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Thursday December 19, 2013 - 03:48:04 GMT
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Morning Briefing : 19-Dec-2013 -0345 GMT

GOOD MORNING!

EQUITIES
The markets are celebrating the end of uncertainty over the QE taper and the dovish stance of the US Fed after it announced beginning “Taper Lite” from January 2014 and to keep the short term interest rate near zero for an extended period.

Dow (16167.97, +1.84%) bulls managed to hold on to the 15650-700 support zone mentioned before and signaled the end of correction by testing its life high. 16700-800 is the next possible target zone if it manages to sustain above the 13 year old resistance line of 16200.

Dax (9181.75, +1.06%) took support exactly from the level of 9085 we were watching and participated in the global rally to reach close to the supply zone of 9225-55 once again. Above this zone, strength will return.

Nikkei (15817.61, +1.47%) looks uncannily similar to Dow when it is noted that both the indices have been pushed back from 13 year old resistances. Going above 15650, it is facing the strongest resistance now, the 13 & 18 year old supply zone of 16000-100 above which a multi-month bull market will be signaled..

Shanghai (2150.30, +0.09%) has not participated in the global euphoria showing the inherent weakness. It has not managed to find even a pause in its downtrend after the false breakout above 2250 levels. Unless 2205 is taken out, the bears will continue to dominate.

Nifty (6217.15, +1.27%) is expected to participate in the global euphoria this morning. Yesterday, it actually recovered all the losses of the last 3 sessions in a single day. Remaining above 6170-90, it can attempt to reach 6275 and 6310. On the other hand, if it fails to cross today’s high, the entire rise could be taken as a mere bear rally and the downtrend could resume.

COMMODITIES
Gold (1220.027) saw a sharp fall yesterday and has now come off from 1226.56. A break below 1225-1220 could see a fall towards 1161.7 in the near term. But there is also a slight chance of breaking the 1226.56 level.

Silver (19.475) is trading lower today as expected. If it continues to fall further, a fall to 19.2-18.5 would not be surprising.

Copper (3.3035) has dipped as the trend resistance holds well. A fall further towards 3.25 may confirm this to be a retracement of the recent rally upwards. However, a rise beyond 3.35 cannot be negated.
Note that there is a crucial resistance zone of 3.35-3.40 just above the trend resistance.

Brent (109.36) rose after the tapering announcement by the FED. We may see some consolidation in the 109.7-108 region. Resistance prevails in the 109.8-110.2 region which if holds might create difficulty for the Brent to rise just now.

Nymex WTI (97.96) has risen from the 13-day MA and on news that the FED will reduce stimulus amidst an improved outlook. After bouncing up from 97.29, it is likely that it would rise towards 98.8-98.9.

CURRENCIES
The Dollar has strengthened against all the currencies after the Fed announced that it was going to cut its monthly purchases of Treasury and mortgage-backed securities from $85 billion in December to nothing by the end of next year in a series of small steps, starting with a reduction to $75 billion in January.

Dollar Index (80.61) has jumped up above 80.50 confirming the strength after an initial spike to 79.80. The door to 81 or even 81.50 has opened now. Support comes at 80.45-50 once again.

Resistance at 1.3825-50 has held well for the Euro (1.3660) and brought it crashing down after the Fed statement. It must hold on to the support level of 1.36, otherwise it may drop to 1.3525.

Dollar-Yen (103.95) is trading at the higher end of the range of 101.50-104 mentioned yesterday. A weekly close above 104 will signal a rise towards 105.50 and even 109 in the next few weeks. Any weakness will emerge only below 102.50.

The Euro-Yen Cross (141.94) remained stuck in the range of 140.90-142.90. It must break beyond this range to get a directional move and participants should keep in a wait and watch mode till then.

The Pound (1.6367) got tremendous buying pressure from the 1.62-1.63 area exactly in line with our expectation and hit a new 2 year high at 1.6484. As long as it stays above 1.62, a lot more rally remains to be seen. Next hurdle comes at 1.6740-50 on the upside.

The Aussie (0.8838) extended its loss to make a new 3 year low. In a case like this it would be better not to search for any supports or targets and concentrate on the resistance levels like 0.8870 and 0.8915.

INTEREST RATES
The Germany-US Yield Spreads is moving in favour of the Dollar after the Taper yesterday. The 2-Yr Spread (-0.11%) could move down towards -0.2%. The 10-Yr Spread (-1.06%) could also move down towards -1.10%. Against Japan, the US-Japan 10Yr spread (2.23%) is continuing to soar.

The US 10-Yr (2.90%) might move up further towards 3.0%, but might stabilise for a while below that. We have to see if the 30-Yr (3.91%) will see an accelaration on the upside, given that it is the 5Yr (1.55%) that has been moving up more agressively over the last few weeks. With one Taper out of the way, the Fed might have created room for itself to stand back and asses what impact the move has on the economy, especially Housing.

In India, we have to see if the Indo-US Yield Spread (5.89%) will move back up after the US Taper. It had dipped from 8.91% earlier in the day yesterday after the RBI declined to raise rates. A dip below 5.75% may not be easy because the Indian 10Yr GOI (8.79%) may find it difficult to fall significantly below 8.75%.

Dollar Rupee (62.09) may face the conflicting pressures of two opposing forces - a strong Dollar Index and a strong equity market to open flat. We have to watch for which one wins after the opening. Anyway, our trend decider level remains at 62.20-25. A break above 62.20-25 would mean a rise towards 62.75 and 63.15. A failure to get above 62.25 could bring it grinding back to 61.55-70 once again.

DATA TODAY

19:00 GMT or 0:30 IST US FOMC Meeting
...Expected <0.25 % ...Previous < 0.25 % ...Actual < 0.25 %

0:05 GMT or 5:35 IST UK Cons Conf
...Expected -11 ...Previous -12

9:00 GMT or 14:30 IST EU EA (17) Curr Acct Bal
...Previous - 13.70 EUR Bln

9:30 GMT or 15:00 IST UK GDP
...Expected 0.80 % ...Previous 0.78 %

15:00 GMT or 20:30 IST US Philifed Index
...Expected 10.30 ...Previous 6.50

15:00 GMT or 20:30 IST US Existing Home Sales
...Expected 5040 K ...Previous 5120



DATA YESTERDAY

RBI Repo Rate
...Previous 7.50 % ...Actual 7.75%

RBI Reverse Repo Rate
...Previous 6.50 % ...Actual 6.75%

RBI CRR
...Previous 4.00 % ...Actual 4.00%

RBI MSF
...Previous 8.75 % ...Actual 8.75%

GER IFO Business Climate
...Expected 109.50 ...Previous 109.30 ...Actual 109.50

GER IFO Business Situations
...Previous 112.20 ...Expected 112.50 ...Actual 111.60

GER IFO Business Expectations
...Previous 106.40 ...Expected 106.50 ...Actual 107.40

UK Unemp
...Expected 7.60 % ...Previous 7.60 % ...Actual 7.40%

UK BOE Minutes
...Expected 0-0-9 % ...Previous 0-0-9 % ...Actual 0-0-9%

US Housing Starts (Mln) (Sep)
...Expected 910 K ...Previous 883 K ...Actual 873 K

US Housing Starts (Mln) (Oct)
...Expected 920 K ...Previous 889 K ...Actual 889 K

US Housing Starts (Mln) (Nov)
...Expected 950 K ...Previous 889 K ...Actual 1091 K

 

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Amazing Trader EVENT RISK Calendar:


Tue 21 Nov
15:00 US- Existing Homes Sales
23:00 US- Yellen Speech
Wed 22 Nov
13:30 US- Weekly Jobless
13:30 US- Durable Goods
15:00 US- final University of Michigan Survey
15:30 US- EIA Crude
19:00 US- FOMC Minutes
Thu 23 Nov
US/JP- Holiday
All Day flash PMIs
13:30 CA- Retail Sales
Fri 24 Nov
All Day flash PMIs
09:00 DE- IFO Survey
US- Early Closes

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  • POTENTIAL PRICE RISK: HIGH Mon -- 14:00 GMT EZ- Draghi speaks in Brussels. Looking for any policy hints or bias


  • POTENTIAL PRICE RISK: HIGH Tue -- 13:30 GMT US- Existing Homes Sales. Top Housing Statistic

  • POTENTIAL PRICE RISK: HIGH Tue -- 23:30 GMT US- Yellen Speech. Early evening. Looking for anything on policy


  • POTENTIAL PRICE RISK: Medium Wed -- 13:30 GMT US- Weekly Jobless, Durable Goods
  • POTENTIAL PRICE RISK: Medium Wed -- 15:00 GMT US- final University of Michigan Survey
  • POTENTIAL PRICE RISK: Medium Wed -- 15:30 GMT US- EIA Crude
  • POTENTIAL PRICE RISK: HIGH Wed -- 19:00 GMT US- FOMC Policy Minutes. Key policy release


John M. Bland, MBA
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