500 since the last several days and a range break is not expected before at least the holiday season.
The Asian indices are trading mixed. The Nikkei (10184.05) is trading 1% higher and the Shanghai (3280.26) is up 0.34%. Most of the other Asians are trading nearly half a percent lower. The Sensex (16877.16) had closed 1.3% lower yesterday, above an important Support at 16800. A break below this, if seen, may lead to a fall towards 16400.
Crude (70.76) has risen and closed higher above 70 yesterday thereby putting an end to the nine day consecutive lower close. Increase in demand during this cold weather and expectation on a drop in Crude inventory, the data for which is due today supported the rise in price although the dollar remained strong. We may see a rise towards 72-73 in the coming days if it continues to trade above 70.
Gold (1127.10) is continuing to remain silent and is trading in a range of 1110-30 over the last couple of rates. The broader picture continue to remain bullish with the Support in 1120-00 region still holding although the dollar is continuing to trade strong. The FOMC meet on interest rate decision which is due today will be watched closely for clues of interest rate hikes.
The Euro (1.4545) saw a sharp fall to a low near 1.4505 after US PPI numbers fanned fears of an early rate increase by the Fed. Today is the FOMC announcement. Our view is that the Fed will do nothing at this juncture to short-circuit the nascent recovery. Still, a test of the Oct-09 low of 1.4475 cannot be ruled out for the Euro. A Week Close above 1.4625 would, on the other hand, turn out to be bullish. Dollar-Yen (89.59) has seen a strong rise yesterday and the chances of a fall below 88.25 have reduced quite a bit. Expect a range of 88.90-90.45 through the rest of this week, with chances of a rise towards 91.20 next week. The Euro-Yen Cross (130.25) is likely to remain ranged between 129.50-130.50 for another few days while both the Euro and the Yen move in tandem vis-a-vis the Dollar.
The Aussie (0.9002) has fallen quite a bit and might be vulnerable to a further dip towards 0.8913, which is a strong Support. The Pound (1.6250) is trading sideways in a broad range of 1.6100-6650 and might dip towards the lower end of the range in the coming days. Note that EUR-GBP (0.8953) is bouncing from a superb Support at 0.8930. Dollar-Swiss (1.0405) rose past a crucial resistance (now Support) at 1.0363 yesterday, but could come back down if the Euro rise post FOMC today.
In Asia, the Sing Dollar has weakened a bit with the USD-SGD moving up to a high near 1.3972 today, following on from a good rise yesterday. The chart is turning bullish with potential for 1.4050 next week, unless a sell-off occurs today. Dollar-Won (1166.80) remains ranged for now between 1148-68. Dollar-Rupee had closed higher near 46.71 yesterday. The NDFs are ambivalent. We see the 46.20-80 range remaining intact, with chances of dip towards 46.50.
3M USD LIBOR was unchanged at 0.25%. The yields on US Treasuries have not changed much for nearer term. The farther term yields have increased a little. The 2Y yields are trading near 0.84% and 10Y yields are trading 3 bps higher at 3.58% ahead of the FOMC rate decision. The FOMC is scheduled to announce the key interest rates today. Though it had mentioned earlier an extended period of low interest rates, the expectations of a rate increase have started increasing after high PPI numbers yesterday.
AU GDP Q3 '09 (Pre)
...Actual 0.2%...Previous 0.6%
10:00 GMT EU Nov CPI (YoY)
...Expected 1.2%...Previous 1.2%
01:30 GMT US Nov Core CPI (MoM)
...Expected 0.2%...Previous 0.2%
01:30 GMT US Current Account Balance
...Expected $ -106 Bln...Previous $ -98.8 Bln
01:30 GMT US Nov Housing Starts
...Expected 0.590 Mln...Previous 0.530 Mln
19:15 GMT US FOMC Interest Rate
...Expected <0.25%...Previous <0.25%
US Nov Core PPI (MoM)
...Actual 0.5%...Previous -0.6%
US Nov TICS (Net foreign purch of long-term Sec)
...Actual $ 20.7 Bln...Previous $ 40.7 Bln
US Nov Industrial Production
...Actual 0.8%...Previous 0.0%
US Nov Capacity Utilization
...Actual 71.3%...Previous 70.6%
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