Morning Dew - 30 January 2014

Another USD10b More

JCI moved higher on Wednesday as Turkey’s central bank stepped in and raised interest rates to quell the steep decline of Turkish lira. Similarly, South African central bank also decided to raise the interest rates.

From the US, the FOMC meeting decided that another $10bn must go. The amount of monthly bond purchases is now $65b per month. The Committee viewed that while labor market indicators were mixed, on balance however, the indicators showed further improvement. On unemployment rate, the Fed Chairman Ben Bernanke pointed out that the unemployment rate has declined, but it’s still elevated. Bernanke himself is scheduled to be out of office and to be replaced by his colleague, Janet Yellen starting in February.

Rates Raised

In Turkey, one-week repurchase rate was raised to 10% from 4.5%, overnight lending rate was raised to 12% from 7.75%while the overnight borrowing rate from 3.5% to 8%.

South Africa’s central bank unexpectedly raised its interest rates by 50 basis points.

In Argentina, relaxed regulation to buy dollars failed to attract interests.

Technically Speaking...

JCI continued to rise on Wednesday, hitting the intraday high at 4,432. This is the upper border of the EMA-band.

Recent low at 4,286 will be the nearest support line while the next big support comes at 4,161, followed by 4,109 and 3,837.

Upside potential remains, but as we bumped into the EMA resistance around 4,435, the JCI is vulnerable again and is likely to step back a bit.

MACD is now inching even closer to the zero line, while RSI stays high around 70%.

No new recommendations for now as we prefer to see the market stabilizes a bit after a major sell-off recently.

Day Ahead

Turkey and South Africa have at least stem the fall in both lira and rand, respectively. This week is to be cut short by national holiday on Friday, so it is likely that we may see less activity this Thursday. Fed’s move to cut more stimulus has triggered another 1.19% fall in the Dow. JCI itself then, will be vulnerable during the coming session.

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