Friday October 15, 2010 - 03:52:34 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 15-Oct-2010 -0345 GMT
Congrats to Indian Sportsmen for their stellar show in CWG.
Bulls took a breather in Wall Street as Dow and S&P 500 closed marginally lower, Dow at 11,095 (down 0.1%) and S&P500 at 1174 (down 0.36%). In after-hours Google posted strong earnings numbers and there is talk of tech major Seagate approaching PE, both these developments could put the wind back in sails of the bulls tonight once US session gets underway. At same time all eyes will be on FED Chairman, Ben Bernanke, whether he gives any clue to another round of asset purchases. However, we would warn our reader against what we believe is a risk of "Bubble of Hope". When QE1 was announced in early 2009, market was caught off-guard and asset prices zoomed overnight and dollar got bashed badly. This time in our opinion market could be over-prepared and is vulnerable to a setback post US Fed Speech.
Asia is quiet today with Honk Kong, Australia and Japan trading marginally weak with losses ranging from 0.25% to 0.75%. . Data out from China indicate that property prices have continued their northward march inspite of Government curbs to lending. Shanghai A shares Index is surging ahead with a 0.81% gain at 3042. Yesterday Nifty registered losses of 0.91% to close at 6177.35. Nifty has strong supports has around 6150 and as long as it can stay above its last swing low of 6080 Nifty si expected to move higher towards 6250-6300.
Crude (82.75) has been trading sideways between 80.50 and 84.50 since 04-Oct-10. While above the Support at 80, the outlooks remains bullish for a rise towards 87-90 on a strong break above 85 in the coming days/weeks. A break below 80 might see 77-75 on the downside.
Gold (1379.50) is retaining its strength. The overall bullish sentiment is intact and a strong break above 1380 would trigger further upmove. A weekly close above 1380 would open doors for a rally towards 1420.
Yesterday was a day of mild profit-taking on the sell-Dollar trades. All the non-Dollar currencies have dipped a bit. The Euro (1.4033) has come off from a high of 1.4122 yesterday. Important Support now seen at 1.3970-50, which is possibly vulnerable over the next few days. Fresh Greek protests at the Acropolis yesterday would not help the Euro's cause.
Dollar-Yen (81.38) had risen yesterday itself, from a low of 80.89, just about a big-figure away from the all-time low of 79.80. The Pound (1.6000) has come off from yesterday's high of 1.6067. But, the Pound is now performing a little better than the Euro, with the EUR-GBP hitting Resistance yesterday and falling from there to 0.8768. This could be a chink in the armour of the Euro. Dollar-Swiss (0.9555) has seen a good upmove/ bounce from yesterday's low of 0.9462. There can be some chances of a further rally towards 0.9601, or even higher.
The Aussie (0.9908) saw some good profit-taking after it missed Parity by a whiskeer yesterday. The high was 0.9994. A fall below 0.9890 today might suggest a temporary top is in place.
Asian currencies are also a little weaker today. The Won trades near 1116, compared with 1107 yesterday. The Sing Dollar trades near 1.2975, weaker than yesterday's 1.2890. The RBI is reported to have been in the market yesterday for Dollar-Rupee, which had closed at 44.1150. Expect the RBI to be there today as well as next week, policing the market. As such, we might not easily see a fall below 43.80.
The 3M USD LIBOR was unchanged at 0.29%. The 2Y yield was unchaged at 0.37% while the 10Y yield was up 5 bps to quote at 2.48%. The 2Y yield is just 10 bps above the 3-mth Libor and lower than the 6-mth Libor which is at 0.45%.
PIMCO said it is selling Bonds and it does not see the uptrend in Bond prices continuing.
Portuguese 2-Yr Bond spreads compared with German Bunds is up 305.2 points compared with 279.0 yesterday, the first rise in a long time.
09:00 GMT EU Sep CPI (YoY)
...Expected 1.0%...Previous 1.0%
09:00 GMT EU Trade Bal
...Expected 1.3 Bln...Previous -0.2 Bln
12:30 GMT US Sep Retail Sales
...Expected 0.5%...Previous 0.4%
12:30 GMT US Sep Core CPI (MoM)
...Expected 0.1%...Previous 0.0%
US Sep Trade Balance
...Actual $ -46.3 Bln...Previous $ -42.6 Bln
US Sep Core PPI (MoM)
...Actual 0.1%...Previous 0.1%
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