Tuesday November 23, 2010 - 03:40:11 GMT
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Morning Briefing : 23-Nov-2010 -0334 GMT
US markets tumbled early in the session but recovered by close on the back of postive earnings releases from tech companies. Dow closed at 11,179 (down 0.22%) and S&P500 at 1198 (down 0.16%). Bulls are having to wrestle with negative news flow about the insider trading scandal rocking wallstreet and some fresh issues from PIIGs. However, a postive earnings picture is helping to put a floor under the averages. It is to be noted that Dollar has come back strongly overnight and we are watching closely the movement in Euro. We expect Euro to hold its recent low around 1.3447 and head back towards 1.40 in the coming days. But if Euro makes a fresh low then we expect US markets to come under renewed selling pressure. The Dow is safe as long as it is above 10,900 on a closing basis. Resistance is expected around 10,200 and then around 10,300.
Asian indicies have opened weak with HangSeng at 23,190 (down 1.42%), Shanghai at 2942 (down 2.65%) and Kospi at 1932 (down 0.63%). Yestreday Nifty gained 2% to close at 6010. On Nifty 6020-30 is a major Resistance cluster and a break above that can see Nifty test 6100 handle. Support is expect around 5950, 5900 and then at 5860.
Crude (81.72) fell yesterday. Although the Support at 80 is still holding, the stronger dollar and the Euro Zone crisis is retaining the downside pressure. As mentioned earlier, 80 is a very crucial Support level to watch for. Also important to note is that Crude has not seen a close above 82 since last wednesday (17-Nov-10). Whether the Support at 80 holds or breaks will decide the further direction of move.
Gold (1362.30) is contiuing to trade above 1350. However it is not showing much strength on its upmove. While above 1350 there are chances of further rise towards the significant Resistance in 1380-90 region. On the downside 1330-20 is a very significant Support region.
Weakness in the Dollar seen on Friday and early morning yesterday proved to be shortlived. The Dollar Index (78.64) has recovered from yesterday's low near 77.98 to trade at its long-term trendline Resistance. A rise past this would be very bullish.
The Euro (1.3575) has taken it on the chin, plummeting from yesterday's high near 1.3785. The immediate reason being put forward for the fall is a possible Moody's credit downgrade for Ireland, just as it agreed to seek aid from IMF-EU. Even the Aussie (0.9859) has come off sharply from yesterday's high near 0.9954 and looks vulanerable to a fall towards 0.9750-00.
Overall, the last few weeks of the year could see skittish sideways trade in a widish range in most pairs as the market debates whether to cast its lot with the Dollar or the Euro for 2011.
Dollar-Swiss (0.99) has Support at 0.9850 and could rise towards 0.9950. The Pound (1.5935) which was looking potentially the most bullish against the Dollar, is beginning to disappoint, falling to its long-term trend Support 1.5955. A break thereof would target 1.5850.
Among the Emerging currencies, the Won (1130.30) has weakened again, after having strengthened to 1121 over the last couple of days. Even the Sing Dollar (1.3022) is trading weaker, compared to 1.2924 yesterday. The Brazilian Real (1.7208) is also weaker. A further rise towards 1.74 is possible while Support at 1.7100 holds. Dollar-Rupee, which had closed at 45.40 yesterday, could move up towards 45.60 today.
Japan is closed today.
The 3M USD LIBOR was unchanged at 0.28%. The 2Y yields and 10Y yields were down 3 bps and 9 bps to quote at 0.48% and 2.81% respectively.
The Treasury yields saw some dip yesterday because of 2 reasons:
1. Successful auction of $35 bln 2Y Treasury notes last evening
2. Loss of investor confidence over the un-ending problems of the EU
In another move to strengthen its might, China will issue $1.2 bln worth of yuan-denominated government bonds in its second Hong Kong bond sale. China also opened its forex market to the Russian ruble yesterday. The ruble joins six other currencies â€” USD, HKD, Yen, Euro, Pound and Malaysian Ringgit â€” that are allowed to trade in China's tightly controlled forex market.
12:30 GMT US GDP Q3 '10 (Pre)
...Expected 2.3%...Previous 2.0%
14:00 GMT Oct US Existing Home Sales
...Expected 4.51 Mln...Previous 4.53 Mln
11:00 GMT CA Core Inflation Index Y/Y
No major data release yesterday.
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