Thursday September 1, 2011 - 03:51:09 GMT
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Morning Briefing : 01-Sep-2011 -0340 GMT
GOOD MORNING!
EQUITIES
The US markets had closed higher yesterday. Dow (11613.53) was up 0.46% and the Nasdaq (2579.46) was up 0.13%. Dow is holding well above 11500 and as we had mentioned earlier, while above 11500 there is a good chance of seeing 11900 on the upside. On the other hand Nasdaq has to see a strong rise past 2600 to extend its upmove further. The important US NFP data release is due tomorrow (02-Sep-11).
The Asian markets are trading higher following the rise in the US markets and the better than expected PMI data release from China. Nikkei (9080.05) is up 1.39%, Australia (4415.90) is up 1.05% and the Shanghai (2571.49) is up 0.16%. The Indian markets were closed yesterday and are closed today as well on account of Gnaesh Chaturthi holiday.
COMMODITIES
Nymex Crude (89.18) is holding above 88 and is keeping up our view intact for further rise to 90-93. Only a strong break/close below 88 will reduce the chances of further upmove.
Gold (1825.50) is trading flat above 1800 in a range of 1810-40 since yesterday. The broader outlook is bullish for a revisit of 1900 while above 1800. However, hopes of further stimulus from the US might restrict the upside momentum.
Silver (41.65) is continuing to trade above 41 and is keeping up the chances of testing 44 on the upside.
Copper (4.17) has risen further as expected to test its important Resistance at 4.20 and has come off slightly from its high of 4.205. A strong weekly close above 4.20 will be very bullish which would increase the chances of further rise to 4.50-60.
CURRENCIES
The Euro (1.4375) has fallen below 1.4400 in the US session as reportedly US Factory Orders rose 2.4% in July. The earlier failure of the Euro to build on its rally to 1.4550 a couple of days ago had made it vulnerable to a fall, beleagured as it is by ongoing policy confusion in Europe as to how to help the countries that need help. The Pound (1.6233) has also fallen.
Dollar-Swiss (0.8068) saw a sharp decline to 0.7993 yesterday after the Swiss Economy Minister that the Swiss will "have to live with" a strong Franc. In the meanwhile, Dollar-Yen (76.95) has moved up today, to a high of 77.23, after having trended down to 76.42 over the last couple of days. The Aussie (1.0707) is trending higher and the better than expected Aussie Retail Sales today may help it further going forward. We are targeting a rise towards 1.0780-0800.
Overall, the Dollar Index (74.14) has bounced well from the range support at 73.50 and is now testing an important Resistance in the 74.15-30 region. Should this Resistance break, the Dollar can get much stronger in the coming days. Translating this to the Euro, there is crucially important and strong Support at 1.4350 and 1.4300 that would need to be broken for the Euro to melt down. But, that might not be so easy, given that German/US Bond Yield Differentials seem to be stabilising/ bottoming for now and could turn up in favour of the Euro. Take a look at
http://www.kshitij.com/graphgallery/eurusddiff.shtml#eurusd
In Asia, the USD-SGD (1.2024) has come off a bit and is close to testing the important Range Support at 1.2000. The Korean Won (1066) and Taiwan Dollar (28.87) trade relatively strong. The Indian Rupee (46.0850) has been underperforming its Asian peers by a large margin. The market is closed today on account of Ganesh Chaturthi.
INTEREST RATES
In the US, bond prices came off increasing the yields across all tenors with higher end increasing more, 5Y yields continued remained 1% and closed at 0.96% (+3bps), 10Y closed at 2.24%(+6bps) and 30Y closed at 3.62% (+9bps). We see bond prices to fall further in near future.
In Euro area, like US, German bond prices moved southward and yields increased between 6bps and 9 bps among all maturities, 5Y yields inched up to 1.31% (+9bps), 10Y to 2.22% (+6bps) and 30Y to 3.08%
(+8bps).
Brazil cut policy rate by a half point to 12% after five consecutive increases in central bank meetings. This is a major step in response to slowing consumer confidence across the globe and unlike other counterparts in the BRICS group using interest in fighting against inflation sacrificing economic growth.
DATA TODAY
05:45 GMT CH GDP Q1'11
...Expected 0.4% ...Previous 0.6%
14:00 GMT July US Manufacturing ISM
...Expected 48.9 ...Previous 50.9
DATA YESTERDAY
US ADP Emp
...Actual 91K..Previous 109K
CA GDP
...Actual 0.2% ...Previous -0.3%
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