Monday November 29, 2010 - 03:50:56 GMT
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Morning Briefing : 29-Nov-2010 -0334 GMT
US markets closed in the red on Friday with Dow at 11,092 (down 0.85%) and S&P 500 at 1189 (down 0.75%). US holiday shopping season got off to a tepid start. Markets will keep a close eye on the retail sale figures over this period as US consumers account for 70% of the GDP. Trend remains up in Dow as long as 11,000 holds on a closing basis. Immediate resistance is around 11,210-220 and then around 11,400.
Most Asian markets underwater with Hanseng down 0.15% (22,843), Shanghai down 0.62% (2987), Kospi down 0.11% (1899) but Nikkei is up 0.30% (10,069). Most of the Asian markets are holding above strong support zones and December is seasonally a favourable month for the global equity markets, hence we expect a Santa rally in equity markets soon. Indian equity markets closed in the red with 0.82% decline in Nifty (5752). Though various kinds of scams and sleaze is being unearth every week but we attribute the recent selling to a natural mean reversion phase in markets after a near 33% rally in headline indicies over the last 6 months. Though it is early days to say how soon markets can get back above its old highs of 6340 but this can be said that Nifty has entered a zone of support located between 5650-5600. for the day support is expected around 5730 and then at Fridays low at 5690. Resistance is expected around 5870, 5910 and then at 5970. Late recovery in Nifty on Friday could have been an indication of a short term recovery in prices towards 5950-70 in the coming sessions.
Crude (83.92) is continuing to oscillate near the Resistance at 84. Although an intraday break above 84 was seen over the last three trading days, a close above 84 was not seen. 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 (1355.40) is continuing to trade silent above 1350 over the last few days. Much strength is not seen on its upmove. Also the Resistance at 1380 has held very well last week and there is now a threat of Head and Shoulder Reversal pattern formation the neckline Support of which is now coming near 1335. If this patterns gets confirmed then Gold might see 1250 on the downside. Need to be cautious and this week will be very crucial.
Strong enough opening for the Dollar today, first day of the week but the second last day of the month. The Dollar holds onto its strength of the last three weeks, with the Dollar Index trading at 80.382. The question is whether the Dollar can gain further in December or not. Barring an initial round of profit-taking, the chances are that the Dollar will indeed strengthen further.
The Euro (1.3229) is trading below 1.3250, but might see a pullback rally. Dollar-Yen (84.10) has moved up well, a far cry from the calls of sub-80 levels a few weeks ago. Short-term Resistance can be expected near current levels now. Dollar-Swiss (1.0000) has met Resistance at 1.0040-50 after having risen for the last several days. The Pound (1.56) has bounced a bit from an early morning Low near 1.5559. A small intra-day bounce might be possible while the pair stays above 1.5550 now. The Aussie (0.9626) had seen an early morning low of 0.9584, but has bounced a bit from there.
Overall, we see chances of a modest pullback/ profit-taking in the Dollar for a couple of days before the bigger Dollar uptrend resumes.
In Asia, the Korean Won (1156.30) seems a little consolidative in an overall weakening trend. The Sing Dollar (1.3173) has weakened considerdably over the last several days and might well weaken further towards 1.3250-75 over the course of the week. Dollar-Rupee had closed at 45.86 on Friday. It might extend its upmove towards 46.10-20, but may find selling interest there.
The 3M USD LIBOR was unchanged to quote at 0.29%. The 2Y yields were unchanged at 0.52% and the 10Y yields were down 1 bps at 2.88%.
The US treasuries may see some increase in yields after the $113 bln bailout of Ireland. Investors are jittery about the market conditions and will continue running in and out of US treasuries in short intervals till we see some long-term stability in the EU.
Indian bonds are headed for the best month since May. The 10Y bond yields have dropped 14 bps to 7.97% this month, the only BRIC nation bond to rally during this period.
10:00 GMT EU Biz Climate
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