Monday April 28, 2014 - 03:47:04 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 28-Apr-2014 -0343 GMT
There is a feeling of escalation coming in the old stand-off between USA and Russia as Russia faces the threat of new sanctions. The Asian markets have begun this week in a stuttering mode in light of this development.
The Dow (16361.46, -0.85%) finished the 10th week of trading in the range of 16000-16600. The weak close signals a move to 16300-200 again as the bulls still need a new high above 16630 to confirm the resumption of the uptrend.
The Dax (9401.55, -1.54%) dropped lower once again after failing to break above our resistance of 9720. This rangebound movement inside the broad range of 9050-9720 may continue for some more time before a breakout.
In the Asia-pac, Shanghai (2012.61, -1.17%) broke below our support of 2050-35 and may reach the 1985-75 levels once again. The 2035-50 area is going to act as a good resistance now above which 2080 stands as the trend decider zone.
The Nikkei (14262.71, -1.15%) has reached close to our target zone of 14200 with the risk of falling further to 14000-13900 after facing selling pressure from the strong resistance of 14675-700 with the Yen weakening a bit more. The trend remains weak below 14675-700. But a break above 14700 will take it higher to 15000. Bias is neutral now.
The Nifty (6782.75, -0.85%) has triggered our short term stoploss in its first sign of weakness. But please note, as long as the major support band at 6740-20 is not broken, the main trend remains firmly up. Only a break below 6720 will signal a weakness of the major trend and a deeper cut towards 6650-6600.This sharper correction has brought the possibility of a sideways move between 6650-6850 for the next few days, which canít be ruled out in the light of the upcoming General Election result.
Gold and Silver look bearish while Copper, Brent and WTI Crude are potentially bullish.
Gold (1304.86) is trading just below crucial resistance near 1307.24 which if holds may lead to some ranged moves in the 1300-1305 region before rising towards 1310. Note that it is testing crucial resistance levels on the weekly and the daily line charts. Overall downtrend persists.
Silver (19.7) continues to range sideways testing 19.5-19.66 levels. Currently testing resistance, there are possibilities of a fall to 19.5-19; else could range sideways for a few more sessions. Gold-Silver ratio (66.209) has been ranged in the broad 65-67 region and may target 67-67.5 in the coming sessions.
Copper (3.1335) has risen and is targeting resistance near 3.15. Copper-Gold ratio (5.16) is stable for now but may fall a little more toward 5 indicating a rise in Copper against in the near term.
Brent (109.81) seems to have slowed its rising momentum entering into a ranged pattern still targeting 111-112 on the upside while WTI Crude (100.88) has fallen sharply and is now testing crucial support near 100.76. If this holds we may see a rise again targeting 104-105 in the near term. Brent-WTI spread (9.48) is on a rally and is nearing resistance at 10.
The currencies must break beyond the narrow range they continue to trade in for the last two weeks and till then absolutely no change would be visible.
Dollar Index (79.7960) is stuck in the narrow range of 79.50-80.00 for the last two weeks and the broad range of 79.25-80.50 may remain in force for some more time. Only on a break above 80.55-60, the trend will reverse from down to up. A break above 80.15 would be an initial sign of strength.
The Euro (1.3825) is trading inside 1.3785-1.3865 for the last two weeks and this narrow range may break this week giving birth to a trending move towards either 1.3755 on the lower end or 1.4000-30 on the upper end.
Dollar-Yen (102.12) has been pushed down a bit by the resistance at 102.75-103.00 as expected but without any serious momentum. It has managed to hold above 101.50-20 so far to remain in the 10 week long broad range of 101-104. We keep watching the long term support at 101.00-100.50 for major moves.
The Euro-Yen Cross (141.16) must break beyond the range of 140.00-142.00 for a major directional move. A breakdown would take it to 138 and then 136 but a breakout on the upside could take it to 144.00-145.50.
Pound (1.6788) is trading inside the narrow range of 1.6750-1.6850 just like the other major currencies. To reach 1.7000-50 in the next 1-2 weeks, it must break above 1.6850. The short term momentum remains intact above 1.6730-1.6695.
Aussie (0.9284) is in a weak state right now and may face selling pressure on all rallies now till it manages to break above 0.9380-0.9400. Major supports are at 0.9160-30.
Dollar-Rupee (60.60) corrected to test our major support zone of 60.60-40. A bounce from here will keep the uptrend intact. A few days of sideways range between 60.40-61.00 is also possible.
We have the FOMC and the BOJ Monetary Policy Meeting this week. The US Fed will continue to cut its Bond purchase while the BOJ is expected to maintain its Monetary Policy.
The US 10Yr yield (2.68%) dipped further taking the 10-5Yr yield spread (0.94%) lower. The US 5Yr yield (1.74%) remained stable. A break above the resistance at 1.75% and the 5Yr can rise further towards 1.85%. The 10Yr on the other hand is vulnerable to a fall towards 2.65% while below 2.70%.
The German-US 2Yr spread (-0.27%) and the 10Yr spread (-1.20%) are expected to be ranged between -0.30% to -0.20% and -1.2% to -1.1% respectively as the Euro (1.3825) remains ranged between 1.3785 -1.3865. The German 10Yr yield (1.48%) has fallen below 1.50% and is vulnerable to a fall to 145% while below 1.50%.
The US-Japan 10Yr spread (2.06%) is currently testing support at current levels and can bounce from here. The Dollar-Yen (102.12) is down and can see a bounce from the support near 102. The Japan 10Yr yield (0.62%) is testing resistance at current levels. A break above the current resistance can take it towards 0.65%.
The Indo- US 10Yr spread (6.23%) bounced from the support near 6.15%. The Indian 10 Yr GOI yield (8.89%) rose contrary to our expectation and can now target 9.00%.
No major data release today.
No major data release friday.
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