Recap of the Latest Global News By Cory Vi & Andrew Su on Jan 24, 2012 The EUR staged a rally yesterday as European finance ministers met in Brussels to discuss new budget rules and the Greek debt swap plan. In a familiar pattern, Europhoria seems to grip the markets every time officials meet to discuss the debt crisis and the EUR rallies. Our expectation that history would repeat itself and the EUR would once again fall after the optimism surrounding the meetings dissipates is eventuating. The region's finance ministers have failed to agree on the Greek debt swap deal and are calling on a greater contribution from debt holders. The EUR has fallen from a high of 1.3065 during the Asian session to as low as 1.2988 during the European morning.
Germany has proposed the idea of combining the temporary and permanent rescue funds in an effort to reinforce the funds and boost resources to them. Meanwhile, a move by European finance ministers to provide greater debt relief to Greece by calling on investors to accept a lower interest rate on exchanged bonds is setting up a possible fiery situation at the next EU Summit on January 30. All the event risk in the markets has finally caught up with the riskier currencies with the Australian dollar falling more than a cent from yesterday.
Equity markets in the US closed flat yesterday as investors took time to evaluate the reasons for three consecutive weekly rises in stocks and caution still surrounds the debt crisis in Europe. The S&P 500's 14 day relative strength index has stayed above 65 since mid January and recording its strongest run in almost a year. Asian markets were largely subdued with many closed for Chinese New Year celebrations. The Nikkei closed 0.22% higher while the ASX 200 closed flat. European bourses have lost 1% mid session as negotiations over the Greek debt swap deal stall. Commodities News Commodity prices rose yesterday lead by a rise in crude and copper futures with the CRB index closing 3.67 points higher at 313.58. WTI crude, after surging on news that the EU has agreed to a ban on Iranian crude imports, has since fallen 0.45% to $99.10. Precious metals have eased slightly with gold lower by 0.45% to $1,671 while silver has lost 0.25% to $32.20. Soft commodities were broadly lower while copper has lost 0.75%.
GOLD
GOLD moved firmly higher yet again in offshore trade as short covering in the Euro coupled with continued gains in equities is seeing demand remain strong for commodities. USD weakness is helping this move and as we have said before, as soon as volatility calms and the Euro can post some gains we should see gold prices tend higher again and this is exactly what is happening. We may also be seeing a rise as tensions between Europe, the US and Iran intensify after a European embargo on Iranian crude imports was agreed to last night. Gold finished US trade higher by 0.80% at $1,677. Another great night for the precious metals space and gold man-aged to catch up with some of silvers recent gains. Gold is now up against downtrend resistance at $1,680/81 and if we can see a clear break then $1,700/02 is the next big hurdle. We do not want to get ahead of ourselves but a break of the latter and then $1,750 and $1,800 come into play of which $1,800 is major level for gold. The USD remains weak, demand remains robust and improving conditions are seeing demand increase as investors are still not involved in this equity market rally. Gold should continue to rise until the US raise rates which look like still being a long way off. Remain a buyer of dips towards $1,665 with stops under $1,640 in the ST and under $1,600/05 in the MT. FX News EUR/USD EUR/USD found support today at 1.2986 as news hit the market that Euro zone finance ministers rejected an offer made by private bondholders to help restructure Greece's debts as insufficient. From there short-term traders adjusted their positions while they waited for German Purchasing Manager Index for both the manufacturing and services sector. When that was released showing positive figures above expectations Euro drifted between 1.3000 and 1.3030 not knowing decisively which direction to take. For the record, Germany's manufacturing index came out at 50.9, market expected 49.2 and December was 48.4. The services index grew to 54.5, above 52.6 expectation and December's 52.4. However by 9.15am London time EUR/USD found its top at 1.3061 before drifting down again. At the time of writing EUR/USD is trading at 1.3022. Looks like we may have seen the top for today but the downside may be tested again during London/New York session. We are still eyeing 1.3145 top for the week based on technicals. USD/JPY finally broke Jan high (77.34) today hitting 77.39 at the time of writing. This may be on the back of news that Bank of Japan cut its growth outlook. Governor Shirakawa and board members lowered the economic forecast to 2 percent from an October estimate of 2.2 percent for fiscal 2012. In addition we heard funds bought large in the run up hoping to trigger stops above 77.40. We think this resistance will not be easy to break hence going short with a tight stop is worth considering if the risk/reward for you makes sense. Technically 76.50 should be quite solid now if not for anything other than the chance of BOJ intervention. The next level on the top side is 78.25.
AUD/USD
AUD/USD fell during the Asia session yesterday to meet the 1.0450 solid support on the back of slightly weaker than expected PPI data but once the European bid tone came around the rallied headed above the 1.0500 option resistance to manage a high of 1.0570during the late US morning. Positive expectations across the markets about Greece and the Bond holders coming to agreements sparked the wave, whilst a positive Dow did the work during the US morning. A retreat back towards 1.0520 has been seen in the afternoon as an unnamed Greek official warned about the reports of the IMF cutting Greek lending lines. CB Lending Index is the only data of note for Australia, however, with the focus mainly on the Euro the release should pass quietly. We have changed out short term bias to neutral as the current wave of sentiment has been stronger than we first expected and could last another couple of days with the current tone. Below 1.0450 with a rush starts the ball down the hill again! Compass Global Markets
DISCLOSURE AND DISCLAIMER
Compass Global Markets Pty Ltd ("Compass Global Markets") ACN 144 657 885, Authorised Representative No. 377377, is a Corporate Authorised Representative of Calibre Investments Pty Ltd (Australian Financial Services License No. 337927). Please refer to the Financial Services Guide which is available through our website www.compassmarkets.com for more information regarding the financial services that we offer.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.
GENERAL ADVICE WARNING: The advice provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should, before acting on the advice, consider the appropriateness of the advice having regard to these matters and, if appropriate, seek independent financial, legal and taxation advice before making any financial investment decision.
This report has been prepared for the general use of Compass Global Markets clients and must not be copied, either in whole or in part, or distributed to any other person. This report and its contents are not intended to be construed as a solicitation to buy or sell any security, product or asset, or to engage in or refrain from engaging in any transaction.
Compass Global Markets does not guarantee the performance of any investment discussed or recommended in this report. This report and the information used within may include estimates and projections which constitute a forward looking statement that express an expectation or belief as to future events, results or returns. No guarantee of future events, results or returns is given or implied by Compass Global Markets. Such statements are made in good faith and based on reasonable assumptions at the time of publication. However, such statements are also subject to risks, uncertainties and other factors which could cause actual results to differ substantially from the estimates and projections contained in this report or otherwise provided by Compass Global Markets.
Any information referencing past performance is not indicative of future performance. All information in this report has been obtained from sources believed to be accurate. Compass Global Markets does not give any representation or warranty as to reliability, accuracy or completeness of information contained in this report and therefore all responsibility is expressly disclaimed, whether due to negligence or otherwise. The information presented and opinions expressed in this report are given as of the date hereof and are subject to change without notice. We hereby disclaim any obligation to inform you of any changes after the date hereof in any matter set forth in this report.
Global Compass Markets, its affiliate and their employees may hold positions in the financial products, or securities or derivatives of, in the companies referred to in this report from time to time.
Analyst Certification: The views or opinions expressed in this report accurately reflect the personal views of the analyst(s) and no part of the remuneration of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this report. Any views or opinions expressed are the author's own and may not reflect the views or opinions of Compass Global Markets unless specified otherwise.
|  Related Blog Posts |  Subscribe via RSS *Get live updates in your web browser window. | |
Leave a comment