Wednesday May 15, 2013 - 03:42:34 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 15-May-2013 -0340 GMT
The Nifty (5995.40, +14.95) has been unable to close above 6000 yesterday despite good inflation data. As such, it still has some danger of falling towards 5900. We see strong resistance come in at 6050-6080.
Dow Jones (15215.20 ,+123.57 ,+0.82%) surged in trade yesterday and closed above 15200. Dow may continue to move higher but we need to keep in mind that supports are much lower at 14900-14800 and therefore we need to keep ourself prepared for any sudden downward correction.
Dax (8339.11 ,+59.82, +0.72%) continues its dream run and has closed above 8330. DAX looks likley to move higher as long as the Support of 8200 holds.
Nikkei (15,097.00, +338.55, +2.29%) has moved above 15000 for the first time in 5 years. The momentum looks to continue in Nikkei as the Yen may see a prolonged spell of weakness. Supports for the Nikkei come much lower though at 14500.
Shanghai (2,217.76, +0.84, +0.04%) has opened flat in trade and may see rangebound trade between 2010-2050. We expect the index to see a move on the upside and target 2050 as the Shanghai seems to be holding on to the supports at 2015-2010.
Gold (1425) has come down as expected and can now target 1400, especially since the Euro can slip to 1.2930-2870.
Brent (102.72) is also back down to 102 and may head down to 101 within a band of 101-104.
Silver (23.25) has come down lower and is heading towards 23 as we have been saying in our Morning Briefing. Silver will continue to stay weak as long as it trades below 23.70.
Weakness in commodities is showing in Copper (3.2965) also and it may head lower to 3.25. However we may see Copper bouncing back to 3.35 from 3.25.
Most of the currencies have weakened against the USD and may remain weak in the coming days. However the Euro is moving into the oversold areas and a small bounce may be seen from the 1.2900-1.2875 region. That could benefit the other currencies as well.
Dollar-Swiss (0.9665) has moved back above the 0.96 levels and is closing on a resistance around 0.97. As the Euro (1.2924) may continue to remain subdued, the USD-CHF looks good for some more gains. Supports for the USD-CHF comes in at 0.957.
Dollar-Yen (102.185) is trading above 102 on renewed weakness in Yen. We expect the USD-JPY to target 103 with Supports at in at 101. The overall mood of the Dollar-Yen looks likely stay upbeat. But, watch the USA-Japan yield Spread. More on that in the Interest Rates section.
Like Dollar-Yen, the Euro-Yen (132.126) may also target 134 in medium term with support around 130. However the Euro-Yen has not shown the expected momentum as the Euro (1.2924) is trading weak. So we expect the currency pair to eventually reach 134 but that might take some time though.
The Pound (1.5226) has also come down on the strength of Dollar. The Pound is moving towards an important support around 1.52 and we need to see whether the support actually holds in coming days. However with Euro expected to stay weak we may see the Pound staying subdued.
The Aussie (0.9886) may continue to stay weak as meaningful support comes in much lower around 0.9830-0.98. Till then the mood in Aussie is going to stay weak.
The Singapore Dollar (1.2388) is likely to trade between 1.2375-1.24 in coming days.
Dollar-Rupee (54.81) has once again moved back above the 54.80 mark on weakness in Euro. Should the Euro fall we could see Dollar-Rupee move up towards 54.90-55.00 again. The market is evenly poised now, neither Overbought nor Oversold. There is Resistance at 55.00 and while that holds the Dollar could fall back again towards 54.60 the day after.
There's been a sharp rise in US yields over the last few days following the fall in Unemployment to 7.0%. The US Fed's Unemployment target of 6.5% does not appear so very distant now and could be achieved sooner than previously anticipated. The market fears that the Fed might reduce its $85 bln per month asset purchases. The 10-Yr (1.98%) has some Resistance near 2.0%. The 30-Yr (3.19%) also has Resistance near current levels. So we could see the market consolidate here for some time while it debates possible future Fed action.
The sharp rise in US yields has led to a decline in the Germany-USA 10-Yr Spread to -0.60%, levels earlier seen on 27-March. Now it looks like a further dip towards the longer term Support at -0.65% might be seen. We think that Support should hold on first testing and produce a bounce, which would be good for the Euro as well.
Japanese Yields have also risen sharply recently, especially on the 5-Yr (0.22%) and 10-Yr (0.56%). This has caused USA-Japan 10-Yr Spread to fall sharply in the last few days. Unless the Spread (1.08%) bounces back from near current levels, it could put a brake on the rise in Dollar-Yen. We need to watch out for that.
The Indian 10-Yr GOI (7.48%) is falling in response to better CPI and WPI data recently. We target 7.40% in a few days now. The market is again hoping for a rate cut by the RBI.
8:30 GMT or 14:00 IST UK Unemp
...Expected 7.90 % ...Previous 7.90 %
9:00 GMT or 14:30 IST EU GDP
...Expected -0.10 % ...Previous -0.60 %
9:00 GMT or 14:30 IST EU CPI (YoY)
...Expected 1.80 % ...Previous 1.70 %
12:30 GMT or 18:00 IST US PPI ex Food & Energy (MoM)
...Previous - 0.16 %
13:00 GMT or 18:30 IST US TICS (Net foreign purch of long-term Sec)
...Expected 43.40 $ Bln ...Previous -17.84$ Bln
13:15 GMT or 18:45 IST US Industrial Production
...Expected -0.10 % ...Previous 0.40%
13:15 GMT or 18:45 IST US Capacity Utilization
...Expected 78.40 % ...Previous 78.5 %
EU IND Prodn (MoM)
...Actual 1.01 % ...Previous 0.30%
EU IND Prodn (YoY)
...Actual -1.57 % ...Previous-2.65% -
...Actual 4.89%...Previous 5.96 %
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