KRW: USD/KRW Holding Close To Recent Highs, Diverging From Broader USD Trends

The Nikkei(NHZ5) contract overnight range was 50770 - 51220, closing -0.14%. The Nikkei stalled towards the 51500 area yesterday and drifted lower off those highs. The Index has gone parabolic beginning in August/September, it looked to finally be putting in some sort of a top last week but with global sentiment improving again this price action could potentially continue into year-end. The support between 49000-49500 proved to be solid last week and while this continues to hold, I suspect the bulls will be around on dips as the focus turns back to the year's highs above 52 600 and a potential “Santa Rally.” This price action is pretty wild and the acceleration higher has been relentless but I do become wary when price action becomes parabolic, it's prudent to not fight the market when the price moves like this but history tells us when it does eventually stall the pullback could be just as brutal. Look for a 50500-51500 range on the day as it looks to consolidate these recent gains.

Fig 1: Nikkei Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

US gas continued to rise strongly driven by wintery weather across the east and forecasts for a cold season. Prices are now almost 10% higher this month and 21% since 17 October but is now flashing overbought. Production remains ample though to provide for increased heating consumption and robust demand for LNG exports. European prices continue to trade in a narrow range waiting for direction.

• Henry Hub rose 4.3% to $4.525 after reaching $4.581 off a low of $4.276. Not only has a cold snap hit the eastern US this week, but long-term forecasts for November to March have shifted cooler, according to Bloomberg. Temperatures for mid- and into the second half of the month have also been revised lower for the north and central US (Vaisala). Thus heating demand over winter is looking solid. BNEF data showed demand on Tuesday was up 20.1% y/y.
• European gas was little changed trading between EUR 30.83 and 31.180. The lack of direction is reflected by flat prices in November. The market is waiting for information on the outlook for winter and is stable while LNG imports remain strong but remains vulnerable to any supply disruptions.
• Storage in Europe is slightly lower at 82.4% having reached 83% last week. Near-term the weather shouldn’t cause a drawdown with temperatures above average over the second half of November, according to Bloomberg.

• RES 3: 140.08 High Jun 13  
• RES 2: 139.05 High Aug 4 
• RES 1: 137.30 - High Sep 8 and key short-term resistance
• PRICE: 135.90 @ 16:17 GMT Nov 11
• SUP 1: 135.58 - Low Nov 10
• SUP 2: 135.39 - 1.618 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)
• SUP 3: 134.69 - 2.000 proj of the Aug 4 - Sep 2 - Sep 8 swing (cont.)  

Prices started last week well, growing the gap with next support into the 135.61 Oct 08 low. Despite this stability, prices remain inside the firm downtrend that’s dominated prices since mid-September, and prices will need to challenge resistance before signaling any broader reversal. Key short-term resistance has been defined at 137.30, the Sep 8 high. Further weakness would open 135.39 next, a Fibonacci projection.