Tuesday May 27, 2014 - 03:36:21 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 27-May-2014 -0335 GMT
With the US market closed yesterday and domestically, the Modi ministers swore in, there are no news or event to move any of the markets and we may see a quiet day today.
There is a contraction visible in Dow (16606.27, +0.38%) as both the rallies and the drops are getting smaller even with the higher highs & lows coming up. Keep an eye on 16300 on the downside and 16800-900 on the upside for an explosive breakout beyond this contracting range. The Dax (9892.82, +1.28%) chart shows similar price contraction too with the price coming out of the pattern at 9900 with increasing volatility. Anyway, this clean break above 9800 to an all time high may take it to 10300-400 now.
The Nikkei (14706.95, +0.72%) has broken above 16650 to trigger a short term reversal and a rally towards 15200-300 or even higher. The Shanghai (2040.70, -0.04%) is testing the 2040-50 resistance band repeatedly without much momentum in favor. The sideways move in the broader range of 1990-2080 may continue for some more time in a base-building process. Supports are at 2010-1990.
With huge volatility yesterday, the corrective mode of the Nifty (7359.05, -0.11%) has been well established with the possibility of consolidation in the broader range of 6900-7500 gaining more ground. The most bullish option would be the correction ending above 7235 but the possibility of this correction retesting 7130 is looking much higher right now. Keep an eye on 7200-7190 and 7080 for major supports.
Precious Metals are stable while Copper, Brent and WTI are potentially strong before the US data today.
Gold (1291.61) continues to remain stable within the 1280-1304 regions. Unless we see a break on either side of the range, further direction cannot be determined. Silver (19.391) is also stable but is testing crucial long term support near current levels on the line chart. This may lead to 19.66 again but unless a break above 19.66 is seen, it may remain range bound.
Copper (3.1795) is maintaining the rise targeting resistance zone of 3.20-3.23-3.25 in the upcoming sessions. Growth in Chinese economy may increase demand for the metal boosting prices in the near term. We may see a little correction from 3.23-3.25 towards 3.15 before resuming further rise. Overall the metal is in an uptrend.
Brent (110.58) is trading near crucial resistance at 110.58 on the weekly line charts and while that holds we may see some sideways movement below 110.5. There is also a fair possibility to fall towards 110-109 before resuming the rise towards 112. However, a break above 110.58 would take it higher towards 112.
Nymex WTI (104.38) is in a rally aiming resistance 105-105.22 in the coming sessions which if holds may come off to 103-102 levels. However, if it breaks above 105.25 it may rise further towards 107. There is a double bottom formation on the line charts which may signal near term bullishness.
After a few sessions of a strong Dollar, the currencies are trying to appreciate a bit against the Dollar but without much success yet. The major pairs have to rise much more to really weaken the Dollar.
The Euro (1.3662) is creating a Matching Low at 1.3613, close to the trendline support at 1.3590-80 and this bounce may take Euro higher to 1.3700-30. But the weakness remains intact below 1.3800 and any bounce is expected to face selling pressure.
Dollar-Yen (101.97) is testing our resistance area of 102 and a break above 102.00-15 may take it to the major supply zone at 102.75-103.00.The Euro-Yen (139.29) is bouncing from an important Support around 138.70-30 but unless Resistance at 140 is broken, there could be chances of further fall to test 200-day MA at 137.94 or even lower towards 136.
The Pound (1.6864) has suffered from a sharp correction lately but the uptrend remains intact for targets of 1.70 as only a break below 1.6730 could negate the uptrend and then a dip to sub-1.6600 levels would be on cards. Watch for a break above 1.6900-20 for strength.
The Aussie (0.9256) is trying to stay above the major support area of 0.9200-0.9180 after the sharp fall, but the current structure remains weak. Are the Bulls thinking of a large Cup & Handle breakout in the near future?
Dollar-Rupee (58.71) made a higher high above 58.86, activating a buy signal with a stoploss below 58.33. Still, a break above our old resistance area at 58.90-59.00 and 59.20-30 would make us much more confident with our longs. Support comes at 58.62-55.
The US yields are testing the crucial levels of 1.55% for the 5Yr (1.54%) and 2.55% for the 10Yr (2.55%). A clear break on either direction of these levels will we give us further direction. The 30Yr (3.40%) remained unchanged and may test the support near 3.38%.
The German –US 2Yr spread (-0.29%) is down while the 10Yr spread (-1.13%) is up, breaking above the resistance near -1.15% as the Euro (1.3662) bounced slightly from the support as seen in the weekly line charts. The German 10Yr (1.42%) was unchanged after the rise from the 1.37% levels and is trading near our target of 1.45%.
The US-Japan 10Yr yield spread (1.96%) is stable as the Dollar-Yen (101.97) also remains stable near yesterday’s levels. The yield spread is testing the 55 Week MA support at current levels and can rise further up from here. The Japan 10Yr (0.59%) is also unchanged and is expected to maintain a range of 0.55% - 0.60%.
The Indo-US 10Yr yield spread (6.15%) has bounced from the support near 6.10% as expected. The 10Yr GOI (8.68%) is up after the bounce in the yield spread and can target 8.75% if the rise continues otherwise the downside risk of 8.50% - 8.55% remains open.
12:30 GMT or 18:00 IST US Durable Goods Orders
...Expected -0.50 % ...Previous 2.51 %
13:00 GMT or 18:30 IST US Case Schiller
...Expected 11.90 % ...Previous 12.86 %
14:00 GMT or 19:30 IST US Cons Conf
...Expected 83.20 ...Previous 82.30 %
No major data release yesterday.