Wednesday August 28, 2013 - 03:39:44 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 28-Aug-2013 -0338 GMT
Nasty turn down south in the Dow (14776.10, -170.33, -1.14%) overnight. Opens up chances of fall towards 14000, down 5% from current levels. This, despite the decline in the US 10-Yr Yield to 2.73%. Syrian tensions are being blamed for the fall, but we think there could be something deeper. Maybe we're in for a July-Sep 2011 kind of correction.
Asia-Pac indices are all in the deeply in the red today. Shanghai (2082, -1%) and Nikkei (13235, -2.27%) are down sharply. Indonesia (-2.3%) is the other big loser. Crucial Support seen at 13200 on the Nikkei. Things turn pretty bearish if that breaks. The fall in Dollar-Yen (97.15) is a big negative for the Nikkei.
Sentiments being really bad, the Nifty (5287.45) is likely to fall further today with 5200-100 now looking possible.
Gold (1415.30) has moved past 1400 as political tension over Syria increased demand for the metal. A rise towards 1425-1450 can be seen. Silver (24.65) continues to rise steadily but faces long term resistance at 25.
Copper (3.3340) continues to consolidate sideways. We continue to look for an eventual rise towards 3.45-3.50. View holds while above 3.30-25.
Nymex WTI (109.92) is now close to our prediction of 110. A further rise towards 112-114 could be on the cards if the Syrian situation impacts sentiments further. Brent (115.47) has risen past our target of 114We can now expect a further rise up to 117-118.
The Dollar Index (81.16) trades slightly lower, but still above the crucial 81.00 Support. The Euro (1.3389) is turning higher, but has to break above the crucial Resistance at 1.34 to enter into newer bullish ground. Pound (1.5542) fell to 1.5480 yesterday, but has bounced back a bit. It is caught between Resistance at 1.56 and Support at 1.55 now. Note that there is 21-day MA Support at 1.5487 now.
Dollar-Yen (97.10) has fallen sharply yesterday and can fall towards 96 this week. That is a crucial Support which absolutely needs to hold to prevent further Yen strength.
Dollar-rupee (66.2450) touched its all time high yesterday creating panic in the market. It is expected to trade between 66.25 and 67 today.
The US 10-Yr (2.73%) has fallen further suggesting that a top could be in place for the medium term. There could be some chances of one more surge towards 2.90-95% in the next couple of weeks ahead of the FOMC but then we could see a decent Double Top for the longer term. If tomorrow's US GDP data comes in a little lower than the expected 2.3%, that would suggest that the economy is not doing as well as previously thought.
The German-US 2-Yr Spread (-0.13%) has been rising in favour of the Euro. The 10-Yr Spread (-0.78%) has also risen sharply reflecting the fall in the US 10-Yr. The US-Japan 10-US Spread (1.99%) has come off sharply. A further fall below current levels would break the uptrend since 1.05% (since May). That could be bearish for Dollar-Yen.
The Indian 10-Yr (8.84%) had climed sharply on Rupee depreciation yesterday. We have to see how it reacts to the overnight decline in the US Yields.
No major data release today.
GER IFO Business Climate
...Actual 107.50 ...Previous 106.2
GER IFO Business Situations
...Actual 112.00 ...Previous 110.1
GER IFO Business Expectations
...Actual 103.30 ...Previous 102.40
US Case Schiller
...Actual 12.06 % ...Previous 12.17 %
US Cons Conf
...Actual 81.5 ...Previous 81.0
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