Friday November 26, 2010 - 03:56:10 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 26-Nov-2010 -0334 GMT
US markets were closed overnight and is going to have a truncated session tonight. Dow is well supported as long as 11,000 holds on a closing basis. Resistance for Dow is expected around 11,220 and 11,400. We would like to talk about German DAX Index today. DAX has been the strongest amongst the European stock indicies. DAX has not only marched to fresh highs for the year but managed to close above a major resistance structure on charts. Strength in DAX can be taken as a leading indicator of an ensuing resumption of bull rally in global equity markets.
Asia is mixed bag with Nikkei flat at 10,072, Hangseng at 23,029 (down 0.11%), Shanghai at 3007 (down 0.94%) and Kospi at 1915 (down 0.65%). Almost all these markets are still holding their key support levels and as a result we expect a rally soon in Asia. Nikkei is expected to test 10,250 resistance and finally accomplish the breakout target of 10,800. Yesterday, Nifty closed at 5799 (down 1.13%). There is sustained bullish divergence building on charts between price and oscillators and we expect a bottom soon. We believe if Nifty can hold above 5910 we can see a rally towards 6000-6020.Support is expected around 5780 and then at 5750. We expect support to emanate from tech stocks today.
Crude (83.83) closed flat as much action was not seen in the market beacause of the Thanksgiving holiday in US. Our view remains the same. 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 (1371.40) traded flat near the 1380-90 Resistance region. No significant move on either side over the last couple days retains our immediate outlook to be unclear. As mentioned earlier, we might look for a range of 1350-90 for some time.
Not much action seen in the market yesterday beacause of the Thanksgiving holiday in the US and most of the currencies are trading flat.
The Euro (1.3323) is ranged between 1.3280-3400. Significant Support is seen in 1.3300-3280, a break below which might pull it further down towards 1.3150. Dollar yen trades as 83.80 and trend remains strong with immediate resistance around 84 handle with Gamma Sellers capping the rally. A break above 84.20 can see a squeeze of gamma shorts and the pair can aim for 84.80-85. Euro-Yen trades at 111.67, and structure remains bearish as long as the 113 handle is not beached on the way up. We expect the pair to find supply on a recovery towards 112.50-60.
The Pound (1.5750) has very crucial Support at 1.5700. A break below it might see 1.5600-5550 on the downside. While 1.5700 holds, there are good chances of resuming the broader uptrend.
Dollar-Swiss (0.9994) is unable to break the Resistance at 1.00 but we may still see 1.0050-70 before a dip. Aussie (0.9751) has broken below the 55-DMA Support and may now see some more fall towards 0.97.
In Asia, USD-KRW is trading lower near 1146, but has very good Support in 1140-38 region. If it holds we might see an upmove towards 1180-85 on a strong break above 1150. USD-SGD is trading near 1.3110. With Support at 1.3080 we see good chances of revisiting the Resistance at 1.3180. Dollar-Rupee has closed at 45.51/52 and might test the Support in 45.40-38 region before further rise.
The 3M USD LIBOR was unchanged to quote at 0.29%. The 2Y yields and 10Y yields were down 2 bps each to quote at 0.52% and 2.89% respectively.
The Brazilian bond yields have fallen in the last 3 days in hope that Mr Henrique Meirelles will take measures to curb inflation. Mr Meirelles will be the new Brazilian central bank president next year, if confirmed by the Senate.
The yield on the contract due in January 2013 quoted at 12.21% (down 7 bps).
Some good news for the EU - Spanish budget deficit fell by about 47% in first 10 months of the year as compared to last year. In addition, Spanish efforts to find domestic buyers for its bonds seem to be showing some results. Spain has only about 50% of it bonds held by foreigners as against Portugal and Ireland which have more than 80% of their bonds held by foreign investors.
No major data release today.
No major data released yesterday.
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