Monday November 22, 2010 - 03:41:00 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 22-Nov-2010 -0340 GMT
Stepping into trade on Monday morning, as expected, a bailout of Ireland is helping lift prices of risk assets around the globe from commodities to stocks and to Euro. After closing in the green on Friday, Dow at 11,204 (up 0.20%) and S&P500 at 1,200 (up 0.25%), is expected to tick higher in the open. However, Dow faces strong Resistance closer to 11,300 and only a close above that will set a trend for a new high. Support is expected around 11,100-000.Only a close below 10,900 will flip the bias to bearish.
Asian indicies are trading mixed bag with Nikkei (10,124 up 1%) and ASX Australia (4736 up 0.4%) trading in the green but Hangseng (23,511 down 0.40%) and Shanghai (3016 down 0.26%) trading below par due to new measures on real estate in HongKong. SGX suggests a near 1% gap up at the open after a dismal closing of 5890 on Friday. Unlike most Asian indicies, Nifty and ASX are two indicies which are offering some signs of topping. However, with our studies indicating that one more upleg in major indicies around the globe possible, we could see atleast a rally close to the last highs, if not new highs, before this Bull rally tops out. For the day 5850 should provide strong support and 5950 strong resistance.
Crude (82.49) has bounced back from Friday's low of 81.08 and is now trading above 82. Technically the crucial Support at 80 has held very well and is retaining the overall bullish outlook intact. However, Resistance is seen in 84-85 region a break above which will have to be seen for a rally towards 90.
Gold (1360.10) has risen above 1350. Significant Resistance is seen in 1380-90 region which might tested in the coming days. As mentioned earlier, failure to see a break above 1380 might increase the chances of a dip once again towards 1350-30. Also a pull back from 1380-90 region will result in the formation of a Head and Shoulder reversal pattern.
Ireland has finally decided to approach the EU and the IMF to help save off a sovereign default. The Euro (1.3755) has risen well since Friday and has pulled most other non-Dollar currencies up with itself. Expect sideways consolidation in most currencies this week. The Dollar Index (78.19) now has an important Resistance at 78.75.
The Pound (1.6013), Aussie (0.9941) and Dollar-Swiss (0.9918) are all trading stronger and could gain a little bit more today. After that, however, they might all start languishing, waiting for further developments out of Europe. In the meanwhile, Dollar-Yen (83.38) continues to trend higher slowly and might move up towards 84.00-25 this week.
Among the Emerging currencies, the Korean Won (1126.60) and Sing Dollar (1.2934), could both strengthen this week, regaining some of the ground they had lost over the last couple of weeks. The Brazilian Real (1.7165) might strengthen towards 1.7100-7050. Dollar-Rupee (closing 45.29 on Friday) might also fall a bit towards 45.00 today.
The 3M USD LIBOR was unchanged at 0.28%. The 2Y yields and 10Y yields were up 3 bps each to quote at 0.51% and 2.90% respectively.
Ireland finally ceded to the EU pressure over the weekend and has reportedly agreed to take a bailout which may be around 80-100 bln Euros.
Brazilian Real bonds have seen their biggest decline since May this month. The Brazilian president-elect, Dilma Rousseff, plans to boost spending on the poor and increase the minimum wage rate more than initially planned, which may increase inflation further, forcing the central bank to raise rates again.
No major data release today
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