That is not unlikely in our opinion

Per-Erik Karlsson from Avantage Financial GMBH at 11/11/09

S&P 500 futures once again approaching the key 1100 resistance level this morning after the successful test last week. Need to see a strong punch through this level to force stops and avoid selling from longs to get a successful break out. As outlined last week Gold has more potential to the upside with overhead resistance at 1118 as the closest resistance level now, which is the 75% quartile of the current rising trend channel, meaning it will only be overbought once it goes above that level in our models. Lots of Speculation that China will buy the rest of the IMF gold quote for sale after the India deal was announced. That is not unlikely in our opinion. Volatilities in equities and FX options have dropped substantially over the last 2 sessions as risk appetite is back in full force.
Seems like 30 level in the VIX is a tough resistance level and it has basically failed to trade above this level for any longer period of time since this summer. Looks like a range of 20 to 30 in the VIX for the moment and possible break to the upside as most likely if this range should break. GBP once again on the radar this morning and dropping substantially on news out from Fitch that UK is most a risk losing the AAA rating among the major economies. These comments regarding UK rating has been out before and should probably have limited impact. More talk on Yuan overnight as Obama has put the Yuan on the agenda for his upcoming meeting in Beijing next week. We suspect China will resist any major Yuan revaluation until the export figures fully recovers. It is probably not so easy for US to argue that much with China since US is very dependent on the credit from China and China holds about $2trn in reserves. We generally think JPY has limited scope for a very strong rally as BOJ will most likely step in and prevent the JPY from moving much below 87 vs. USD. Remember that Toyota was out last week saying that if JPY got stronger they had to move their production abroad. We can mention it again as we have done over the past few months, Japan has really weak looking fundamentals with ageing population, weak domestic spending, huge public debt and now a strong JPY. That is not a good mix to have in our opinion and it is unlikely that JPY can sustain a substantial rally when the fundamentals are that bad. It is normally that JPY benefits from risk aversion and we don’t want to step against that trend just yet, but at lower levels in both AUDJPY and EURJPY we would favor longs. We expect AUD to continue to perform strongly and dips to be supported as other Central Banks are still clearly behind RBA in the tightening cycle. Crude continues to struggle to get above 81 USD per barrel level once and we favor selling rallies for move back towards the 77.50 support level. Pretty much bearish figures out from USDA raising output forecasts for both Soybeans and Wheat, but prices continue to hold above the support levels tested last week. We are looking for short entries in Wheat, but prefer higher levels to get short. Interesting article in the Guardian from a so called whistle blower inside IEA, claiming the oil reserves have been distorted, see link below.

Technical’s

Euro: Bullish momentum intact above 1.48 and key resistance remains the yearly high at 1.5060. Higher equities could pull along Euro towards the 1.5060 level where we expect stops to be lurking.

Cable: Failed above 1.67 on a few occasions since September. We still think the GBP will underperform EUR for the rest of the year and EURGBP long on dips looks attractive.

USDJPY: Has been trading inside the falling trend channel since March 09, with overhead resistance at 92.30 and support at 86.88. We see limited scope for JPY to go below 86 and favor longs on dips, however need a daily close above 92.50 to really open the upside.

Swissy: Bearish below 1.02 and need to break 1.00 to extend the drop.

AUDUSD: Still trading inside the rising trend channel that has been in place since 13th of July 09. The rising support of this trend line is down 0.8980 today with overhead resistance at 0.9518.

USDCAD: Bearish below 1.09 and this level held the rally, key support down at 1.02.

EURJPY: Struggling to stay above the 135 level and looks more range bound inside the key resistance of 138.72 and support down at 131 (2 Nov. low).

GBPJPY : Key levels remains 147 support and 153.30 resistances. Technically bullish above 147.

AUDJPY: AUD is strongly correlated to equities. We expect the direction in equities to drive AUD as well. Keep an eye on US nonfarm payrolls for direction.