Market Update - 19 March 2013

• Spotlight still on Cyprus, the government delayed voting on the EU deal again and announced banks would remain closed until at least Thursday while discussions continue behind the scenes over how best to administer the draconian Troika medicine to the Cypriot people.

• The latest update is that the tax levied on smaller deposit holders (i.e. less than 100k) will be reduced and that levied on the larger holders (i.e. more than 100k) will be increased to soften the blow on the protesting masses. The Troika has left the composition of the tax up to the Cypriot government but they have just reiterated €8 must be raised, so they will have to come to a compromise before passing it through parliament, presumably tomorrow.

• USDMYR came off a little, opening at 3.1220 as overnight markets turned a little risk off and MYR NDF traded lower. No change from my end still for USDMYR expectations, range of 3.1100-3.1350 with 3.1000 being the strong support and bias towards the upside with resistance coming in at 3.1500.

• USDJPY having dipped down towards 94.50, it gapped up to 95.50 but USDJPY options riskies seems to favour more downside which I agree as I reckon market could push USDJPY lower towards the 93.80 support again before resuming this upside trade.

• Until the deal passes parliament you can expect markets to remain on edge but it seems a straightforward path to me. Longer term this may well have implications for other peripheral states if more bailouts are necessary, as is expected in Portugal and Greece (and quite possible in Spain and Italy), but in the short run I think markets are more than capable of getting over this scare.

• In the US the NAHB housing market index fell for a second month to 44 from 46, current conditions have softened but expectations remain distinctly positive.

• The DOW is down 0.43% after trading briefly in the black and the S&P is lower by 0.55%. Commodities stabilized with oil pared losses of as much as 2%, now down only 0.5% while copper fell 0.62% and gold held onto gains made in the Asian session at $1604.70 last.