Thursday January 9, 2014 - 03:52:13 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 09-Jan-2014 -0345 GMT
Dow (16462.74, -0.41%) remains in a shallow sideways corrective mode between 16400 and 16600. 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 (9497.84, -0.09%) has bounced but it still looks like a correction of the earlier fall only as it is making a Bear Flag. 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 (15929.64, -1.19%) 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 (2052.12, +0.38%) got resisted at 2063 yesterday, 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 (6174.60, +0.20) failed to cross above 6200 after a feeble bounce, nothing different actually. We reiterate, the most important thing to remember is that the trend remains down even after the third day of pause. 6130-50 remains the support to watch and 6225-30 the resistance.
Gold (1226.465) is trading lower after bouncing from just above the13-day MA yesterday while the resistance near 1245 still holds. Bearishness is still on the cards but if the support at 1225 holds, it could take it higher, back to 1250.
Silver (19.602) is also trading lower after testing resistance near 19.71 and is at a crucial juncture now. Immediate support coming up near 19.5-19.which if holds may take it to 20-20.5.
Copper (3.3500) remains stable for now and may continue so for the next few sessions moving steadily towards support near 3.30-3.31.Overall it is in a near term downtrend.
Brent (107.45) is stable for now after a fluctuation yesterday between 107 and 108 levels. Minor moves in the 106.8-108 region is still expected. Currently testing support at current levels on the line charts, a break above 108 could take it to 110. However we cannot negate a fall below 107-106.5 just now. Need to wait and watch.
Nymex WTI (92.66) traded lower after a bigger than expected gains in gasoline and distillate supplies in US was shown in a government report.
Falling below the support at 93, if it does not see a correction by the next 2-3 sessions we could see a fall towards 90. Strong bears still dominating, we need to keep an eye on this.
Dollar Index (81.09) is trading firmly above 81, the resistance we were 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. Immediate resistance comes at 80.30.
Euro (1.3574) has dropped from the major supply zone of 1.3660-90 in line with our expectation. The bearish momentum will return again below 1.3550-70 and the price is testing that right now. Any rally may face selling pressure. Only a rally to 1.3730 may mitigate the immediate weakness.
Dollar-Yen (104.94) 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 (142.42) has dropped sharply exactly from the strong supply zone of 143.30-70 mentioned yesterday. It was noted that, the selling pressure may return any moment as long as this zone was not convincingly broken above. Interestingly, it is making a Bear Flag too just like Dax. Bearish momentum will return below 142 and 141.50.
The Pound (1.6455) 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 falls canít be discarded. It is struggling with this resistance just now.
The Aussie (0.8882) has made yet another Bear Flag. It has been 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. Bearish momentum will return below 0.8820-30.
Dollar Rupee (62.07) may open positive at 62.15-20 today on the back of RBI scaling back Gold curbs in various ways. It broke below the two day low of 62.25 yesterday and failed to recover its ground. The bearish scenario mentioned here has played out so far and strength will be back only on a firm move above 62.25-30. Major resistances remain unchanged at 62.45-65 and supports remain at 61.60-70. The broader rangebound movement continues.
The FOMC Minutes came out last night and the US 10Yr (2.98%) saw a rise as policy makers saw risks to financial stability from continued monthly bond purchases. The ADP Employment Data came out better than expected. The NFP and Unemployment Data are due on Friday will be closely watched by the markets. The 5Yr (1.76%) saw a sharp rise while the 30Yr (3.88%) remained stable.
The markets are eagerly waiting for the ECB and the BOE Meetings today. The Euro Area yields i.e. the German 10 Yr (1.90%) and the Italian 10Yr (3.88%) saw a rise before the conclusion of the ECB Meeting. But the Spanish 10Yr (3.78%) dipped as improving Euro Area Retail Sales suggested that the economy is showing signs of improvement. The UK 10Yr (2.97%) also saw a rise before the conclusion of the BOE Meeting.
The Japan 10Yr (0.70%) remained stable. The US-Japan 10Yr Differential (2.27%) rose a bit and can bounce to 2.30%-2.35% from here.
The Indian 10Yr GOI yield (8.80%) is stable and moving in the range of 8.75%-9.00%.
19:00 GMT or 0:30 IST FOMC Minutes - - -
9:30 GMT or 15:00 IST UK Trade Balance
... Expected -9.40 £ (Bln) ...Previous -9.73 £ (Bln)
10:00 GMT or 15:30 IST EU Biz Climate
...Expected 99.00 ...Previous 98.50
12:00 GMT or 17:30 IST BOE Mtg
...Expected 0.50 % ...Previous 0.50 %
12:45 GMT or 18:15 IST ECB Meeting
...Expected 0.25 % ...Previous 0.25 %
...Expected 12.10 % ...Previous 12.10 % ...Actual 12.10%
EU Retail Sales
...Expected 0.20 % ...Previous -0.41% ...Actual 1.34%
US ADP Emp
...Expected 199 K ...Previous 229 K ...Actual 238K
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