Thursday November 25, 2010 - 03:46:48 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 25-Nov-2010 -0334 GMT
Santa Clause rally is on in Wallstreet with Dow clocking a gain of 1.37% to close at 11,187 and S&P gained 1.49% to close at 1198. As we have been saying for past few days that as long as Dow is holding above 10,900, the trend remains up. Yesterday saw some heavy duty economic releases from US, from Home sales, durable goods orders to personal income and spending. US durable goods and homes sales dissapointed but personal spending numbers came in line with estimates. However, data does not matter when market has made up its mind head higher. Immediate resistance is around 11,220 and above that 11,400. Key support is now 11,000 on a closing basis.
Santa clause is not only coming to town in Wallstreet, but also in Asia too. As we step into trade this morning, it feels good to see loads of green ticks on screen. Hanseng is trading at 23,103 (up 0.34%), Nikkei at 10,074 (up 0.44%), Shanghai at 3013 (up 0.61%) and an odd downtick is coming in Seoul with Kospi at 1918 (down 0.40%). Yesterday Nifty plunged and this time it was another scam, Loan scam. Nifty closed down 1.16% at 5865. It feels like a season of scams, from CWG, to 2G to now loan scam. Too many adverse factors the bulls have to battle to get Nifty back above 6000. We do not know whether Nifty is on Wave 3 of Elliot study but it definately seems India is seeing a BUll Market in Corruption. Key support is around 5820-5800, below that 5700 opens up and key resistance cluster is between 5980-6025, a break above 6025 would be a very bullish.
Crude (83.84) has risen sharply above 83 yesterday. The positive economic data, pre-holiday short covering overshadowed the stronger dollar and the EIA's data release showing an unexpected increase in the US Crude inventories. As mentioned earlier Resistance is seen in 84.00-85.00 region a strong break above which will have to be seen for further rally towards 90+ levels. Strong Support is seen at 80.
Gold (1370.10) is continuing to trade near the 1380-90 Resistance region. With lack of strength on either side of move, the immediate outlook is not clear and we might expect the commodity to be ranged between 1350-90 for some time.
Some stability coming into currencies since yesterday after the sharp rise in the Dollar the day before. Today should be quiet since the USA is on Thanksgiving holiday. Many will say "Thanks" for that :-)
Overall, the Dollar Index (79.70) is still holding onto its gains. Serious profit-taking in the Dollar might only come in next week. The Euro (1.3315) has important Support in the 1.3280-30 region and might bounce to 1.3450 while that holds. The IFO came out better than expected yesterday, but could be close to peaking. Take a look at
The Cable (1.5757) might be bearish overall now, having broken below an important trend Support at 1.5950 day before yesterday. Dollar-Yen (83.45) is trading sideways between 83.75-00 and seems to be basing for a rise towards 84.00. The Monthly chart is looking very bullish. Dollar-Swiss (0.9963) seems poised to move up to test the 100-day MA at 1.0071. Surprisingly, the Aussie (0.9762) seems to be showing no strength at all, falling sharply today after having seen a relief rally to 0.9850 yesterday. A further dip towards 0.97 is possible.
Among the Emerging currencies, the Korean Won (1150.50) has recovered a bit from the level of 1169 seen day before (the day of the North Korean attack), but is weaker than yesterday's level of 1140. Watch important level of 1160 now for further direction. The Sing Dollar (1.3103) had also gained a bit yesterday, but seems to be weakening again today. The Brazilian Real (1.7220) has strengthened a bit, but the market needs to remain below 1.73 if it wants to gain further. Else, we may look for weakening towards 1.74-75 in the medium term.
Dollar-Rupee had closed 45.70 near yesterday. The immediate outlook for the day is uncertain.
The 3M USD LIBOR was up 1 bps to quote at 0.29%. The 2Y yields and 10Y yields were up 8 bps and 11 bps to quote at 0.54% and 2.91% respectively. The yields surged after a lukewarm response to the $29 bln auction of 7Y Notes yesterday.
Spain postponed its Euro 13.5 bln auction of the state-guaranteed power revenue bond until market stability prevails. The Spanish 10Y debt commands a premium of 235 bps above the similar maturity German Bunds.
No major data release today
Oct GER IFO Business Climate
...Actual 109.3...Previous 107.7
US Oct Personal Income
...Actual 0.5%...Previous 0.0%
US Oct PCE Price Index M/M
...Actual 0.0%...Previous 0.2%
Oct US Durable Goods Orders
...Actual -3.3%...Previous 5.0%
Oct US New Home Sales
...Actual 283K...Previous 308K
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