Tuesday March 25, 2014 - 03:29:34 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 25-Mar-2014 -0324 GMT
The global sentiment is a bit mute this morning after the US manufacturing data came a tad off the expectations but that could be taken as a normal correction of the sharp rally enjoyed by the Asian markets yesterday.
The Dow (16276.69, -0.16%) is stuck in the 500 points band of 16000-16500 for more than 5 weeks now. This sideways medium term move may be taken as a bullish consolidation before breaking out to rise to 17000 later.
The Shanghai (2064.16, -0.10%) is not falling anymore nowadays on the bad Chinese data and all the hoopla about it entering a new bear market. This actually invites the suspicion if the already existing 6 year long bear market is coming to a close. Right now we watch the 2080-85 levels for sustained rally or reversal back to lower levels.
The Dax (9188.77, -1.65%) was sharply rejected from our 9400 levels and a failure to break above 9400-9460 may drag it down to 9050-9000 levels once more. Nikkei (14425.14, -0.35) is consolidating in the range of 14200-14700 but the downtrend remains in force till 14700-800. We look for a break of 14200 to confirm the bearish momentum.
Nifty (6583.50, +1.39%) rallied sharply in line with our expectation and may extend it further to 6650-6700. Any correction should be limited to 6540-25 to continue the rise.
Gold (1312.23) has fallen sharply reaching almost to our downside target of 1300. A fall to 1300 may be expected from where it may rise back targeting 1368-1380 else; a break below 1300 (if seen) could push prices to 1295.
Silver (19.98) has bounced exactly from support near 19.8 in line with our expectation and if this holds we may see a rise towards 20.5-21 in the near term. However a further fall to 19.5 may be seen below 19.8. Gold-Silver ratio (65.63) has dipped a bit and if this is a signal of retracement then we could see a fall to 63.7 else could see a little rise towards 66-66.5 before falling.
Copper (2.9550) remains stable within 3-2.90 with no major movement for now. It may consolidate for some more time before indicating further movements.
Brent (106.51) is struggling to rise but is fluctuating highly between 106 and 108 regions. A fall below 106 could take it to 104. Long term expected to remain bullish.
Nymex WTI (99.28) is trading a bit higher but overall the bears donít seem to have gained enough strength to take prices up. While below 100.5, movements may be restricted within 100.5-97 levels.
Brent-WTI spread (7.21) is stable for now. It could test 6-6.8 on the downside from where it may bounce back towards 8.
Dollar Index (79.89) remains on course to its way to 80.50-75 with the expected correction going on right now. Staying above 79.70-65, the strength remains intact.
The Euro (1.3836) has bounced sharply but yet to break above 1.3885-95 to negate the downtrend. The bearish momentum may intensify on a break below 1.3750.
Dollar-Yen (102.22) held above 101 to maintain the broader range of 101-104. The sideways action in this range may continue for some more time before a decisive move emerges.
The Euro-Yen Cross (141.44) remains stuck in a narrow range of 140.40-142 for the last few days and needs to break it for a trending move. The bullish view for 144-145 survives as long as it holds above the major support area of 139-138.50 but a break below this support may turn the view bearish and may pull it down to 136-135.50 and even 131. Initial sign of weakness will be a break below 140.50.
Pound (1.65) is close to our buying zone and the medium term trend decider level of 1.6470-50 now. Now if it manages to hold above our stop loss level at 1.64 and breaks above 1.6585, a resumption of the uptrend may be expected.
Aussie (0.9147) is showing initial signs of strength but only a break above 0.9210 would confirm a rally to 0.93-0.9350 initially. A failure to break above 0.92 may still drag the Aussie down.
Dollar-Rupee (60.7750) has tested our target support of 60.80-70 now and no particular sign of strength is visible yet. The price reaction in the long term support zone of 60.60-50 will determine any follow through or more rangebound movement.
The US 10-5Yr yield differential (1.01%) has remained stable as the US 5Yr (1.73%) was unchanged and the 10Yr (2.73%) dipped slightly and fell below 2.75%. Both 5Yr and 10Yr yields are testing crucial resistances near 1.75% and 2.75% respectively. Only on a break above the resistances we may see the US yield curve getting steeper.
The German 10Yr (1.58%) has come off from the resistance near 1.65-1.66%, contrary to our expectation of a rise. The German-US 10Yr spread (-1.10%) is up and can come up to -1.05% to -1.03% to test the resistance there. The 2Yr spread (-0.21%) is moving in line with the Euro (1.3836) which recovered at little overnight.
The US-Japan 10Yr spread (2.12%) is stable can target 2.20-2.25%. The Japan 10Yr (0.61%) is range bound between 0.55-0.65%. A break beyond this range will give further direction.
The Indian 10Yr GOI (8.78%) has dipped further but it is still range bound between the support near 8.75% and the resistance near 8.85%. A break beyond this range will give us further direction.
9:00 GMT or 14:30 IST GER IFO Business Climate
...Expected 110.90 ...Previous 111.30
9:00 GMT or 14:30 IST GER IFO Business Situations
...Expected 114.60 ...Previous 114.40
9:00 GMT or 14:30 IST GER IFO Business Expectations
...Expected 107.70 ...Previous 108.30
9:30 GMT or 15:00 IST UK CPI Y/Y
...Expected 1.70 % ...Previous 1.90 %
13:00 GMT or 18:30 IST US Case Schiller
...Expected 13.30 % ...Previous 13.42 %
14:00 GMT or 19:30 IST US Cons Conf
...Expected 78.70 ...Previous 78.10
14:00 GMT or 19:30 IST US New Home Sales
...Expected 447 K ...Previous 468 K
CN Manufacturing PMI
...Expected 48.70 ...Previous 48.50 ...Actual 48.10