Thursday August 26, 2010 - 06:20:48 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 26-Aug-2010 - 0616 GMT
The Dow (10060.06) fell to as low as 9937.98 after the bad Durable Goods and New Home Sales data, but managed to climb back and close above 10000, on short-covering. Remember, 10000 is an important Support and is not expected to break without a fight. If it remains intact for the next few days, there would be chances of a rise towards 11000 in the weeks ahead.
Asian stocks are mixed today, with some "green shoots" visible. The Nikkei (8873) is up 0.31% while Shanghai (2594) is down a mere 0.09%, which is hardly anything. The Sensex (18179.64) and Nifty (5462.35) could see a bounce today, given that the Dow has closed above 10000 and there is F&O expiry today.
Crude (72.78) bounced back sharply from yesterday's low of 70.76 and closed above 72 thereby bringing to an end the five consecutive days of lower close. Although EIA's data showed an increase in the US Crude inventories, the bounce back in the equity markets towards the market close supported the rise. With the global economic outlook is still a worry, we will have to wait and see whether Crude could sustain this bounce back.
Gold (1240) is retaining its strength. The weak economic growth outlook is increasing the demand for safer assests like gold. A further rise towards 1250 or even 1275 is looking likely in the coming days. To see the Gold graph click on the following link:
The Euro (1.2697) seens to have formed a bit of base at 1.26, which could lead to a corrective rally towards 1.2760-2830, within an overall downtrend. Dollar-Yen (84.70) has recovered rather well yesterday, responding to threats of intervention. The trend remains bearish, however, and if yesterday's bounce extends up to 85.30-40 by tomorrow, it could run into eager Sellers. The Euro-Yen Cross (107.55), likewise, is bouncing up, and could extend gains up towards 108.25, or even 108.91.
Dollar-Swiss (1.0293) seems to be breaking down, having spent the whole day below 1.0330 yesterday. A slow decline towards 1.0050 seems quite likely in the coming weeks. It is interesting that both Gold and Swissy have been strengthening recently, since 27-July. The Pound (1.5491) bounced back yesterday alongwith the Euro and might rise towards 1.5555 today.
The Aussie (0.8851) remains weak overall, but has bounced back a bit from yesterday's low near 0.8767. With Support forming at 0.8770 on the Weekly Candles, there could be chances of the current bounce extending up to 0.8920-70 going into next week.
Among the Asian currencies we track, the Won (1192.50) remains weak, but the USD-KRW has come off a bit from yesterday's high near 1207.10. The Sing Dollar (1.3568) has strengthened back a bit after having stalled over the last couple of days. Dollar-Rupee, which had closed at 46.91 yesterday, might not rise to 47.00-20 today, but could dip back to 46.80 instead.
The 3M USD LIBOR was down 1 bps to be set at 0.30%. The 2Y and 10Y yields were up 3 bps each at 0.51% and 2.53% respectively.
In Europe, the Greek 10Y benchmark bonds yielded 11.42%, a premium of more than 900 bps over the German bunds of similar maturity priced to yield 2.13%. The Irish 10Y government debt yields soared 21 basis points to 5.57% yesterday after Standard & Poorâ€™s cut the countryâ€™s credit rating one step to AA- on concern the rising cost of supporting its banks will swell its budget deficit.
No major data release today
July GER IFO Business Expectations
...Actual 105.2...Previous 105.5
July GER IFO Business Situations
...Actual 108.2 ...Previous 106.8
July GER IFO Business Climate
...Actual 106.7...Previous 106.2
July US Durable Goods Orders
...Actual 0.3%...Previous -0.1%
July US New Home Sales
...Actual 276K...Previous 315K
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