Wednesday July 3, 2013 - 03:28:01 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 03-Jul-2013 -0325 GMT
Caution led profit-taking hits Equities globally after the rise last week. Caution ahead of ADP Employment data today and position squaring ahead of US holiday tomorrow and crucial US NFP data on Friday. Expect some more dips till Friday.
Dow (14932.41, -0.28%, -42.55) has closed marginally lower. All of Asia-Pac is in the red. Shanghai (1983, -1.19%) and Australia (4735, -1.56%) are trading particularly weak. Even the Nikkei (14014, - 0.64%) is also seeing some profit-taking.
The Nifty (5857.55) had closed lower yesterday and can dip further towards 5825-00 today. But, the medium term looks bullish targeting 6000.
Mixed moves in Commodities. Precious metals soft. Industrial Commodities firm.
Gold (1248) has started retreating again, as overall bearishness prevails. Even Silver (19.59) has dipped a bit. There is a bit of confusion on the outlook. On the one hand Silver looks like it can rise past 20 towards 21. But, it needs to remain above 19.25 in order to be able to rise further. Failure to do so can send it back down towards 18.35-25.
Gold (MCX, 25907) remains bearish targetin 24500. Silver (MCX, 40492) is also bearish targeting 38000.
Copper (3.1345) has dipped a bit after the strong rise to 3.15 earlier. But, the bigger picture is hopeful as a disastrous decline towards 2.90 has been avoided. However, we still need to see a rise past 3.15-17 to put the market on a higher ground.
WTI (101.95) and Brent (105.17) have spiked in the last two days, reportedly on Egyptian unrest. The rise has been in line with our expectation. But, there is crucial Resistance coming up near 102.95 for the WTI. Brent can rise further towards 107.50, especially if the Brent-WTI Spread (3.22) rebounds a bit.
Dollar strength continues.
The Euro (1.2975) has slipped below 1.3000, in line with expectation of fall towards 1.29. That said, we are not overly bearish as we see good chances of a bounce from 1.29 towards 1.34 all over again.
The Pound (1.5153) and Aussie (0.9157) are also falling. As mentioned yesterday, there is Support at 1.5090 for the Pound, but the Aussie can decline further to 0.9070.
Dollar-Yen (100.53) has risen to our target of 100.40-70, seeing a high near 100.85 yesterday. Further rise towards 101.85-102.50 may also be possible. The Euro-Yen Cross (130.45) too looks like it can rise towards 132.10.
The Rouble (33.21) has weakened further, as expected. The Real (2.2398) and Rand (9.9895) also look potentially weak only or ranged at best. Dollar-Rupee is being quoted near 59.55 on the NDF markets as compared to the Close near 59.6650 yesterday. We are looking for a rise towards 59.75-85 at least.
BOE and ECB meetings tomorrow. The markets may be hoping for some hints of QE. The US 10-Yr (2.47%) trades steady ahead of the NFP on Friday. The German-US 10-Yr Spread (-0.77%) is steady, while the 2-Yr Spread (-0.18%) is slowly rising. This supports our view that the EUR-USD can find good Support near 1.29.
News reports say that junk bond yields are rising worldwide. The main point is that while money is available, it is getting costlier. Looking at the 3-mth MIBOR (8.43) we'd say that while rates are slowly rising they are still relatively low. The 3-mth MIFOR (6.48%) is also in a downtrend but could bounce from here. This one needs to be watched carefully.
1:30 GMT or 7:00 IST Australia Trade Balance
...Expected 0.05 $Bln ...Previous 0.03 $Bln
9:00 GMT or 14:30 IST EU Retail Sales
...Expected 0.40 % ...Previous -0.52
12:15 GMT or 17:45 IST US ADP Emp
...Expected 161K ...Previous 135K
12:30 GMT or 18:00 IST US Trade Balance
...Expected -40.30 $ Bln ...Previous -40.29 $ Bln
...Actual 2.75 % ...Previous 2.75 %
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