Wednesday March 20, 2013 - 03:36:23 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 20-Mar-2013 -0333 GMT
Cyprus has voted against allowing deposits to be touched/ taxed/ raided. So, currently Europe does not know what to do. Whether the ECB will pull some rabbit out of the hat or not is to be seen. The world has to decide whether it needs to be concerned about the mess Europe is still in (and pushes itself into) or whether it wants to brush away Cyprus as being too small.
The Dow (14455.82, +3.76, +0.03%) managed to stay flat even though the S&P and the Nasdaq fell. Housing Starts were good yesterday, but Europe is a bigger worry. On the whole, the chances of a dip to 14250 are still there and it would actually be healthy if the Dow did dip in the near term.
Asia-Pac is mixed, ranging from -0.42% (Australia) to +1.07% (China). The Shanghai has bounced well from its 21-week MA, as suggested yesterday. On the whole, it seems that Asia is not too badly spooked by Cyprus.
The Nfty (5745.95) had fallen sharply yesterday on the DMK pullout. It has a crucial Support at 5700 today. We need to see if that holds. If not, the Nifty could fall towards 5500 in the coming weeks.
Gold (1612) has moved up over the last few days, possibly as a safe haven for Russians, and could move higher towards 1620-40. But, that goes against the overall Dollar strength and so the gains in Gold might be limited.
Brent (107.88) has broken below 108 and could move down towards 103 in the coming days/ weeks.
The Euro (1.2877) is trading near the 200-day MA (1.2875) and may be in a danger of falling towards 1.28-27 by next week, unless things improve in Europe all of a sudden. One thing Europe can do is to give Cyprus an easier bailout. It seems a little too much to jeopardise the whole of Europe for a small sum of $10 bln.
Dollar-Yen (95.02) has been unable to sustain its bounce to 95.75 yesterday and seems more likely towards 94.30 and lower. The Euro-Yen (122.35) now has a long-term Double Top on the Dailies and could be in danger of falling towards 118.25 on a break below 121.85.
The Pound (1.5090) has been steady between 1.5080-5140 over the last two days, benefitting in a relative way from the Euro's woes. The EURGBP (0.8532) has fallen substantially. The Cable might have chances of moving up towards 1.52+ if it manages to remain above 1.5050 over today-tomorrow.
The Aussie (1.0378) has been consolidating above 1.0350 over the last two days and looks keen to move up towards 1.05. The SGD (1.2526) continues to weaken. It is surprising that it is not being able to benefit from the Euro's weakness.
Dollar-Rupee rose to 54.37 yesterday and might test 54.50-60-70 if the Nifty continues to tank.
RBI lowered the Repo by 25bp yesterday. The FOMC meeting gets over today. The press conference is at 14:30 EDT or 24:00 IST.
The US 10-Yr (1.91%) has dipped further and may target 1.75%. Spain 10-Yr (5.04%) is up from 4.77% last week, Greece 10-Yr (12.01%) is up from 10.82% and Italy 10-Yr (4.73%) is up from 4.63%. The Spain-Germany 10-Yr Spread (3.69%) is up sharply from 3.25% last week.
All of the above suggest that Europe may continue to worry the markets for some time. With politicians really making a mess of things, it is upto the ECB to come to the rescue again.
9:30 or 15:00 UK BOE Minutes
...Expected 0-0-9 ...Previous 0-0-9
9:30 or 15:00 UK Unemp
...Expected 7.80 % ...Previous 7.80 %
23:30 or 5:00 US FOMC Meeting
...Expected < 0.25 % ...Previous < 0.25
RBI Repo Rate
...Actual 7.50% ...Previous 7.75 %
RBI Reverse Repo Rate
...Actual 7.00% ...Previous 7.00 %
...Actual 4.00%...Previous 4.00 %
UK CPI Y/Y
...Actual 2.80 % ...Previous 2.70 %
US Housing Starts
...Actual 917 K ...Previous 910 K
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