Wednesday January 8, 2014 - 03:29:57 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 08-Jan-2014 -0329 GMT
Dow (16530.94, +0.64%) finished its correction and began the next upmove from 16400. It was mentioned that any fall till 16100-200 may be just a normal correction. The trend remains up but we have been keeping an eye on the broader band of 16800-17600 as a lot of projections converge there. Initial sign of weakness will come only below 16100.
Dax (9506.20, +0.83%) has bounced but it still looks like a correction of the earlier fall only. It has reached close to the resistance zone of 9520-25 and the bulls must cross and sustain above this. Strength will be confirmed only above 9570 only. Till then, the targets of 9100-9150 remain open.
Nikkei (15978.34, +1.04%) has reached the initial resistance zone of 16000-16015 and only a sustained move above it can take it to the next major resistance cluster of 16050-16120. There is a fair chance that the bounce may get finished at any of these levels and the fall can resume in a day or two.
Shanghai (2048.71, +0.07%) got resisted at 2063 this morning, very close to our resistance zone of 2068. Earlier, it had bounced from our target support zone of 2030 and provided a bit more conviction to our speculation that there is a fair chance that the broader range of 2030-2250 may continue for a few months more. The immediate resistance is 2068 but unless 2165-75 is taken out, the bears will continue to dominate on every rally. Breaking and sustaining below 2030 will bring much larger fall.
Nifty (6162.25, -0.47) has closed below the two day low of 6170 today after two days of consolidation. It is currently testing the support zone of 6130-50 mentioned before. Even if this support zone of 6130-50 holds for a while, any bounce may be limited to 6225-30 or 6250-60 at most. We must keep in mind that the trend remains firmly down and a rise is not going to be an easy task.
Commodities are all down and trading within crucial support and resistance levels.
Gold (1229.61) fell from the 50-day MA resistance near 1245 as the US Dollar strengthened before the release of the FOMC minutes. If this is only a small correction, we may see a rise towards 1250 in the coming sessions. But while the resistance at 1245 holds we may expect a movement within the 1225-1245 range. Only a break above 1245-1250 would ensure further rise.
Silver (19.768) has fallen and is testing the 13-day MA support at current levels. Immediate support coming up near 19.5.which if holds may take it to 20-20.5.
Copper (3.3640) is stable with no major movement and may remain ranged for some more time within 3.35-3.40 while above 3.35. Overall it is in a near term downtrend.
Brent (107.44) continues to trade low with bearish pressure still on the cards. Unable to rise past 108 in the last 3-sessions, we could see minor moves within 106.8-108 regions. A break below 106.8-106.5 could lead to a major fall towards 104.5-104 on the downside whereas a break above 108 could take it to 110. Need to keep an eye on the current levels.
Nymex WTI (93.91) is trading low as the Crude inventories shrank in the US. Near term support coming up near 93 which if holds may take it towards 96-98. Strong bears are dominating currently. Need to check if it is able to push the price below 93.
Dollar Index (80.86) bounced sharply from the support zone of 80.45-55 to test the resistance of 81 yet once again but still failed to break above, the resistance we are watching for a confirmation for a rally towards 81.50. Right now, a fall below 80.85 would drag it down to 80.55 once more. Major support comes at 80.45-55 and 80.25.
Euro (1.3627) is bouncing weakly from the modified major support zone of 1.3550-70. As long as it stays below the major supply zone of 1.3660-90, the bears may keep their dominance but the bearish momentum will return again below 1.3550-70. Any rally may face selling pressure. Only a rally to 1.3730 may mitigate the immediate weakness.
Dollar-Yen (104.50) has held above 104 so far and it was mentioned repeatedly that the bullish momentum remains fully strong above 104 and the next target of 109 remains open. Any sign of weakness will be seen only below 103.50 and 102.50. Immediate resistances are at 105 and 105.40 levels.
The Euro-Yen Cross (142.89) has bounced from exactly 141.50 in line with our expectation. The current bounce still has to tackle the strong supply zone of 143.30-70 before the bulls can hope once again. Otherwise, the selling pressure may return any moment.
The Pound (1.6394) saw good buying pressure once again near the area of 1.63 and bounced. As long as it stays above 1.62-1.63, more rallies may emerge towards 1.6740-50. Before that, it has to cross above the resistances of 1.6450-80, failing which the possibility of more fall canít be discarded.
The Aussie (0.8927) is testing the resistance area of 0.90 repeatedly but failing to sustain above it so far. Earlier too, it was rejected from our resistance area around 0.8975-0.90 which it must cross and sustain above to trigger any hope for a possible move towards 0.91-0.92. Till then the downside remains open towards 0.87-0.8750.
Dollar Rupee (62.31) may open flat to negative at 62.25-30 today. It has created a narrow range of 25 paisa for the last two days between 62.25 and 62.50. It is also at the upper end of the broader range at 62.45-65, which gives us two possible scenarios Ė the bullish one would be holding 62.15-25, a break upwards to resume the rally towards 62.75-80 and the bearish scenario would be played out if it fails to break above 62.45-65 and breaks 62.15-25. In that case, the range bound movement continues.
The US 10Yr (2.95%) remained stable after the Trade Balance Data which came out yesterday showed that the Trade Deficit decreased more than expected. The markets are awaiting the Employment Data which is due later this week and it is expected that there will be an improvement in the employment situation. The 5Yr (1.69%) and the 30Yr (3.89%) also remained stable. The yields are currently trading in their respective support zones and can see a rise from here.
The German 10 Yr (1.88%), the Spanish 10Yr (3.80%) and the Italian 10Yr (3.80%) dipped further before the ECB Meeting tomorrow. The German-US 2Yr spread (-0.18%) is stable and may bounce to -0.10% from the support at current levels. The UK 10Yr (2.95%) also dipped a little before the BOE meets tomorrow.
The Japan 10Yr (0.69%) dipped. The US-Japan 10Yr Differential (2.25%) dropped and is testing support at current levels. We may see a bounce to 2.30%-2.35% from here.
The Indian 10Yr GOI yield (8.79%) is stable and moving in the range of 8.75%-9.00%.
10:00 GMT or 15:30 IST EU Unemp
...Expected 12.10 % ...Previous 12.10 %
10:00 GMT or 15:30 IST EU Retail Sales
...Expected 0.20 % ...Previous -0.21
13:15 GMT or 18:45 IST US ADP Emp
...Expected 199 K ...Previous 215 K
Australia Trade Balance
...Expected -0.30 $Bln ...Previous -0.36 $Bln ...Actual -0.12 $Bln
US Trade Balance
...Expected -40.20 $ Bln ...Previous -39.33 $ Bln ...Actual -34.25 $Bln
...Expected 54.50 ...Previous 53.70 ...Actual 46.30
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