Forex Exchange Morning Report

The previous day's risk aversion theme continued, with Libya and oil continuing to frighten investors. The S&P500 is down 1.1%, looking vulnerable. WTI oil futures rose 1.2% to a fresh 2/1/2 year high, now technically overbought. Fresh multi-year highs also in gold (+0.1%) and silver (+1.4%) boosted the CRB index to a fresh high, but copper (-3.5%) reversed sharply. US 10yr treasury yields reversed sharply from 3.55% around midday NY, coinciding with the fall in US equities, and are now 2bp lower at 3.47%. There was mixed Fedspeak from Lockhart (QE3 is possible), Evans (QE2 should not be curtailed), and Fisher (opposed to QE3 and QE2 could be curtailed). Moody's downgraded Greece three notches from Ba1 to B1, assigning a negative outlook. Its 10yr government bond yield rose 8bp to 12.33%, while the 2yr bond rose 41bp to 15.92% - a post-May high. Portugal's 10yr rose 8bp, near a decade high, but the other Eurozone peripherals were unruffled.

The US dollar index is slightly higher, falling in London to a fresh four-month low but bouncing in NY, mirroring the decline in US equities. EUR rose to a four month high of 1.4036 during London's morning, but reversed all of that to 1.3960 in NY. GBP underperformed, falling further from its noon peak of 1.6340 to 1.6183, and forming a technically bearish key reversal pattern. Safe-haven yen outperformed, USD/JPY between 81.95 and 82.30.

After peaking at 1.0186 midday London, pro-risk AUD fell sharply to 1.0091.

NZD's fall from 0.7402 to 0.7350 was less severe, probably because much bad news has already been priced in. AUD/NZD made a fresh decade high of 1.3794 before falling to 1.3715.

Fedspeak: QE3 can't be ruled out yet but QE2 may not be seen through to the end. Atlanta Fed president Lockhart says the Fed shouldn't rule out asset purchases beyond June: “given the emergence of new risks, I prefer a posture of [policy] fl exibility”. Meanwhile Dallas fed's Fisher remains doubtful about the effi cacy of QE2 and said he might vote to curtail it and would vote against extending or enlarging purchases “barring some frightful development”. Chicago Fed president Evans said the hurdle for altering the current program is pretty high.

Euroland Sentix investor confi dence rose from 16.7 to 17.1 in Mar, the highest since 2007. Current conditions rose but expectations slipped, with rising oil prices cited as a driving factor.

Canadian building permits fell 5.1% in Jan. The residential component was down 0.9% but non-res dropped by 13.2%.

AUD/USD and NZD/USD outlook next 24 hours: AUD is starting to threaten the lower boundary of its multi-month consolidation, today's ceiling at 1.0200 with a move to 1.0030 more likely. NZD is again testing major support at 0.7350, a break lower likely, 0.7270 the next target.

Events Today

Feb NFIB Small Business Survey Mar IBD-TIPP Economic Optimism Feb Bank Lending (Adjusted) %yr RBA Assistant Governor Lowe speaking 

View the original article here

Market Morning Briefing

EQUITIES

The Dow (12090.03, -79.85, -0.66%) came off a decent bit yesterday and is coming close to testing important Support at 12000. If this holds, we would still target 12500-700 in the medium term.

Asian indices are flat/ mixed, ranging between -0.28% (New Zealand) and +0.98% (Korea), possibly waiting for clues from the USA (as to whether the 12000 Support will hold or not) and from the Middle East, where Crude has cooled off a wee bit.

The Sensex (18222.67) and Nifty (5463.15) might get bought on dips today as Crude is slightly lower and there are some chances of the Congress-DMK shaking hands again.

COMMODITIES

Crude (105.14) surged yesterday to a high of 106.95 and eased following a report from BBC that the Libyan leader might leave the country. Technically the charts are still looking strong with room for further rise to 110-112 in the coming days/weeks. Support is seen in 100-98 region.

Gold (1432) tested its crucial 1445-1450 Resistance reigon and has come off from there slightly. As mentioned yesterday, 1445-50 is a very important Resistance region to watch and a break above it might take it further up towards 1475-1500. While 1450 holds, there is a chance of a fall to 1400-1370 once again. But it is too early to take a call on this and we will have to wait and see.

Silver (35.72) has come off sharply from yesterday's high of 36.75. However, the Support at 35.50 is still holding and while above 35.50 the outlook remains bullish for further rise to 37+ levels.

Copper (4.32) has failed to see a strong rise past 4.50 and has fallen sharply. With this sharp fall yesterday, Head and Shoulder pattern formation seen on the charts. A strong break below 4.25-20 region would confirm this. TO see the Head and Shoulder pattern on the Copper chart click on the following link:
http://www.kshitij.com/graphgallery/coppercandle.shtml#candle

CURRENCIES

Slight recovery in the Dollar Index (76.52) from yesterday's low near 76.12, further rise possible. Sterling Pound (1.6196) has been the biggest loser, coming off from a high near 1.6341 on news that Feb Retail Sales did not do as well as Jan. Supports may be there in 1.6150-00 region.

The Euro (1.3980) trades slightly lower compared to yesterday's high near 1.4036 and Dollar-Yen (82.28) has come up from yesterday's low of 81.95. Dollar-Swiss is steady near 0.9268 while the Aussie (1.0118) has bounced a little after falling sharply to 1.0090 overnight from yesterday's high near 1.0185. Thus, the Aussie has been the most volatile pair since yesterday. But, it has Support in the 1.0090-70 region.

Overall, the Dollar is still very weak and might find short-term selling interest on rallies for a few more days. The underlying concern seems to be that the US is unlikely to raise rates whereas the Eurozone is more likely to.'

In Asia, the Sing Dollar continues to trade strong near 1.2660. The Korean Won too is strong near 1116.40. Elsewhere in the world, the Russian Rouble (28.19) has seen strong gains over the last few months, with the USD-RUB coming down from 31.67 at the beginning of December. Dollar-Rupee has opened steady today at 45.0550/0650.

INTEREST RATES

The 3M USD LIBOR was unchanged at 0.31%. The 2Y and 10Y yields were up 1 bps and 3 bps each to quote at 0.70% and 3.51% respectively. The 10Y yield has very strong Resistance in 3.50-70 region and while it holds the yields can come down further to 3.20 in the coming days/weeks. To see the 10Y US Yield chart click on the following link:
http://www.kshitij.com/graphgallery/usdsin92.shtml#sin92

View the original article here