Market Rumours

With record-high gold moving further into uncharted territory, analysts who study past chart patterns to predict future behaviour are getting acclimatised and see any correction as an opportunity to lengthen exposure.Even as chart signals show signs of strain they say the market's long-term uptrend is intact, in line with the dollar's downward trajectory, with prices targeting $1,200 an ounce by the end of 2009 and an eventual target of $1,500 by mid-2010.Gold has stunned bulls and bears alike, racing up some 30 percent this year to date and registering a record high at $1,149.15 earlier on Wednesday.From a technical standpoint, the rally looks tired. Gold's Relative Strength Index (RSI), measuring the velocity and magnitude of price direction, stands at 81.7 on a 14-day basis -- a rise above 70 indicates that the market is overbought."It looks like a very well-behaved uptrend," said Phil Roberts, analyst at Barclays Capital.Chart watchers reckon initial support for gold is located in the $1,100/1,110 area -- a break of which could trigger a slightly deeper setback towards $1,060. "Provided gold doesn't drop back below $1,068 -- its bid," Barcap's Roberts said.

EUR has downward bias with declines in EUR/USD to 133.00, EUR/USD to 1.4600 possible if global share prices continue to languish next week, say traders at major Tokyo banks. Nomura Securities senior trader Hiroshi Maeba says "it's going to be a boring market" next week, likely to become subdued ahead of U.S. Thanksgiving holiday Nov. 26, leaving players reluctant to take risks. Says thinner market conditions may last toward year-end. Focus will be on how upcoming U.S. data will affect share markets: there's November's conference board consumer confidence index on Tuesday, and October's personal spending and durable goods on Wednesday. EUR/USD last at 1.4927; EUR/JPY at 132.45.
USD/JPY down on selling by Japan exporters for regular settlement, causing CTAs to follow suit, with knock-on effects for EUR/JPY, says trader at major Tokyo bank. USD/JPY may fall to 88.00 next week if sluggish stock performance continues, raising demand for safe-haven JPY, says Gaitame.com analyst Tsuyoshi Okada; "the market is facing dollar-bearish sentiment. Players are more likely to try the downside." Adds Fed likely to keep its interest rates low, also keeping weighing on pair. Tips USD/JPY support at 88.50 in global day vs 88.76. Says EUR/JPY may fall to 131.80 vs last 132.38.
AUD/USD may be struggling for fresh gains for moment, but retreat likely to be limited, says Amber Rabinov, FX strategist at ANZ. There's still a lot of pent up demand from exporters who have been awaiting a softening in AUD/USD, particularly in commodities space; buying on dips has been a key trend. Meanwhile, central bank buying of alternative reserve assets (particularly in Asia) is still in its early stages. Adds, a third-consecutive 25bp rate hike from RBA in December may also lend upside support, but she acknowledges that markets seem less convinced the RBA will deliver the hike. AUD/USD dips to be limited to 0.9000. Now 0.9199.

Dollar/yen options were unchanged in Asia Friday, but dealers said prices are likely to fall in the weeks ahead as the underlying exchange rate remains stable. At 0200 GMT, Benchmark one-month at-the-money implied volatilities stood at 11.00%, unchanged from New York Thursday. Volatilities are likely to fall below 10% in the next few weeks for the first time since August last year, dealers said, as modest moves in the spot rate require no hedging against the risk of market fluctuations. The greenback has traded in a range of less than Y1 a day recently, and dealers expect a slow dollar decline in the medium-term on views that the Federal Reserve may not hike rates for the next couple of years. "With the dollar moving in a narrow range, buying options contracts doesn't make sense because there's little chance you will exercise a right. You don't want to waste money by paying a premium," an options dealer at a major Japanese bank said. He added even that if the dollar falls below this year's low of Y87.10, players won't buy new options contracts if the speed of decline is slow. "We might have an interesting situation in which the dollar falls under Y87.00 but one-month volatilities are below 10%," he said.

AUD/USD should peak at 1.02, 1.03 before investors view it as 30% overvalued, though flows into pair these days are more fundamentally driven rather than speculative as in last AUD bull run, says State Street Global Advisors Head of Currency Management Collin Crownover. "The flows into Australia this time are more of a stable long term variety." Flags usual risks to outlook, China slow down, Asian bubble and early U.S. recovery. "If there are significant upside surprises in U.S. economy...that will put a bid into USD." Pair last 0.9177 vs previous record post-float high 0.9850, July 2008.

For Asia, concerns about a much deeper sell off in assets due to a reversal of capital flows are becoming more acute, says Calyon; "the view the Fed is fueling a wave of hot money by keeping rates very low has fueled plenty of concerns expressed by various officials in the region. The latest was the HKMA which warned yesterday of an asset bubble due to money pouring into Hong Kong." Some countries in region have implemented or are warning about implementing measures to curb hot money flows; "concerns about (such) inflows are not surprising given the outperformance of Asian equity and real estate markets over recent months. If Asian central banks act on these concerns it will have important implications for currencies in the region and may slow or put a break on the sharp appreciation trend that has been in place." Says in short term, increased risk aversion will play positively for USD vs most currencies, especially high betas like AUD, NZD, GBP; "Asian currencies will also be on the back foot due to profit taking on the multi-month gains in these currencies."