Tuesday November 30, 2010 - 04:21:24 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 30-Nov-2010 -0334 GMT
US markets recovered from early losses to close the day with mild cuts, Dow at 11,052 (down 0.36%) and S&P500 at 1188 (down 0.14%). Inspite of an intra-day breach, Dow managed to close above its key suport around 11K . As a result trend remains bullish and only if Dow falls below yesterday's low of 10,928, bias will flip to bearish. Resistance is expected around 11,210-220. There is number of key data releases on Industrial activity and consumer confidence from US and EU. Market will also keep an eye on Bernanake's speech as on announcement from Congress on the extension of tax cuts.
Stepping into trade Asian markets are in the red with Hangseng down 0.74% (22,995), Shanghai down 2.54% (2925), Nikkei down 0.41% (10,084) and Kospi UP 1% (1914). Japanese industrial activity showed a fifth straight month of deceleration and jobless rate ticked higher to 5.1%. Yesterday Nifty rallied 1.36% to close at 5830. Nifty is expected find resistance around 5850-70 zone and support around 5780.
Crude (85.69) has risen above 85 and is trading strong thereby retaining our bullish view intact for a rise towards 90+ levels in the coming weeks. With Support at 84.00 we might see 87.00 on the upside in the coming days.
Gold (1366.10) is continuing to trade above 1350 with less upside momentum. A strong break above 1380 will have to be seen for the overall uptrend to continue. As mentioned yesterday there is a threat of a Head and Shoulder formation on the daily chart the neckline Support of which is coming near 1340-35 region. As such a strong break below 1335 might see 1250 on the downside.
Further relentless rise in the Dollar Index (80.83). The Euro (1.3135) is trading well below 1.32, which is a very good Resistance now. It had fallen to a low of 1.3064 in the US session yesterday despite the bailout package for Ireland, as the market possibly prepares to target the next nation in the PIIGS lineup.
Dollar-Yen (84.15) remains strong and largely stable. Dollar-Swiss (0.9994) has dipped marginally from yesterday's high near 1.0040. Note that 1.0070 is a crucial and strong Resistance and whether it breaks or not will likely set the trend for December. The Pound (1.5555) and the Aussie (0.9610) have declined further. The Pound looks very weak but the Aussie might find some temporary Support near current levels.
Current levels are not good for the non-Dollar currencies to posting on the last day of the month. Unless there is a sharp sell-off in the Dollar today, the Monthly charts for the non-Dollar currencies will look very bad. This will erode the confidence and holding power of the Dollar Bears who had been in the majority just before the QE2 FOMC at the beginning of the month.
Among the Emerging currencies, the Korean Won is trading weak near 1161.10 while the Sing Dollar is also weak at 1.3180. A high of 1.3234 had been seen on the USD-SGD yesterday. The Brazilan Real (1.7170) has been consolidating sideways for the past few days, but could weaken afresh as the USD-BRL may find Support near 1.7070. Dollar-Rupee had risen to 45.93 yesterday and is quite likely to move up to 46.10-30 today.
The 3M USD LIBOR was up 1 bps to quote at 0.30%. The 2Y yields and 10Y yields were down 2 bps and 7 bps to quote at 0.52% and 2.80% respectively.
The Brazilian bond yields fell sharply yesterday after Alexandre Tombini won the vote of confidence to head the Brazilian central bank. He is expected to raise interest rates to curb inflation. The yield on IRF's due in 2014 fell by 22 bps.
The liquidity tightening measures in China have started reflecting on the dollar bonds issued by the Chinese real estate companies. The 21 China property bonds in BoA MLâ€™s Asian Dollar Corporate Index were down 0.35% for the month of November. Their first monthly loss in H2-2011.
23:30 GMT JP Unemp
...Expected 5.0%...Previous 5.0%
05:25 GMT IN GDP Q4FY10
10:00 GMT EU Unemp
...Expected 10.1%...Previous 10.1%
13:30 GMT CA GDP
...Expected 0.2%...Previous 0.3%
14:00 GMT US Case Schiller
...Expected 1.4%...Previous 1.7%
15:00 GMT US Cons Conf
...Expected 52.9...Previous 50.2
EU Biz Climate
...Actual 105.3...Previous 103.8
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