Singapore Markets Morning Briefing - what you need to know for Fri Jan 27, 2012

Friday bears not so good news for the local bourse following setback in US stocks.

OCBC Investment Research said:

US stocks slipped overnight and this is likely to weigh further on local sentiments this morning after the STI showed signs of halting its strong climb yesterday.

Despite surging as much as 0.9% intraday, the index faced a fairly strong selling pressure at around the 2910 key resistance before pulling back to just a 0.1% gain by the close.

And with today's tone likely to remain more downside biased, we could see the index falling further towards the immediate support at the 2852-2860 (gap support formed recently).

Below that, the subsequent base is at the 2793 resistance-turned-support. On the upside, we still see the vital resistance around 2910 (key support-turned-resistance and 200-DMA), with the subsequent obstacle pegged at the 3000 key psychological level.

RBS, on the other hand, noted:

The USD strengthened modestly during the session versus the EUR and some of the higher-beta G10 currencies, such as the AUD, NZD and CAD, as equities closed the session lower. But despite some of the retracement today, the USD was still weaker across the board following Wednesday's FOMC decision as relative rate differentials remained unfavourable to the USD.

USD/JPY remained below 77.60 for much of the session as the reaction to the Fed's end-2014 projection for its policy rate dampened some of the recent upside momentum in the pair. USD/CAD briefly broke below parity and we continue to hold long CAD vs. short USD and JPY recommendations.

Meanwhile GFT said:

The EUR/USD continued to power higher, rising 7 out of the past 8 trading days. Stronger German consumer confidence contributed to the rally by easing concerns about a recession in the Eurozone this year. Low unemployment helped to boost sentiment for the fifth month in a row and according to GfK, the agency that conducts the survey, morale in Germany should increase further in the month of February.

This upbeat outlook is not unique to consumers – earlier this month we saw similar reports of stronger investor and business sentiment. These reports show that confidence is not completely lost in the Eurozone even if it means that Germany decouples from the rest of the region. As the largest economy in the Eurozone, they control the purse strings. They are forcing austerity on other Eurozone nations while enjoying for themselves the benefit of a weaker euro.

The EUR/USD continues to shake off all EUR negative news including the sharp rise in Portuguese bond yields and reports that the ECB is split on how to handle their holdings of Greek debt. European Union leaders continue to look to the IIF and Greece to solve their own problems – they announced today that there will be no plans to hold a special meeting on Greece at the EU Summit.

There was also talk that a Greek deal could be close to a deal with creditors ready to accept a lower coupon payment. Given how many times these “rumors” about Greece end up unsubstantiated, we remain skeptical about the accuracy. In the meantime the EUR/USD has cleared its 50-day SMA but has yet to break above 1.32, which is the key level mentioned yesterday. As a former breakdown and support turned resistance point, this is a critical level for the EUR/USD to break before further gains are possible.