Thursday November 21, 2013 - 03:42:41 GMT
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KSHITIJ.COM - Morning Breifing
Talk of Taper in "coming months" induces profit-taking in the Dow (15900.82, -66.21, -0.41%). We continue to see 16100 as a crucial Resistance which is holding well. A break below 15800 (if seen) will be very bearish.
All of Asia-Pac, apart from Japan, is down shaprly, ranging between -0.23% (Australia) and -1.12% (Korea). Only the Nikkei (15322, +246, +1.63%) is up sharply on a weaker Yen (100.36). The Chinese Manufacturing PMI (50.4) has come in lower than the expectation of 50.8. The Shanghai (2195, -0.52%) is retreating from the strong 2200-2225 Resistance region. Growth seems to be in question all around.
The Nifty (6122.90) fell sharply yesterday. Expect a fall below 6100 today on global Equity weakness.
Gold (1248.33) has fallen sharply after FED signaled tapering in the coming months. We may see a little upward correction but overall near term bearishness exists. Silver (19.87) continues to fall and may target support near 18.5
Copper (3.1515) is showing a sideways movement in the 3.12-3.20 region for now. We may expect some bearish moves in the near term.
Brent (107.79) has shown fluctuation in the 108.38-106.51 levels which is a good support region. We may expect a steady move for now. Note that the 50-day MA has been a crucial resistance in the past 5-days. Nymex WTI (93.690) is trading between the 100-Wk and the 200-Wk Ma . We could see a sideways movement in this range for sometime now. A rise past 95.50 would ensure a break in the recent downtrend.
Euro (1.3426) has reached our target zone of 1.3420-25 and now is trading very close to the important support zone of 1.34. A move below this will take it to 1.33 and eventually we would expect it to reach 1.31 or lower. Dollar Index (81.13) has bounced sharply after the US FOMC minutes disclosed the possibility of the QE tapering beginning from this December depending on the coming economic data. Above the immediate resistance of 81.50, it can go straight to 82.50. All the dips till 80.50 are expected to be bought into.
Dollar Yen (100.37) is hitting the upper boundary of the 4-month range. A clear move above 100.60-101 could take it to 105. Support remains at 99.50. . EURJPY (134.72) reversed sharply and found support at 134. Any bullishness will resume only above 136.
Pound (1.6082) got rejected from the resistance are of 1.6180-1.62 mentioned before. All the rallies may face selling pressure as long as it stays below the major resistance zone of 1.63-1.64.
The FOMC meeting minutes discussed a Taper in "coming months" but dwelt on need to emphasise that interest rates will remain low for a long time even after the Taper starts. But, the US 10Yr Yield (2.80%) has moved sharply higher and the 30Yr (3.92%) has increased relatively more, steepening the Curve at the Far end to 112bp from 109bp earlier. Not good for "risk" assets. The Dollar gets a Yield boost, of course.
On the other side of the Pond, the ECB is discussing possibilities of a -0.1% deposit rate to force banks to lend instead of sitting on cash as the Europeans are worried about deflation now. The German 10Yr (1.71%) has dipped slightly from 1.72%. As a result, the German-US 10Yr Spread (-1.09%) has fallen below the crucial -1.05% level and could decline more. The 2Yr Spread (-0.18%) has not reacted much, but has potential to fall towards -0.28% while below -0.15%.
The BOJ is expected to keep rates steady at 0.10% in its meeting today. The US-Japan 10Yr spread (2.19%) has seen a huge rise with the upmove in US Yields.
Indian 10Yr 9.03% in the meanwhile looks like it can move higher towards 9.25%. India battles inflation while Europe and Japan battle deflation.
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