U.S.
Overnight the U.S. Treasury announced it will be selling its warrants in three wall street financial houses including JP Morgan. The warrants will be auctioned off in a move that is another step in the gradual withdrawal of bailout funds to major financial firms. Treasuries rallied and yields on two-year notes dropped to 0.68% which further weakens USD on a yield differential basis; remarkably, the yield on some three-month bills turned negative. U.S. equity markets recovered from their session lows and closed down about -1% to -1.5%. The market seems to have had another of its occasional attacks of the jitters in what has been a relatively uneventful week in terms of economic data. USD made some strong gains, particularly against the commodity currencies as they have been the most overbought. The lack of follow-through in EURUSD indicates to us that the market isn't really running scared, but just winding off some risk. The drop in crude oil prices helped push USDCAD to a high of 1.0688; it has since retraced to 1.0627. Gold has recovered strongly from its low at $1130 and is currently back above $1140. In other news, Treasury Secretary Timothy Geithner expressed confidence that China would eventually allow the Yuan to appreciate as it became less reliant on exports, but he wouldn't give a timeline (who can?). For all intents and purposes, Mr. Geithner is waving the white flag on the U.S. - China currency debate which has become a lose-lose situation for both sides. Indeed, such empty rhetoric on currencies has hardly added to Mr. Geithner's credibility which has already been hollowed out by his repeated strong dollar statements. The OECD added its voice yesterday to the global call for Yuan appreciation, stating that the fixed rate policy risks importing inflation into China.

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Asia
Predictably, Asian markets have followed the lead form the U.S. overnight and have opened lower. The Nikkei 225 is adding to a two-week losing-streak and seems determined to test support at 9000; the 9000 area is about as good a technical entry point that Nikkei bulls can get in the near-term, so CFD traders should keep their eyes peeled. USDJPY has tested 88.70 support levels for the third time this week and they held; the word that comes to mind when looking at USDJPY is drifting, and we have been forced to rescind our bullish bias on the pair for the moment. As expected, the Bank of Japan left its cash rate at 0.10% overnight by a unanimous decision. In the accompanying statement, the BoJ said it will continue to maintain low rates and upgraded its assessment of the economy, particularly capital expenditure and private cosumption were forecast to improve. This relatively upbeat assessment from the BoJ contrasts sharply with the Finance Ministry's concerns for a double-dip recession, not unlike the current debate in the markets.

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Over on the subcontinent, the Indian Nifty Index has opened down nearly -0.5%. The 50-stock index represents 21 different sectors of the Indian economy and offers traders a broad and fast-moving exposure to one of the most exciting emerging markets. The Nifty has risen more than 100% in 2009 as global liquidity flows have found their way to emerging markets; as an index it is among the more volatile.

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EURUSD Support/Resistance: 1.4820/1.4938
USDCAD Support/Resistance: 1.0614/1.0688
USDJPY
Support/Resistance: 0.8866/0.8940
GBPUSD Support/Resistance: 1.6670/1.6750
S&P 500 Support/Resistance: 1086/1100
Nikkei 225 Support/Resistance: 9385/9560
NSE Nifty
Support/Resistance: 4915/5076