Wednesday November 24, 2010 - 03:39:03 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 24-Nov-2010 -0334 GMT
US stock markets tumbled as sovereign fears from PIIGS continue to rattle markets. There is so much of ink being spilt on how North Korean brinkmanship is causing a global meltdown but we do not think so. In our opinion the development in Korean Peninsula is not yet significant for markets. However, we interested in how market is changing the way its reacts to even peripheral issues. Times when peripheral issues cause large flutter in markets it is time take stock of the underlying strength of markets. We had warned previously that we believe we are in the last leg of this rally that began from 2009 and as we get close to the summit the weather shall become even more treacherous.
Dow closed at 11,036 (down 1.27%) and S&P 500 closed at 1181 (down 1.43%). Dow is still managing to hold above its key support zone around 10900-10950 and therefore the up trend is still intact. Asian markets are recovering after a weak start with Hangseng at 23,069 (up 0.75%), Shanghai at 2972 (up 0.35%), Nikkei at 10,039 (down 0.75%) and Kospi at 1917 (down 0.6%).
Yesterday was big down day for Indian stock markets, Nifty closed at 5934 (down 1.25%). Nifty needs to cross above 6030 to break the downtrend and set a target for 6150. Nifty has very strong support around 5850-5800. A close below 5800 will definitely damage whatever bullish structures left on the charts.
Crude (81.65) is continuing to be ranged between 80.00-82.00. Although the dollar strengthened following North Korea's attack on South Korea and the Euro zone crisis are retaining the downside pressure, the Support at 80.00 is holding very well and is retaining our overall bullish outlook. As mentioned earlier, whether the Support at 80 contiues to hold or not will decide the further direction of move.
Gold (1374.60) has risen sharply yesterday. The Euro zone debt concerns and the attack of North Korea on South Korea supported the price rise. As we have been mentioning for some time 1380-90 is a very important Resistance region to watch for. A break above it might see the overall uptrend continuing. However, if it holds, there are good chances of a Head and Shoulder Reversal pattern formation. On the downside 1330-20 is a very important Support region to watch for below 1350.
Dramatic fall in most non-Dollar currencies yesterday on a sharp pick-up in risk aversion. Korean tensions added to Irish tensions. Funny, isn't it, how news tends to come from nowhere to prove the charts correct? The Dollar Index (79.63) has picked up very well. Although there is Resistance at current levels, we look for an eventual rise towards 80.50.
The Euro (1.3405) saw a low near 1.3365 overnight. Very strong Support is seen in the 1.3310-3250 region. This needs to hold for the Euro to retain some semblance of strength. The Aussie (0.9795) also saw a large fall to 0.9708 overnight, but has seen a respectable bounce in Asia today. The overall structure is weak, however, and the Aussie could be bearish in the long term. Dollar-Yen (83.21) saw relatively muted action, but did drop to 82.79 in the the overall market volatility. Good Support is seen at 82.80 and a rise towards 84.00 might be possible.
Dollar-Swiss (0.9947) has been more sedate, ranging sideways between 0.9850 and 1.0000 for the last few days and could be basing for a rise towards 1.0075. The Pound (1.5285) has recovered a bit from the sharp fall to 1.5761 overnight.
Understandably, Dollar-Won (1161.70) shot up big time yesterday. The decks are now cleared for a rise towards 1195, in its appropriate time. The Sing Dollar (1.31) also weakened substantially, to 1.3156 yesterday and further weakness is likely in the days ahead. Dollar-Rupee (closing near 45.57 yesterday) may well move up towards 45.90 today.
The 3M USD LIBOR was unchanged at 0.28%. The 2Y yields and 10Y yields were down 2 bps and 1 bps to quote at 0.46% and 2.80% respectively.
The US Treasury is scheduled to sell $29 billion of 7Y securities today, the last of 3 auctions this week totalling $99 billion (1/6th of the QE2).
India is seeing its highest levels of investment in tax-exempt infrastructure bonds since 2002; after the government allowed tax benefits for bonds linked to infrastructure projects this February. This exemption is aimed at facilitating the requirement of about $1 trillion that the country needs for infrastructure projects upto 2017.
08:00 GMT Oct GER IFO Business Expectations
08:00 GMT Oct GER IFO Business Situations
08:00 GMT Oct GER IFO Business Climate
...Expected 107.7...Previous 107.6
12:30 GMT US Oct Personal Income
...Expected 0.4%...Previous -0.1%
12:30 GMT US Oct PCE Price Index M/M
...Expected 0.5%...Previous 0.2%
12:30 GMT Oct US Durable Goods Orders
...Expected 0.3%...Previous 3.5%
14:00 GMT Oct US New Home Sales
...Expected 312K...Previous 307K
US GDP Q3 '10 (Pre)
...Actual 2.5%...Previous 2.0%
Oct US Existing Home Sales
...Actual 4.43 Mln...Previous 4.50 Mln
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