Wednesday November 10, 2010 - 03:46:21 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 10-Nov-2010 -0340 GMT
US stocks closed in the red with profit taking occuring after a sustained rally over the last couple of weeks. Dow shut shop at 11,346 (down 0.5%) and S&P 500 at 1213 (down 0.81%). Dow has support between 11220-250 and only a close below 11,200 will flip the bias to negative. We expect resistance around 11,380-400.
Asian indicies are a mixed bag with Hangseng and Shanghai in the red by 1% and Nikkei leading the bull charge with a 1% gain at 9807. A weak Yen is helping the Japanese index stay in the green. Yesterday Nifty closed in the green with a 0.45% gain at 6301.55. We expect a range of 6270-6350 for the day.
Crude (86.77) is continuing to trade sideways. Resistance-turned-Support is seen in 85-84 region and while above this Support region, the outlook is bullish for a rise towards 90-91 in the coming days/weeks.
Gold (1402.30) has come off from yesterday's high of 1424. With Support at 1380, the broader outlook remains bullish for a rise towards 1450-70 in the coming weeks. A break below 1380 might see 1350-30 on the downside.
Serious damage has been done to the Euro (1.3746) overnight, as it has been hammered down from a US session high near 1.3975. The Dollar Index (77.795) has soared as a result and people should be scrambling to cover their Dollar Shorts now. Increased concerns about the European sovereign debt (will Portugal be able to find takers for a small bond issue of EUR 1.25 bln) has caused the Euro to plunge. The best case scenario for the Euro now would be extended sideways range trade between 1.37-42 for the next several weeks, as the chances of a rise to 1.45 (at least in the next few weeks) have fallen dramatically.
Dollar-Yen (81.74) saw a strong rise yesterday in the all-round Dollar recovery. Talk of a fall below 80.00 will suddenly not be heard for some time now. Even the formidable Aussie (1.0025) has come off substantially yesterday. It has an important Support at 1.0010-00 though, which might hold for the day.
Dollar-Swiss has moved up to 0.9696 from yesterday's low near 0.9595 while the Pound (1.5985) has fallen from an intra-day high near 1.6184. Supports are seen at 1.5945 and 1.5820.
Emerging currencies are also trading a little weaker against the Dollar. For instance, Korean Won trades near 1120.70 and can weaken further towards 1130. The Sing Dollar has weakened to 1.2880 from 1.2821 yesterday. Further weakness towards 1.2950 is possible. Dollar-Rupee (close 44.32 yesterday) may well rise again towards 44.45 today, after having fallen yesterday.
The 3M USD LIBOR was unchanged at 0.29%. The 2Y yields and 10Y yields were up 3 bps and 9 bps to quote at 0.42% and 2.63% respectively.
Concerns over the budget deficit of European Economies are keeping the yields high in the Euro Area. The 10Y yields on Portuguese bonds reached their highest levels at 7.02% and the Irish 10Y yields rose for the 11th consecutive day to to 8.11%, their longest continuous rise since January 2009.
Tentative UK Cons Conf
12:30 GMT US Sep Trade Balance
...Expected $ -44.8 Bln...Previous $ -46.3 Bln
08:30 GMT UK Oct Trade Balance
...Actual $ -8.2 Bln...Previous $ -8.2 Bln
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