Tuesday May 6, 2014 - 03:40:04 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 06-May-2014 -0340 GMT
The conflict between Ukraine and Russia has intensified but the effect seems largely contained to the commodities and the equities or Forex have not been affected till now.
The Dow (16530.55, +0.11%) 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 or they will run the risk of going towards 16300 and lower.
The Dax (9529.50, -0.28%) 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 (2028.85, +0.07%) is testing our resistance at 2030 now and may reach 2040-50 now. The upward journey may not be that smooth with 2070-80 expected to stiffly push down any bounce.
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 (6699.35, +0.07%) bounced as expected but was limited to 6740 levels so far. Today it may try to bounce again towards our expected 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.
Gold, Copper and Silver potentially bearish while Crude may trade higher in the near term.
Gold (1309.019) and Silver (19.51) are stable for now. Gold came off from crucial 1315.32 which if holds may push it to 1300; else it may rise higher to 1320. Silver remains stable while below crucial resistance at 19.66. Overall metals are in a long term downtrend.
Copper (3.0500) is testing channel support on the daily and may bounce a little targeting 3.08-3.10. Overall longterm down trend is in force since Janí12 and the bears would hover around unless we see a break above 3.10-3.15.
Nymex WTI (99.41) is trading within crucial levels of 98.71-100.76 and unless a break on either side of this range it may remain ranged. A break above 100.76-100.99 could take it higher to 101.12-102 levels. However if a break below 98.71 is seen, it may fall further towards 96-94. Overall itís in an uptrend since Juní12.
Brent (107.71) fell sharply as the 200-day MA holds well for now. While below resistance at 109.18, it may trade in the broad 107-109 region. It needs to break crucial level of 108.74 and then 109.18 above which it may target 110. Note that it is testing channel support on the daily charts and may bounce back in the next couple of sessions.
The major currencies remain largely unchanged after the Friday spikes produced by the surprising US NFP data.
Dollar Index (79.4690) keeps trading inside the broad range of 79.25-80.50 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 (1.3880) is trading in a narrow sideways range of 1.3860-90 after bouncing from 1.3810. While the bounce is bullish enough, it must break above 1.3900 to confirm immediate rise to 1.4000-50.
Dollar-Yen (100.06) 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 (141.66) 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 (1.6877) 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 (0.9285) may rise to the strong resistance area of 0.9380-0.9400 if it manages to break and stay above 0.9315 now. A failure may result in another fall to 0.92. Major supports remain at 0.9160-30.
Dollar-Rupee (60.21) has bounced from 60.00 levels but doesnít bring any conclusive reversal yet. The oversold state has produced a 23 paisa bounce similar to the bounce of 25 paisa on 28th April before falling again. So it remains to be seen if it manages to break above 60.25-28 today to reach the strong resistance zone of 60.40-50. If it fails to break above 60.25-28, the fall may resume again.
The US 5Yr (1.68%), 10Yr (2.61%) and the 30Yr (3.40%) yields saw a slight rise yesterday. The yields have crucial supports coming up at 1.62%, 2.50% and 3.35% respectively. The 30-10Yr spread (0.80%) has also come to test support at current levels. We can now expect the US Yield curve to steepen in the coming months if these supports hold.
The German-US 2Yr yield differential (-0.29%)remained stable and may come to test the support near -0.35% as the Euro (1.3880) struggles to break above the long term resistance at current levels. The German 10Yr (1.46%) remained stable and can target 1.40%.
The Japanese markets are closed today. The Japan yield spreads have come to test supports at current levels and we may see a bounce from here.
The Indian 10Yr GOI (8.74%) dropped below the support near 8.80% and is vulnerable to further fall towards 8.50-8.60% while below 8.80%.
Over in Australia, we have the RBA Meeting at 10.00 (IST) and it is expected that the RBA will keep its rates unchanged.
1:30 GMT or 7:00 IST Australia Trade Balance
...Expected 1.10 AUD Bln ...Previous 1.26 AUD Bln ...Actual 0.73 AUD Bln
4:30 GMT or 10:00 IST RBA Meeting
...Expected 2.50 % ...Previous 2.50 %
9:00 GMT or 14:30 IST EU Retail Sales
...Expected -0.20 % ...Previous 0.39 %
12:30 GMT or 18:00 IST US Trade Balance
...Expected -40.10 $ Bln ...Previous -42.30 $ Bln
14:00 GMT or 19:30 IST CA PMI
...Expected 54.50 ...Previous 55.20
CN Manufacturing PMI
...Expected 48.40 ...Previous 48.00 ...Actual 48.10