Tuesday February 4, 2014 - 03:36:49 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 04-Feb-2014 -0335 GMT
The global markets are witnessing a bloodbath today as the latest bad news has come in the form of a disappointing US Factory data.
Dow (15372.80, -2.08%) broke below 15600 sharply to reach 15350 in line with our expectation. This is the first sign of losing momentum since the 2009 bottom and opens the door towards 14700-900 initially with short rallies interrupting the fall. Equality with the 2011 correction gives a medium term target of 14100-13900 but even 13400 might be in cards now.
The end of the bull market in Nikkei (14278.28, -2.33%) was mentioned in this space repeatedly which is now confirmed by Yen too. Below 14000, our targets of 13700 and 13200 may be achieved quickly.
Shanghai (2033.08, -0.27%) remains closed till 6th February. It is among the better performers in this turmoil as it has already been in a major bear market for while now and has been beaten a lot already much before the other markets came under bear grip. That said, it needs to rise past 2080-90 and then 2150 to break the longer term downtrend it is trapped in.
Dax (9186.52, -1.29%) failed to bounce even a little in a show of major weakness. The continuation of this firm downtrend may take it to 8950-8850 now.
Nifty (6001.80, -1.44%) is all set to achieve our first target of 5970 in the opening itself and may achieve even 5920 today itself. The price action at 5970 has to be watched closely but actual threat for the bulls could be the possibility of the strongest sector CNX IT breaking the 7 month long support at 9710-30.
Gold (1256.56) has risen after an intraday low near 1240 and seems to be ranged in the 1274-1235 region while in the near term uptrend. While above 1250, we may see a rise towards resistance near 1274.42, which if breaks could move further up to 1295-1300.
Silver (19.366) has been ranged since the last two months now within the broad 19-20.5 region. Near term looks bearish with 18.5 on the downside from where it may bounce back to 20 and maybe 20.5 in the longer run.
Copper (3.1815) continues to fall but we may expect a bounce from 3.18-3.195 in the next few sessions towards 3.25-3.35.Failure to bounce from these levels would push prices down to 3.10.
Brent (106.020) has fallen a bit and may test support near 104.5-104.8 region from where it may bounce back to 108-109 levels. But a break below 104 may push it to 102. While in an overall uptrend we could see 110 in the longer run.
Nymex WTI (96.65) paused after rising for 3-sessions but remains above 96.5. While it remains within 96-99.60 we may see consolidation, expecting eventual bullish movements in the near term.
Technically, almost all the instruments, except Dollar Index, show a monthly Bearish Engulfing candle, implying a lot more negativity in the coming days.
The Dollar Index (81.1340) has not been able to break the higher end of the 3 month long range of 79.70-81.50 in a repeat show of the same movie and has increased the probability of keeping it range bound for some time more. A successful break above 81.50 may take it to 81.85-90 and then 82.50-60.
The Euro (1.3511) is testing the resistance zone of 1.3540-75 now after it signaled a move towards 1.33 and even 1.31. The bearish momentum may increase below 1.3450 while any possible bounce may face good selling pressure.
Dollar-Yen (101.24) is firmly trading below the bull market defining support level of 101.50-101.90 to signal the bear market. Staying below 102.50-103.50, we may see a journey towards 98 in the coming days.
The Euro-Yen Cross (136.88) achieved our second target of 137 too and got closer to the major support of 135. No sign of strength is visible yet and all rallies may face good selling pressure.
Even the Pound (1.6302) could not escape this carnage and weakened to 1.63, below which a fall to 1.6175-1.62 is possible. A break of 1.617 would open a huge downside.
The Aussie (0.8757), already beaten blue and black, is relatively unscathed after it has bounced from the major support of 0.87 but must go above 0.8830 and then 0.89 to make it meaningful. Otherwise, it could be in danger of seeing a meltdown towards 0.8500.
Dollar-Rupee (62.68) may open higher near 62.85-90 today. It is contracting its range in the last 3 sessions. A break above 62.80 may take it to 63.10-15. Weakness towards 61.70-80 may emerge below 62.20-30.
Interest rates are down globally.
The US 10Yr (2.59%) dropped further after the Manufacturing Index came out weaker. It is now targeting support near 2.50%.
The German 10Yr (1.64%) dropped further and is testing the support at current levels. A bounce from the support and we may see it going up to 1.75%-1.80%. The German-US 10Yr spread (-0.93%) is up and can target -0.90%.
The Japan 10Yr (0.60%) dropped and is trading near the lower boundary of our range of 0.60%-0.65%. We may now see it drop to target support near 0.50%. The US-Japan 10Yr yield spread (1.99%) dropped and can now target 1.95%.
The Indian 10Yr GOI yield (8.73%) fell further. With no confirmed direction of movement, we can say that it may remain ranged between 8.70% - 8.90%.
3:30 GMT or 9:00 IST RBA Meeting
...Expected 2.50 % ...Previous 2.50 %
... Previous 47.60 ...Actual 46.7
IN Manufacturing PMI
... Previous 50.70 ...Actual 51.40
... Previous 52.70 ...Expected 53.90 ...Actual 54.00
... Previous 57.20 ...Expected 57.10 ...Actual 56.70
...Previous 55.00 ...Expected 55.10 ...Actual 56.10
US Manufacturing ISM
...Previous 57.00 ...Expected 56.20 ...Actual 51.30
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