Wednesday May 14, 2014 - 03:37:26 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 14-May-2014 -0337 GMT
Slight pause in upmove in global Equity Indices, except for the Dax.
The Dax (9754.43, +51.97) looks particularly bullish, having risen well past 9700 in a gap-up opening yesterday. A level of 10000+ could be seen in coming weeks. On the other hand, the Dow (16715.44) did not rise much as the US Retail Sales for the previous month was revised sharply lower. It now stands at 1.88% for April and 1.92% for May. Please take a look at http://www.kshitij.com/fundamentals/funcharts/usretail.shtml
The Nikkei (14375.72, -49.72, -0.34%) is seeing a bit of profit-taking after the decent rise yesterday. It can test 14650 in a few days, but remains in an overall downtrend while that holds. The Shanghai (2043, -0.37%) is also pausing a bit in its bounce from 2000 that can take it towards 2070-2100 potentially.
The Nifty (7108.75) could also see slight pause/ profit-taking after its 7.8% rise in the last three days, just ahead of the actual Election results on Friday. A good news for the market is that Jayalalitha seems to have said Yes to supporting Modi.
Gold (1293.47) is trading within the crucial support-resistance zone of 1280-1300 and unless a break above 1300-1315 is seen we cannot negate the near term bearishness. Silver (19.527) is finding difficulty to break crucial resistance near 19.66 and while below this level it may continue to move in the 18.85-19.66 region. Overall near term looks bearish.
Copper (3.1270) has come down slightly as the China IIP came out lower than expected but it is currently testing channel support near 3.12-3.13 while in the recent uptrend. There are chances of a rise to 3.20-3.25 levels if it sustains above 3.12 else a break below 3.10 could lead to a sideways consolidation.
WTI (101.92) has risen sharply testing crucial resistance near 101.92-102.00 which if holds could bring it back to 100 else a break above 102 could target 103-104 in the near term. Brent (109.35) has also risen well breaking above 109.16 which if sustains could target 110 in the near term from where we could see some correction. Overall the long term trend remains up.
The Euro (1.3716) has broken below the crucial 1.3735 support level and can decline further towards 1.3625. The Euro-Yen (140.21) found Resistance at 1.4100 yesterday, as expected, and has fallen, dragging the Euro down with it. A test of crucial Support at 139.50-25 is likely over the next few days. Whether that breaks or not will also decide whether the Euro breaks below 1.3625 or not.
Dollar-Yen (102.16) rose to 102.36 yesterday, but could not sustain the gain. A dip to 102.00 is possible today. A bounce from there, if seen, could take the market up to 102.50-60.
The Pound (1.6850) has been seeing a near-term decline from 1.6996 (06-May) but can find Support at 1.6800 soon and could resume its long-term upmove from there. The Aussie (0.9393) rose well yesterday but needs to break above 0.9400 now to attract more Buyers. It remains one of the strongest currencies overall.
The Rupee (59.6850) is closed for Buddha Purnima today. The NDF market seems to be quoting near 59.45/50. The Rouble (34.8160) strengthened further yesterday while the BRL (2.2142) is ranging sideways. From that angle, the Rupee looks relatively strong only overseas.
The US yields saw a slight dip yesterday after the Retail Sales data came out less than expected suggesting a slower growth. The yields had been rising on the back of important supports and they may still rise if the supports keep on holding. The 5Yr (1.62%), the 10Yr (2.62%) and the 30Yr (3.45%) can target 1.75%, 2.75% and 3.75% respectively. The US yield spreads are stable. A continued rise in the yields and the US yield curve can steepen.
The German – US 2Yr differential (-0.26%) has been trading lower as the Euro (1.3716) fell further and has come to test support near 1.37. A bounce from here can take it higher and we may see the yield differential go up. The German 10Yr (1.42%) has fallen and is trading close to our target of 1.40%.
The US-Japan 10Yr yield differential (2.01%) has dipped as the Dollar-Yen (102.16) is stable near yesterday’s levels. The Japan 10-5Yr yield spread (0.42%) is testing support at current levels and we may see a bounce from here taking the yields higher.
The Indian 10Yr GOI (8.78%) saw a rise and is trading near 8.80%. A break above 8.80% and we may see it target 8.90%-9.00%.