Friday May 16, 2014 - 03:29:22 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 16-May-2014 -0328 GMT
Stronger than expected profit-taking Equities globally.
The Dow (16446.81, -1.01%) fell strongly yesterday. But uptrend since January is intact for now provided there is a decent bounce back above 16500 today. A break below 16400 (if seen) could lead to larger decline. The Dax (9656.05, -1.01%) has also seen a strong bout of profit-taking pushing it below 9700, as the EU GDP (+0.2%) came in lower than the expectation of +0.4%.
The Nikkei (14055, -1.7%) continues to fall, pulled down by the strong Yen (101.47) and can test crucial Support near 13850. The Shanghai (2019, -0.29%) also trades much lower but needs to attract Buyers soon if it wants to rise again next week. Watch crucial Support near 2010-00.
Given the bout of profit-taking in global Equities, we could see the Nifty (7123.15) also give up some gains in a classic "Buy the rumour, sell the fact" phenomenon today, even if the NDA does very well.
Gold and Silver may remain range bound in the near term while Copper looks bullish. Crude market looks bullish.
Gold (1296.14) has come off sharply from channel resistance on the daily charts just as expected and is now trading below 1300. Near term may be range bound in the 1270-1315 regions until we see a break on either side of the range. Silver (19.49) could not sustain above 19.6 and came down to resume in the previous 19-19.5 zone. Overall down trend may persist.
Copper (3.1510) after trading in the 3.05-3.07 range had geared up for a rally targeting 3.20 and continues to do so. We may see a fall to 3.15-3.10 if resistance near 3.20-3.23 holds well. Near term looks bullish.
Brent (109.4) is trading just below crucial resistance near 109.82 and if this holds we may see a sharp fall to 108. However a break above 109.8 would take it higher towards 110.58.
WTI (102.04) remains stable for now. But while above 102, there is a possibility of targeting 103.6-103.7 and even 105 in the near term. Overall near term looks bullish.
3 main currency pairs in close vicinity of their 200-day MA Supports. Watch that.
Today's big mover is Dollar-Yen (101.52) which has broken below the important 101.60 support. A test of and dip below the 200-day MA at 101.21 is likely now. 100.99 is an important Fibonacci Support to watch.
The Euro-Yen (139.25) has indeed fallen to our 139.25 target. It is testing an important trendline Support here and could stage a bit of a bounce. But unless Resistance at 140 is broken, there could be chances of further fall to test 200-day MA at 137.94.
The Euro (1.3718) dipped to 1.3648 yesterday, just above our target of 1.3625 (the 200-day MA) but has seen decent short-covering there. Expect near-term Support at 1.3690 and attempts to rise towards 1.3760 while Support at 139.25 holds on the Euro-Yen.
The Pound (1.6790) dipped to 1.6731 yesterday but has bounced from there as our Support at 1.6706 held. This keeps the long-term uptrend intact, especially if the Pound is able to close above 1.6830 today. Else, there could be pressure on the downside, as the EURGBP (0.8170) could rise towards 0.8200+.
The Aussie (0.9363) indeed saw a dip to 0.9327 as feared, but seems to be consolidating sideways, not facing any strong selling pressure. Important/ strong Support at 0.9314 can keep the overall uptrend intact with chances of 0.95+ next week.
Dollar-Rupee dipped to 59.09 yesterday and can fall further towards 58.81 while below 59.50. But, beware the market is becoming increasingly Oversold and a rise past 59.60 could lead to strong short-covering.
The US yields saw yet another fall after the weak IIP data yesterday. The 10Yr (2.50%) has broken below the support while the 5Yr (1.53%) and the 30Yr (3.33%) have dipped further and the 30Yr is testing support at current levels. The 10-5Yr yield spread (0.97%) is also testing support at current levels. A rise from here will suggest a bounce for the yields. But since the 10Yr and 5Yr have fallen below their respective supports there is a chance of a further fall.
The German 10Yr (1.30%) fell further after the low GDP figure yesterday, putting a pressure on the ECB to reduce rates. We can expect a rate cut in the next ECB meet as Draghi had said that the Central Bank is ready to take action in June if needed.
The US-Japan 10Yr yield differential (1.91%) has fallen further in perfect co relation to the Dollar-Yen (101.52) which fell further and is testing support on the weekly candles. The Japan 10-5Yr yield spread (0.40%) has dipped further and so did the Japan 10Yr (0.58%).
The 10Yr GOI (8.78%) remained stable after the fall in yields globally. A break above 8.80% and we may see it target 8.90%-9.00%. Today’s Election results will have a huge impact on the markets. We need to wait and watch what happens.
India General Election Result - - -
9:00 GMT or 14:30 IST EU Trade Bal
...Previous - 13.60 EUR Bln
12:30 GMT or 18:00 IST US Housing Starts (Mln)
...Expected 980 K ...Previous 946 K
...Expected 1.0% ...Previous 0.10% ...Actual 1.5 %
...Previous 5.70 % ...Actual 5.20 %
...Expected 0.40 % ...Previous 0.20 % ...Actual 0.20 %
EU CPI (YoY)
...Expected 0.70 % ...Previous 0.47 % ...Actual 0.71 %
US Core CPI (MoM)
...Expected 0.20 % ...Previous 0.35 % ...Actual 0.25 %
US TICS (Net foreign purch of long-term Sec)
...Expected 47.30 $ Bln ...Previous 90.34$ Bln ...Actual 4.02 $ Bln
US Industrial Production
...Expected 0.40 % ...Previous 0.88 % ...Actual -0.58 %
US Capacity Utilization
...Expected 79.20 % ...Previous 79.30 % ...Actual 78.60 %
US Philifed Index
...Expected 13.90 ...Previous 16.60 ...Actual 15.4
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