Wednesday December 4, 2013 - 03:43:30 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 04-Dec-2013 -0343 GMT
Equities remain flat to negative overall.
The Dow (16008.71, -0.48%) found support near 15830, the area we were watching. The reasons for the bulls to worried were mentioned before as Dow was not being able to sustain at the higher levels of 16100-200. If the index manages to hold on 15800 it can rally again. On the other hand, a close below 15800 could signal a drop towards 15500 or even lower.
The Dax (9223.40, -1.90%) fell retracing in a single session all the gains of the last 6 days – the first bearish signal in a long time. Staying below 9250-80, it can reach 8950-9000 levels. A weekly closing below 9000 could be the signal for the end of this rally and a possible drop to 8500 and 8100.
The Asia-Pac region is trading mixed. The Shanghai (2258.02, +1.59%) has finally broken above the major resistance area of 2235-45. If it can sustain and close above these levels, it would potentially point to a multi-month major rally. The Nikkei (15426.70, -2.05%) has come below 15500-600 after getting rejected from the 2013 high of 15900 levels. Staying below 15600, we may see a move to 15000 or lower.
The Nifty (6201.85, -0.26%) is struggling at the major resistance levels and that validates our stance of cautious bullishness despite the trend being up. Further strength is expected only above 6230 and then 6270. Supports to be watched come at 6160-70 and 6125. We would not like to commit ourselves till next Monday, when the market would open after the Assembly Elections results. We reiterate, the risk reward ratio at this level does not favor the bulls.
Gold (1220.82) is stable. While below 1250, there are still chances of a fall towards 1180.
Silver (19.107) has dipped a bit and may target support near 18.5 in the coming weeks.
Copper (3.1785) has risen slightly but is in an overall near term sideways trend. A near term support is coming up at 3.15. We may expect a sideways movement in the 3.15-3.25 region for some time.
Brent (112.90) rose sharply from the 13-Week MA. While in an uptrend it may target weekly resistance near 114 in the coming weeks. There are also chances that we may see some sideways consolidation before a sharp rise. The 108.5-109.6 levels is a strong support region.
Nymex WTI (97.24) bounced sharply after US manufacturing data came out more than expected and the Crude stock inventories shrank considerably. It is testing the 200-Week MA for now but we cannot expect this to be a fresh rise before further confirmation.
Euro (1.3595) recovered nearly all its loss and made a high of 1.3609. The recovery was stronger than our expectation but the structure still remains weak as it is making a Rising Wedge now. If Euro manages to go above 1.3620-30, it may go make its final rally to 1.3650-70 and then fall sharply. This scenario would be confirmed by a break below 1.3540. This bearish scenario would be invalidated by a sustained move above 1.3675.
Dollar Index (80.61) took support from the zone of 80.35-50 for the 5th time in the last two weeks. It shows the importance of this level. We continue watching the resistance area of 81.10-15 as only a break above that would confirm the end of the correction for the Dollar. A break from this range of 80.35-81.15 would give us the next major directional move.
Dollar Yen (102.43) has seen some profit booking exactly from our supply zone of 103.50-75. As long as the low of 101.98 holds, the bullish momentum remains intact. The initial sign of weakness would come only below 101.98 and 101.65.
EURJPY (139.28) made a weekly and monthly close at a new 5 year high,
signaling its intent to go towards 144. It is consolidating in the narrow range of 139-140 for the last 3 sessions now. Staying above the support of 138.30, it may begin rising again.
Pound (1.6387) is consolidating after a huge rally. But any real weakness will be signaled only on a move below 1.63 and 1.6230. Till then all the dips could be bought. The long term targets of 1.67-1.70 remain intact.
Aussie (0.9058) remains stuck in the range of 90.50-92 with the bears dominating and after getting rejected from the higher end of this range, it has returned to the lower end. The range can extend to 0.9020 now, below which 0.89 would be a distinct possibility. Any return of strength would be signaled only above 0.9150.
Dollar Rupee (62.36) may open flat near 62.35-40. The trend remains up and a break above 62.45 tomorrow may take it to 62.70 and higher. But a failure to rally above 62.45 would keep the Dollar Rupee in the range of 62-62.45 and susceptible to further weakness. Only below 61.85, we would reconsider our stance. For now, we maintain the buy in dips and sell on rallies strategy.
The US 10Yr (2.78%) dipped a little. With the ADP Employment data will prove crucial for the markets as the anticipated increase in the US Employment will be a key point for The Federal Reserve to reduce its Bond buying program. Which way the yields move after the data needs to be seen.
The markets are waiting for the ECB and BOE Meeting to be held tomorrow. The ECB is not expected to cut its benchmark interest rates any further. The BOE is expected to keep its key the same. The German 10Yr (1.72%) has dipped ahead of the ECB Meeting.
The Japanese 10Yr (0.62%) has moved up a bit. The US-Japan 10Yr spread (2.15%) has come down as the Yen rose against the dollar.
The BOC Meeting is also to be held today. It is expected that the BOC will not cut its rates.
The Indian 10Yr (8.76%) rose slightly yesterday and is expected to trade at these levels for the next few days.
Delhi Elections - - -
Mizoram Elections - - -
1:30 GMT or 7:00 IST AU GDP
...Expected 0.70 % ...Previous 0.70 % ...Actual 0.60%
10:00 GMT or 15:30 IST EU GDP
...Expected 0.10 % ...Previous 0.10 %
10:00 GMT or 15:30 IST EU Retail Sales
...Expected 0.20 % ...Previous -0.51 %
12:15 GMT or 17:45 IST US ADP Emp
...Expected 174 K ...Previous 130 K
13:30 GMT or 19:00 IST US Trade Balance
...Expected -40.30 $ Bln ...Previous -41.78 $ Bln
15:00 GMT or 20:30 IST BOC Meeting
...Expected 1.00 % ...Previous 1.00 %
15:00 GMT or 20:30 IST US New Home Sales (Oct)
...Expected 432 K ...Previous 421 K
15:00 GMT or 20:30 IST US New Home Sales (Sep)
...Expected 427 K ...Previous 421 K
...Expected 2.50 % ...Previous 2.50 % ...Actual 2.50%
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