Thursday February 20, 2014 - 03:26:02 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 20-Feb-2014 -0325 GMT
Dow (16040.56, -0.56) has reacted from our resistance area of 16200-240 completely in line with our expectation. This reaction may extend to 15950-800 until it moves above 16240.
Nikkei (14524.83, -1.64%) failed to break above our resistance of 14900 and reacted to the downside where the support of 14470 must hold for the bulls. Otherwise we may see a fall towards 14300-200 below which a new low is possible. Strength will return only above 14900.
Shanghai (2150.50, +0.37%) broke above our resistance of 2120-30 to reach our target area of 2165-85. It may consolidate in this area for a while with the uptrend intact above 2125.
Dax (9660.05, +0.00%) is consolidating near the life high levels of 9700-800 in an overbought state which may produce a correction towards 9500-450.
Nifty (6152.75, +0.42%) may open sharply lower today. It was mentioned before though no such weakness is visible yet, the lack of volume in the current rally and the existence of multiple overhead resistances in the 50 point band of 6140-6190 keeps the bulls at risk. Below 6125, the weakness gets pronounced and a break below 6080-50 may signal the reversal.
Commodities are all trading lower after coming off from crucial resistances.
Gold (1310.75) is trading just above support near 1310.35 and a failure to bounce from this level may push prices down to 1300-1295; else it may rise towards 1340.
Silver (21.439) is also trading lower as the resistance near 22 holds well for now. There may be chances of a bounce towards 23 while above 20.98; else it may fall to 20.5.
Copper (3.2655) is trading lower after being rejected from resistance at 3.32. We may see movement within the broad 3.20-3.32 region for a few sessions now.
Brent (109.92) came off from an intraday high of 110.82 and is testing support near 109.83 now. A failure to bounce back would take it to 108.98. But the target in the longer term remains bullish.
Nymex WTI (102.56) also dropped from crucial resistance near 103.29. It may be ranged for sometime in the 101.5-103 region before resuming its rally to 104.
Dollar Index (80.1330) is stuck in the range of 79.90-80.25 for the last 4 sessions. The next directional move may come only beyond this range. A break on the upside may bring 80.40-45 and a downside break may show us 79.70-60.
The Euro (1.3749) managed to break above the major resistance of 1.3750, above which it may rally towards 1.3850-1.39. The bullish momentum remains intact as long as it holds above 1.37-1.3750.
Dollar-Yen (101.96) is moving in the range of 101.75-102.75 this week. With the medium term downtrend still in force, any rally may face supply pressure at the old resistance zone of 103.50. The bearish momentum will return on a break below 101.40.
The Euro-Yen Cross (140.20), like most other currencies, is rangebound between 140 and 141. It must break above 141-141.25 to reach our target of 142 and even142.70-143 is possible in that case. It has bounced from a major monthly trendline support at 136.20 to produce this sharp rally.
Pound (1.6672) has signaled the next phase of the major uptrend has resumed and now it is in a small correction after reaching our first target of 1.6750. It may reach 1.69-1.7050 after the current correction finishes. All the dips till 1.6470-80 may be bought into.
Aussie (0.8942) is testing our support of0.8925-0.89 now after it failed to break above 0.91. The strength was suspect as mentioned before and now a break below 0.89 may take it to 0.8830-0.8730.
Dollar-Rupee (62.20) may open higher near 62.30-35 today. The rallies are taking much lesser time compared to the drops implying an undercurrent of bullish strength which would be confirmed initially on a break above 62.32 and then 62.50. Till the breakout above 62.32 materializes, the risk of gradual drop towards 62 remains on the cards.
The US 10Yr (2.71%), UK 10Yr (2.73%) and the German 10Yr (1.66%) have remained stable. The US and the UK 10Yrs are trading just below resistances while the German 10Yr is just above support at current levels. We see that the yield curve is getting steeper in all the three countries, with the 10-5 Yr differential in US (1.23%), Germany (1.0066%) and UK (1.11%) showing a rise. We can expect the 10Yr yields to rise.
The Japan 10Yr (0.60%) remained unchanged. It can target the support near 0.53%-0.55%. The US-Japan 10Yr spread (2.12%) has dropped and can target 2.20%.
The Indian market was closed yesterday. We expect the 10 Yr GOI yields (8.77%) to maintain the range of 8.75%-8.85% for now.
13:30 GMT or 19:00 IST US Core CPI (MoM)
...Expected 0.10 % ...Previous 0.11%
15:00 GMT or 20:30 IST US Philifed Index
...Expected 9.20 ...Previous 9.40
UK BOE Minutes
...Expected 0-0-9 % ...Previous 0-0-9 % ...Actual 0-0-9 %
...Expected 7.10 % ...Previous 7.10 % ...Actual 7.20%
US PPI ex Food & Energy (MoM)
...Expected 0.20 % ...Previous 0.27 % ...Actual 0.20%
US Housing Starts (Mln)
...Expected 950 K ...Previous 1048 K ...Actual 880 K
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