Thursday December 9, 2010 - 03:43:44 GMT
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Morning Briefing : 09-Dec-2010 -0339 GMT
As we get closer to the year end, volumes are going to get thinner and large intra-day gyration can become an order of the day. US markets closed in the green with Dow at 11,372 (up 0.12%) and S&P500 at 1228 (up 0.37%). Dow has found resistance around its November high of 11,451 and though a threat of a double top remains but we feel it is premature at this stage. Dow remains well supported around 11,300 and then around 11,200 and only a close below 10,900 will flip the bias to bearish.
Asian markets are mostly trading in the green barring Shanghai which is trading at 2973 (down 0.35%). Hangseng (23,141) up 0.21%, Nikkei (10,254) up 0.21%, ASX Australia (4820) is up 0.60% and Kospi (1970) up 0.75%. Aussie bulls are thumping their chest after the job reports showed 54K new jobs for the month of November against 26K expected and most of the additions came from full time employment.Yesterday Nifty declined 1.22% to close at 5903.70.We have been talking about the 5900-6100 range and we continue to advocate that. Only a close below 5800 will flip the bias to bearish .
Crude (89.09) has bounced back sharply from yesterday's low of 87.33 and is retaining its strength. Though the unexpected increase in the US gasoline stocks pulled down the price yesterday, the cold weather and expected tax cut extension limited the loss and supported the bounce back. We continue to retain our bullish view for a rise towards 93-95.
Gold (1387.00) fell sharply yesterday and has bounced back from the low of 1371.60. Though the Support at 1380 is holding, we expect Gold to remain pressured on the downside while below 1400. 1350 is the next significant Support level to watch for below 1380.
Silver, spot (28.67) has bounced back from the low of 27.99, thereby honouring the Support at 28.00 mentioned yesterday. While above 28.00-27.50 Support region, the outlook is bullish and we might see a rise once again towards 30.
One day the Dollar is bought back, the next day it is sold off again. This is in keeping with the "position squaring" theme, to be expected at this time of the year. The Dollar Index trades lower near 79.80, as compared to yesterday's high near 80.41, but well above important Support at 79.45. We anticipate a bit a bullish-Dollar bias within the overall "squaring up" theme.
The biggest mover this morning is the Aussie (0.9866) which has risen from yesterday's US session low near 0.9750, in response to better than expected Unemployment data, which fell to 5.2%. Its strength has rubbed off on the the Euro (1.3305) a bit, which has moved up from yesterday's low near 1.3180 and 1.3270, the level it was trading at at the US-Asia handover time. Given that the Aussie and the Yen are moving in tandem, Dollar-Yen (83.78) has seen a sharp corrrection to 83.66, compared to yesterday's high near 84.30. The next few days may see Dollar-Yen oscillate between 82.85 and 84.35, with a bit of a bullish bias.
Dollar-Swiss (0.9835) has come off from yesterday's high near 0.9915, but should find good Support at 0.9800 today. The Pound (1.5820) continues to be the strongest among the Major currencies, but faces an important Resistance near the current levels. Some profit-taking on Longs may be expected soon.
The Emerging currencies are also trading a little stronger against the Dollar. The Won trades stronger near 1135-37 while USD-SGD trades lower near 1.3100. Both have Supports at 1130-25 and 1.3085-50 respectively. The Brazilian Real (1.6920) weakened a bit yesterday from a level of 1.6777 the day before. Dollar-Rupee had closed higher at 45.08 yesterday and may be expected to range between 44.90-45.30 over today-tomorrow.
US libor remained unchanged at 0.30% but the Libor- OIS spread, barometer of financial liquidity widened to 12.6 bps from 12.4 bps.
US treasuries after a two day drubbing saw some bargain hunting from overseas investors seeking higher yields. USD 21 billion of US 10 year auction was well received and also helped to provide support to the prices.US 10 year is trading at 3.21% ( down 6 bps) and the 2 year is trading at 0.60% (down 3 bps). Treasury is going to auction USD 13 billion of 30 year bonds today and market would watch closely the bid-cover as an indication of investor appetite, which has been not all that great over the last 4 weeks. On the chart, 10 year yield have sold-off from a key resistance level of around 3.30% and we expect some moderation in the yields going forward. Indian GOI secs were flat on Wednesday after a sizable rally on Tuesday, when yeilds declined from 8.21 to 8.10 on 10 year. Indian 10 year closed at 8.11 (up 1 bps). RBI is going to conduct open market operation (OMO) of INR 12K crore today to infuse liquidity in cash starved financial markets. At the same time GOI has indicated that it will sell INR 6K crore of bonds instead of previously estimated INR 10K crore for this week. Therefore, unless RBI does an OMO of less than 10K, 10 year GOI sec prices should be well supported.
JP GDP QoQ (2nd Pre)
...Actual 1.1%...Previous 0.9%
Nov Australia Labour Force
...Actual 54.6K...Previous 29.7K
11:00 GMT BOE Mtg
...Expected 0.50%...Previous 0.50%
08:30 GMT UK Oct Trade Balance
...Expected $ -8.1 Bln...Previous $ -8.2 Bln
No major data release yesterday
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