Thursday June 19, 2014 - 03:45:43 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 19-Jun-2014 -0343 GMT
The upbeat sentiment from the Fed coupled with the Chinese Premier promising to achieve the growth targets, have made the markets happy. The Fed also signaled a long period of low rates after the QE Taper gets finished.
Dow (16906.62, +0.58%) recovered some more of the previous week’s loss and now may prepare to reach 17000-200 levels soon. As mentioned earlier, bulls would not be concerned till 16600-300 gets broken. The Dax (9930.33, +0.10%) remains in a corrective mode in 9800-10050 but another push up to 10300-400 remains on cards as long as it stays above 9800-700.
Nikkei (15335.55, +1.45%) broke above 15250 to end the correction and rallied to a five month high. This rally may face a bit of selling pressure from the 15400-700 zone. The Shanghai (2048.27, -0.35%) weakened considerably after reaching our initial target at 2080 and broke below 2060-55.A bounce may materialize if the correction ends around 2040 but a break below 2040 may take it down to 2010-2000.
Nifty (7558.20, -0.96%) is trading sideways in the range of 7500-7700 for the last few sessions and may continue doing that. A break below 7510-7480 will bring 7450- 7400 on the table and the old resistance area of 7580-7610 will try to push down the price.
Metals tried to pull in some gains after the FOMC meeting yesterday but long term is bearish. Brent Crude has been shooting up while Nymex WTI is trading lower.
Gold (1277.20) and Silver (19.85) rose after the Fed trimmed its growth outlook and said that the interest rates would remain low. Silver would target 20-20.5 from where it may come off to 19.5 levels while Gold may resume the longer term downtrend.
Copper (3.0465) is rising after bouncing from levels just above 3 and may target 3.10-3.15 in the coming weeks. Resistance coming up near 3.125.
Nymex WTI (106.32) has risen a bit from support near 105.98 after continuously falling for the last three sessions. A break below 105.98 could push it to 105.2 and even 104.28 else while above 105.9, it may target 106.5-107.5. Long term remains bullish with a target of 110 on the upside.
Brent (114.36) has moved up just as expected and looks strongly bullish. The break above the contracting movement has indeed initiated a sharp rise giving an upside target of 115 for now. Also note it has tested resistance on the 3-day charts and may show some correction towards 112 before resuming the uptrend. Long term Strongly bullish.
Dollar weakened considerably against not only the major currencies but the EM currencies too after the Fed expressed a dovish tone yesterday. That may strengthen the Rupee to some extent too.
Euro (1.3587) is stuck in the range of 1.35-1.36 since the ECB meet but a bullish reversal will be confirmed only on a break above 1.3630 and then 1.3680. The bias remains neutral.
Dollar-Yen (101.95) is rebounding from a dip to 101.60 last week. We see it ranging in 101.50-102.75 for the next several days. The Euro-Yen (138.54) still runs the downside risk of testing 137 but there is a bullish reversal possibility, suggested by indicators, to be confirmed only on a break above 139.50-60.
Pound (1.6993) is in our expected corrective mode after reaching our initial target of 1.70 but the strength is still there to reach our next target at 1.71.
The Aussie (0.9398) bounced sharply not from 0.9340 as expected but from slightly lower 0.9320 levels. A rangebound price action in the range of 0.93-0.94 can be expected for the rest of the week.
Dollar-Rupee (60.39) may be ranged in 60.00-60.50 for a while but keep an eye on 60.00 on any dip. The second 45-50 paisa correction in this major rally from 58.33 points to the probability of seeing 60.80-61.20 as long as 60.00 is protected by the bulls.
On the US FOMC...
(1) The Fed seems relatively upbeat about forthcoming growth
(2) has almost given a green signal for further gains in the Dow .Jones (16907, +0.58%) by saying the market does not seem overvalued as per historical norms.
US Ylds have fallen rather sharply and the Euro (1.3589) has risen as yield Spreads have improved a little bit in its favour. The Dollar may give up some Yield advantage against the Yen also as the US-Japan 10Yr spread (2.04%) has Resistance near current levels and can come off a bit. That said, there is no immediate doubt about US yields moving higher in the coming weeks/ months.
We also see chances of FIIs buying Indian Debt today as suggested yesterday, given Resistance at current level (8.67-8.70%) on the 10Yr GOI.
8:30 GMT or 14:00 IST SNB Meeting
...Expected < 0.25 % ...Previous <0.25 %
14:00 GMT or 19:30 IST US Philifed Index
...Expected 14.30 ...Previous 15.40
UK BOE Minutes
...Actual 0-0-9 % ...Previous 0-0-9 % ...Expected 0-0-9 %
US Current Account Balance
...Expected -96.00 $ Bln ...Previous -87.32 $ Bln ...Actual -111.18 $ Bln
US FOMC Meeting
...Expected <0.25 % ... Previous <0.25 % ...Actual <0.25 %