Monday January 25, 2010 - 04:13:13 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 25-Jan-2010 - 0334 GMT
The US equities had seen the sharpest weekly fall last week since Feb '09. The Dow (10,172.98) closed over 4% lower last week. Among the major events which led to the fall are: China's liquidity tightening measures, Obama's plans of regulating proprietary trades by banks and doubts over re-election of Bernanke. The Dow is at an important Support and a break of this may lead to a further fall towards 9800.
The Asian indices, too, have followed the Dow route and have fallen sharply. The Nikkei closed over 3.5% lower, the Shanghai nearly 3% lower and the Sensex (16859.68) fell nearly 4% last week. The Asian indices are trading lower today as well. The Nikkei (10463.12) is down 1.2%, Hang Seng (20604.33) is down over half a percent and the Shanghai (3131.23) is trading flat. The Shanghai is trading at a crucial juncture; a fall below 3000 would be very bad. The Sensex has strong Support near 16400.
Crude (74.61) continued its fall on Friday also and is now trading below 75. Concerns about the demand, economic recovery and stronger dollar are retaining the downside pressure. A break below the immediate Support at 74.50 might pull it further down towards 73 over the next few days. To see the Crude graph click on the following link:
Gold (1099.00) fell sharply on Friday and closed below 1100, the first close below 1100 in 2010. However, the 1100-1080 Support region we mentioned earlier is still holding. Economic recovery concerns and the speculation that the dollar would strengthen further pulled down the price. 1060 is a very significant Support seen below 1080. TO see the Gold graph click on the following link:
Most of the currencies are doing a little better (or stabilising a bit) today against the Dollar, after having taken a bashing last week.
The Pound (1.6115) seems the most vulnerable to a dip, targeting 1.60. At the other end of the spectrum, the Yen (90.20) appears the strongest, threatening to gain towards 88.30 this week or the next. The Euro (1.4165) is not doing too badly, trading a good bit higher than the low of 1.4027 seen on Thursday. The Aussie (0.9065) is also doing better, having bounced from last week's low near 0.8985. Crucial Support seen at 0.90 for this week. Dollar-Swiss (1.0399) has potential to fall towards 1.0350-00 as it is essentially ranged between 1.02 and 1.05.
The US FOMC meeting on Wednesday is the most important event this week for the global markets. Currency markets might prefer to remain quiet ahead of this crucial event, in which nothing is expected to happen that might upset the applecart at this juncture. Too many "negatives" have been in the air as it is.
In Asia, the Sing Dollar (1.4015) has recovered a bit, with the USD-SGD finding Resistance at 1.4070, just below 1.41 last week. Dollar-Won (1146.40) has also recovered a bit from Friday's low point near 1154.90. Dollar-Rupee had 46.14 last week and faces an important Resistance at 46.35-40. If that holds, a dip towards 45.80 is possible.
3M USD LIBOR was unchanged at 0.25%. The yields on US Treasuries have risen slightly after dipping lower over the last several days on "safer haven" pretext.
There are a numbger of central bank meetings lined up this week. The BoJ on Tuesday, the FOMC on Wednesday and the RBI on Friday. The expectations are that the BoJ and the FOMC would keep interest rates unchanged this time around. The RBI is expected to announce interest rate tightening by increasing the CRR.
...Actual -0.4%...Previous 0.1%
15:00 GMT Dec US Existing Home Sales
...Expected 5.98 Mln...Previous 6.54 Mln
EU EA (16) Curr Acct Bal Q3 '09 (Fnl)
...Actual EUR -2.7 bln...Previous EUR 1.6 bln
EU EA (16) Bal of Trade in services
...Actual EUR 12.8 bln...Previous EUR 10.7 bln
EU EA (16) Curr Acct Bal as % of GDP
...Actual -0.1%...Previous 0.1%
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