Thursday April 10, 2014 - 03:38:11 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 10-Apr-2014 -0337 GMT
The underlying bullish sentiment expressed in this space yesterday manifested itself in the markets as the indices met the required condition of an immediate rally.
The Dow (16437.18, +1.11%) bounced strongly as expected and decreased the danger of any immediate fall below 16000 considerably as the Fed minutes signaled a more dovish approach regarding any interest rate hike. We remain bullish but this rise requires follow through buying to take it above 16600-650 and signal further rally towards 17000.
The Dax (9506.35, +0.16) keeps the bullish hopes alive but needs a break above 9730-9800 to signal the next phase of the rise.
The Asian markets are trading mixed.
The Nikkei (14398.19, +0.69) is trading very close to the crucial long-term Support at 14200-150. A break below 14150, if seen, would require a lot of people to rework their bullish outlook.
The Nifty (6796.20, +1.51%) rallied immediately as expected and hence, opened the door towards 6900+. The short term bullish momentum remains intact above 6745-35.
Overall commodities are all up.
Gold (1315.510) has risen to test the 21-day MA on the daily line charts. Targeting 1325 in the near term, if it rises above this level, it may rise towards resistance near 1375. A fall could be seen from either 1325-1330 levels or from further levels of 1375-1380.
Silver (19.997) is well ranged between the crucial 19.6 and 20.25 levels and may continue so for some more sessions as this is a consolidation after the recent fall from 21.78 to 19.67. Prices may test the crucial 20.2-20.5 levels which if holds may push back to 20-19.6.
Copper (3.037) continues to remain in the 3-3.07 region and seems it may continue so for a few more sessions. Till then no major movement is expected.
Brent (107.52) has come off from 108.14 and is currently trading below 108 levels. It may not find difficulty in breaking 108-108.75 levels and may continue to rise targeting 108.98-109-110 in the near term. But if the resistance holds, we may see another fall to 106 levels.
Nymex WTI (103.28) has risen further and has come off a bit after testing resistance near 103.77. If this holds we may see a fall to 102-100; else it may target 104-106 in the coming sessions. Need to wait and watch where it goes today.
Dollar Index (79.50) bears have the best chance in the last few weeks to push it further down to the major support zone of 79-78, but expect some fight from the bulls from 79.25-79.
The Euro (1.3849) has broken above the resistance of 1.3820-40 contrary to our expectation but the old supply zone of 1.3885 may not give in to the bulls that easily and selling can emerge again from 1.3885-1.39.
Dollar-Yen (101.89) has reached a very crucial point as it stands on the lower end of the 10-week channel. Holding above 101.50, a gradual bounce towards 103 is possible but a break below 101.50 may take it to the final medium term support at 100.75-50. Our bias is neutral.
The Euro-Yen Cross (141.10) is testing the support band of 140.50-139.50 and the price action here may determine the medium term trend. The bulls may attempt a comeback from the 139.50 area.
Pound (1.6801) has achieved all our targets of 1.67-1.6750 and now may face some selling at 1.6780-1.6820 area before extending the rise to 1.70-1.7050.
After an unexpected drop in unemployment rate, Aussie (0.9411) has extended the rally to the strong overhead supply zone at 0.94-0.9450 after achieving all our medium term targets. It may be the time for some caution with the longs here.
Dollar-Rupee (60.14) remains stuck in a narrow range of 59.80-60.20 inside the broader range of 59.50-60.50. If the resistance of 60.20 is not broken immediately, we may see a retesting of 59.60-50 soon as the medium term trend remains firmly down.
The US 10 Yr (2.69%) is unchanged. The 5Yr (1.62%) has dipped. The yields can now target support near 2.60% and 1.60%-1.55% before we see a bounce back towards 2.75% and 1.75% respectively.
The German-US 2Yr spread (-0.18%) saw a further rise as the Euro (1.385) rose further to test resistance near current levels on the 3-day line charts. The German-US 10Yr spread (-1.13%) also saw a rise and can test the resistance near -1.05%. The German 10Yr (1.57%) is stable near term, but in a downtrend since 1.95% (Jan-14) that can target 1.50% while below 1.60%.
The US-Japan 10Yr spread (2.08%) seems to be stabilizing and could bounce from Support near 2.05%. The Dollar-Yen (101.88) has also stabilized a bit after the sharp fall yesterday. The Japan 10Yr (0.62%) is up a bit. With the 10-5Yr yield differential (0.43%) testing support at current levels we can expect the 10Yr to target resistance near 0.65%.
The India-US 10Yr spread (6.33%) dropped as the 10 Yr GOI yields (9.03%) saw a fall from 9.10% but is in an overall uptrend that can test 9.25%, maybe before the Inflation data next week.
Over in England, the BOE is expected to keep Interest rates unchanged today. The BOE is looking at the unemployment figures currently at 7.2% and says that they won’t consider increasing borrowing costs till unemployment falls to 7%.
2:00 GMT or 7:30 IST CN Trade Balnce
...Expected 0.90 $ Bln ...Previous -23.0 $ Bln ...Actual 7.7 $ Bln
0:30 GMT or 6:00 IST Australia Labour Force
...Expected 7.30 K ...Previous 48.2 K ...Actual 18.1 K
12:00 GMT or 17:30 IST BOE Mtg
...Expected 0.50 % ...Previous 0.50 %
UK Trade Balance
...Expected -9.30 £ Bln ...Previous -9.46 £ Bln ...Actual -9.09 £ Bln