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Morning FX thoughts - 18 Nov'11

Westpac Global Markets Strategy Group

Friday 18th November 2011 1 Comment

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Commodities joined equities in a slump as European debt woes continued to overshadow encouraging US data.

Earlier, Asian markets were mixed with Japan rising on higher commodity prices from the day before, but Chinese stocks fell as the central bank indicated it can’t loosen monetary policy.

European markets continued to trade weaker amid increasing yields on Spanish and French bonds and UK consumer confidence reaching new lows. Spain raised a 10-year bond at 6.98%.

The S&P 500 opened lower, shrugging off positive jobs and housing data as European debt concerns persist. The Eurostoxx 50 fell by a steep 1.9% intra-day before rebounding to close down 1.1%. The S&P 500 is currently trading down 1.8%.

WTI crude oil is currently trading down 2.2% on demand worries. Gold and copper have also shed 2.1% each.

The US 10-year yields dropped 3bps to an intra-day low of 1.96% before moving up sharply to 2.04% and then dropping again to 1.97%.

While both the AUD and NZD traded in a narrow range through the day, they fell sharply in NY trading. AUD was trading at 1.9985, down 0.5%. NZD dropped 1% to 0.7567. Both were trading close to their lows of the day.

The US dollar index opened weak on falling expectations of stimulus, but maintained its drop at 0.2%. EUR initially traded weaker on the Spanish and French auctions but recovered on reports of ECB bond buying to trade at 1.3468. JPY traded in a narrow range of 76.92 and 77.09, currently at 77.00.

AUD/USD and NZD/USD outlook next 24 hours: US leading indicators and data from Europe are to be looked out for. With no signs of a change in sentiment, we see AUD and NZD trading between their support pivots of 0.9909 and 0.7470 and resistance pivots of 1.0227 and 0.7742 respectively, baring any big surprises.

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Comments from our readers

On 18 November 2011 at 10:41 am Siena said:
The potential for a new financial earthquake in the next few months seems real and still very much in the offing, insofar as the ongoing saga of the eurozone sovereign-debt crisis. No matter what happens, investors will reward companies that master the art of growing under pressure.
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