Monday May 5, 2014 - 03:31:09 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 05-May-2014 -0330 GMT
US Non-farm Payroll data gave a positive surprise but even then the markets pared down the initial gains later. The worse than expected HSBC PMI data for China keeps the Asian markets weak this morning.
The Dow (16512.89, -0.28%) is once again trading close to the upper end of the 10 week long range of 16000-16600 and made a high at 16620 on NFP data before coming down. But the bulls still need a new high above 16650 to confirm the resumption of the uptrend.
The Dax (9556.02, -0.49%) is facing selling once again from the upper end of the range of 9050-9720. This rangebound movement inside the broad range of 9050-9720 is going on for a considerable time now but a breakout above 9720 may produce a very sharp rally to 10000-10200.
In the Asia-pac, Shanghai (2015.56, -0.53%) is falling as expected after it failed to break above 2030. Now only an extension above 2030 may take it to 2050 levels, otherwise the fall may extend to 1985-75.
The Nikkei (14457.51, -0.19%) has bounced from our target zone of 14200. The trend remains weak below 14675-700. But a break above 14700 will take it higher to 15000-200. Bias is neutral now.
The Nifty (6694.80, -0.02%) is highly oversold but the closing reflects weakness now even in the medium term time frame. Keep an eye on 6685, which if protected today, can still produce another rally towards 6770-90, the major resistance areas now inside the broader range of 6650-6850. Only a break below 6650 and then 6620 would open the door to much lower levels of 6500-6400.
Metals advanced on stronger US data while the Crude market trades high as manufacturing contracted in China.
Gold (1307.21) and Silver (19.543) rose sharply after the US NFP data starting the month on a positive note. While Gold trades above 1307 it may target 1315-1320 and Silver needs to rise past 19.66 to rise further towards 20.5. The near term looks bullish while in an overall long term downtrend.
Copper (3.0740) has risen slightly boosted by the stronger than expected US data that was released on Friday. Unless a break above 3.10 we may see movements within the 2.95-3.9 regions while in an uptrend. Near term target on the upside is 3.15 if it rises above 3.9-3.10.
Nymex WTI (99.81) bounced from support near 98.71 just as expected and may now target 100.76-100.99 in the coming sessions. Near term is likely to remain bullish.
Brent (108.47) rose sharply from 106.85, but came off a bit from the 200-day MA near 108.99 while in an uptrend. It needs to break crucial level of 108.74 and then 109.18 above which it may target 110.
Dollar Index (79.4590) keeps trading inside the broad range of 79.25-80.50 even after the NFP data and is close to the major support of 79-78.50 now. 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 (1.3875) created a spike testing 1.3810 levels and bouncing from there. While the bounce is bullish enough, it must break above 1.3900 to confirm immediate rise to 1.4000-50.
Dollar-Yen (101.89) tested 103 briefly before sharply reversing to the downside. It has managed 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 (141.36) has tested the 141 as expected but the broader range of 140.00-143.50 must be broken to generate any meaningful move. It may trade in this range for some more time.
Pound (1.6870) has lost some of its bullish momentum contrary to our expectation when it tested 1.6820 after the NFP data. The immediate recovery keeps alive the possibility of further rise towards 1.7000-50 but another dip to 1.6800-6760 canít be ruled out before any rally.
Aussie (0.9257) tested 0.92 as it remains in a weak state and facing selling pressure on all rallies now till it manages to break above 0.9380-0.9400. Major supports remain at 0.9160-30.
Dollar-Rupee (60.16) has opened the doors to sub-60 levels after giving a very bearish weekly close. All bounces may face selling pressure at 60.40-50 and the price may test 60.00 and then the old support zone of 59.80-60 before any buying emerges.
The US Yields rose initially but fell later after the US NFP data came out at 288K. The 5Yr (1.67%), 10Yr (2.59%) and the 30Yr (3.36%) have crucial supports coming up at 1.62%, 2.50% and 3.35% respectively. The 30-10Yr spread (0.78%) also has a support at current levels. We may now expect a good rise in the US Yields if these supports hold. See http://www.kshitij.com/graphgallery/usdsin00.shtml#sin00
The Japan 10-5 Yr yield spread (0.42%) and 30-10Yr spread (1.11%) have come to test supports at current levels and may bounce from here and we may see the Japanese yields rise further.
The German-US 2Yr yield differential (-0.30%) has dropped and may now come to test the support near -0.35% as the Euro (1.3875) comes to test long term resistance at current levels. The German 10Yr (1.45%) has come down and can target 1.40% now.
The Indian 10Yr GOI (8.81%) has dipped and could bounce from the Support near 8.80%.
No major data release today.
...Expected 3.60 % ...Previous 3.60 % ...Actual 3.60 %
...Expected 0.60 % ...Previous 0.20 % ...Actual 0.90 %
IN Manufacturing PMI
...Previous - 51.30 ...Actual 51.30
...Expected 55.10 ...Previous 54.40 ...Actual 55.80
...Expected 53.30 ...Previous 53.00 ...Actual 53.40
...Expected 11.90 % ...Previous 11.80 % ...Actual 11.80 %
...Expected 207 K ...Previous 203 K ...Actual 288 K
US Unemployment Rate
...Expected 6.60 % ...Previous 6.70 % ...Actual 6.30 %