Monday May 19, 2014 - 03:30:08 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 19-May-2014 -0330 GMT
There are more questions than firm answers right now in the global markets as the major markets remain more in a flux than any major trend.
The Dow (16491.31, +0.27%) is not showing any great upward momentum despite a new life high which raises the possibility of another big fall before the next true phase of the bull market emerges. Keep an eye on 16400 for immediate support below which the current short term uptrend gets negated. The Dax (9629.10, -0.28%) must break above the old high around 9800 levels to overcome the current weakness and resume the major uptrend.
The Nikkei (14105.11, +0.06%) is not seeing any great action today as it remains in the downtrend, with the risk of testing the support of 13850 intact. The Shanghai (2007.25, -0.95%) is testing the major support area of 2000 mentioned before and a break below 2000-1995 may drag the index down to 1975-60 levels.
The expectation of “sell the fact” materialized dramatically in Nifty (7203, +1.12%) but after some more major upside. However, the short term top may have been made at 7564 and we may see some much needed consolidation in the range of 6700-7500 for the next few days. Any dip near 6800-6700 may be bought.
Gold (1294.29) and Silver (19.464) are stable. Gold may range in the 1280-1300 regions for some time before rising above 1300 and while below 1315, downtrend remains in force. Silver is consolidating sideways while below 19.6. There are chances that the metals may remain range bound in the near term.
Copper (3.1525) is ranged for now near the 3.15 region and may eventually target 3.20 in the near term. Overall it is maintaining the near term uptrend.
Brent (109.95) has been rallying since 7th May and may target 110.58 in the coming sessions. A breqak above 110.58 would take it higher to 112 else we may see a fall back to 109. WTI (101.72) is testing resistance near 101.94 but if it sustains a break above this, it may target 103.6-103.7. However if 101.94 holds, it may fall to 101. Near term looks bullish.
Keep an eye on the lows of the last week for all the pairs. Nearly all of them are important supports.
Dollar-Yen (101.52) keeps trading near the major support zone of 101.30-20 and a break below 101.20 may drag it down to the next long term support near 101.70-60.
The Euro-Yen (139.24) is in a confirmed major downtrend now. 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 (1.3707) is trying to bounce from the major trendline support at 1.3646. 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 (1.6827) has bounced sharply from 1.6731 and this keeps the long-term uptrend intact. AA break below 1.6730 could negate the uptrend and a dip to sub-1.6600 levels would be on cards then.
The Aussie (0.9364) 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+ this week.
Dollar-Rupee (58.79) closed below 58.80 to signal a probable consolidation in the range of 58.50-59.50 with the chance of 58.35 getting tested. Only a break above 59.60-70 may signal any return of strength.
The US yields saw a slight rise but the 10Yr (2.52%) and the 5Yr (1.55%) are still trading below the resistance near current levels. The 30Yr (3.34%) has come up from the support at current levels. The 10-5Yr yield spread (0.97%) has fallen below the support suggesting a further fall in the yields if they are unable to break above their current resistances.
The German –US 2Yr spread (-0.27%) has remained stable as the Euro (1.3706) also remained stable near the support at 1.37 as seen in the candle charts. See http://www.kshitij.com/graphgallery/eurcandle.shtml#candle. A bounce in the Euro from here and we may see the spread go up to -0.20%. The German 10Yr (1.34%) is up but the pressure on the ECB to reduce rates may keep it lower.
The US-Japan 10Yr yield differential (1.94%) is up a bit as the Dollar-Yen (101.579) tests support at current levels. The Japan 10-5Yr yield spread (0.40%) remained stable and so did the Japan 10Yr (0.58%).
The 10Yr GOI (8.83%) saw a rise on the back of the Rupee strength as the US – India 10Yr bond differential (6.31%) broke above the resistance near 6.25%. We can expect a further rise in the differential up to 6.45% where it faces a resistance. And the 10Yr GOI can now target 9.00%.
No major data release today.
India General Election Result - - -
EU Trade Bal
...Previous 13.60 EUR Bln ...Actual 17.10 EUR Bln
US Housing Starts (Mln)
...Expected 980 K ...Previous 947 K ...Actual 1072 K