Wednesday July 2, 2014 - 03:41:42 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 02-Jul-2014 -0340 GMT
The fastest growth in Chinese manufacturing in this year coupled with an unexpected strength in British factory output boosted the market mood. US manufacturing came at a five month high helped the sentiment too.
Dow (16956.07, +0.77%) rallied from end to end of its 300 pts range prevalent for the last 4 weeks. But still needs a break above 17050-70 to break out, though more rallies are expected. Only a break below 16700-600 may signal a deeper correction. The Dax (9902.41, +0.71%) had the expected push up from the major support of 9800-700. The confirmation of strength returning will be a break above 9915-35.
Nikkei (15404.60, +0.51%) has bounced sharply after creating a Harami Doji pattern and has broken above our 15350 to signal a rally to 15600-700. The Shanghai (2052.29, +0.09%) keeps trading in a contracting range for the last few months where the range has come down from 200 to 75 points now with the breakout levels coming at 2000 & 2075.
Nifty (7634.70, +0.31%) consolidated in the higher levels after the sharp rally on Monday. It looks prepared to make a new high above 7700 now and just a little bit of assistance from BankNifty may provide the necessary momentum.
Gold (1324.98) tried to rise above 1330 yesterday but could not sustain those levels coming back to support near 1325. We may see an eventual rise towards upcoming resistance zone of 1350-1360 from where it may fall back to 1325. The weekly resistance near 1330 is still holding for now. Near term rise may be seen within an overall down trend.
Silver (21.041) is stable for now in the 20.8-21.2 region and may eventually rise a little towards 21.5-22.5 else consolidate sideways for some more time. Overall the longterm trend remains down.
Copper (3.1830) has dipped a bit after an intra-day high of 3.20 yesterday. A rise above 3.23 would initiate a sharp upmove else we could see some correction towards 3.10-3.07 before again resuming further rise.
Brent (112.17) fell to 111.74 yesterday as expected but bounced from there. If 111.74 holds it may bounce back to 114-115 else we may see a fall to 110.8.
Nymex WTI (105.58) fluctuated highly in the 104.5-106 region but remained stable. It may test 104.2 which if holds may take it higher to 107.35-108 in the near term.
The beginning of a new quarter means the time for asset allocation and the ECB meet tomorrow makes the scene more interesting.
Euro (1.3678) is in a normal consolidation as expected after the sharp rally on Monday but it may rally towards 1.3750-1.3800. Now a lot depends on the ECB meet on Thursday.
Dollar-Yen (101.60) may well bounce to 102.50 levels now as the current daily candles suggest. The range of 101.20-102.75 may continue for some more time. The Euro-Yen (138.97) is trading around the resistance of 139 after a rally on the back of a stronger Euro and a firm break above 139 may take it to 140.00-50 levels.
Pound (1.7149) is trading with a lot of bullish momentum and the strong factory output has helped it more. Now it may reach 1.72 as expected or even higher in a day or two.
Aussie (0.9459) broke above 0.9460 to reach 0.95 levels but failed to sustain the higher levels after the Australian trade deficit came 9 times worse than expected. The uptrend remains valid upto 0.9350 but the bulls need an immediate spike above 0.95 to avoid further weakness.
Dollar-Rupee (60.07) came close to the lower end of the range of 60.00-50 yesterday as expected and now the bulls may be hard pressed once again. Below 60.00, we can expect a retest of 59.75-65 but holding 60 would mean another bounce towards 60.20-25.
Some bounce was seen in US Yields yesterday, in line with our hope/ expectation of a bounce. The US 10Yr (2.57%) is up from 2.53% and the 5Yr (1.66%) is up from 1.63%. The 30Yr is up at 3.40%.
On the other hand, the German 10Yr (1.24%) is trading 2bp lower. The 2Yr German-US yield spread (-0.44%) is bouncing off a downtrend channel Support and the 10Yr Spread (-1.31%) is also testing and could bounce off a downtrend channel Support.
The Indian 10Yr GOI (8.74%) trades mildly lower. Keep an eye on crucial Resistance at 8.8%. A break above that can result in a quick rise towards 9.0%. The Indo-US 10Yr Spread (6.19%) has a strong and crucial Resistance near 6.27%, which might well hold. If so, we could see Indian yields coming off a bit. But, maybe, the market will be quiet ahead of the India CPI data in the middle of the month.
0:30 GMT or 6:00 IST Australia Trade Balance
...Expected - 0.16 AUD Bln ...Previous -0.78 AUD Bln ...Actual -1.91 AUD Bln
9:00 GMT or 14:30 IST EU GDP
...Expected 0.2 % ...Previous 0.2 %
12:15 GMT or 17:45 IST US ADP Emp
...Expected 206 K ...Previous 180 K
JP Tankan Large Manufacturers Index
...Expected 16 ...Previous 17 ...Actual 12
...Actual 48.9 ...Previous 49.20
...Expected 51.0 ...Previous 50.8 ...Actual 51.0
...Previous 51.1 ...Actual 51.5
...Expected 2.50 %...Previous 2.50 % ...Actual 2.50 %
...Expected 52.6 ...Previous 52.5 ...Actual 54.0
...Expected 51.9 ...Previous 52.2 ...Actual 51.80
...Expected 56.7 ...Previous 57.0 ...Actual 57.50
...Expected 11.7 % ...Previous 11.70 % ...Actual 11.60 %
US Manufacturing ISM
...Expected 55.6 ...Previous 55.40 ...Actual 55.3