Wednesday July 9, 2014 - 04:05:37 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 09-Jul-2014 -0405 GMT
A correction in the US market has spread its effects in the Asia-Pac too. The Indian markets wait for the budget tomorrow.
Dow (16906.62, -0.69%) keeps trading in the month old 300 points range instead of rallying as expected. It must break beyond 16800-17120 for a trending move now. The Dax (9772.67, -1.35%) is testing the major support band of 9800-700 again within two weeks in a major show of weakness. If a bounce doesn’t materialize right now, it can fall down to 9550-9440 levels.
Nikkei (15276.25, -0.25%) is gradually settling in the range of 15000-500 and even any extension of the range now could be small and slow with the range dominating for a few sessions more. The Shanghai (2056.67, -0.36%) keeps trading in a contracting range for the last few months where the range has narrowed with the breakout levels coming at 2000 & 2075.A break below 2050 now can drag it to 2020-2000 once again.
Nifty (7623.20, -2.11%) reversed its direction sharply negating the expectations of all immediate upside above 7800. The bulls must protect 7600-7590 levels to survive and produce a bounce or the fall may extend to 7500 levels. Keep watching BankNifty for early clues as it is testing the major support zone of 14900-700. clues as it is testing the major support zone of 14900-700.
Gold (1321.535) and Silver (21.076) have bounced up a bit but continue to remain ranged in the 1310-1325 and 20.5-21.5 regions respectively. A break above this range is necessary to bring in any bullish views. Gold has been trading along the daily channel support which if holds may take it higher to 1340-1345 while Silver seems to be in a sideways consolidation.
Copper (3.2540) has bounced back. No bearishness is visible for now. Near term target would be resistance near 3.32-3.33 from where some correction may happen. It may also remain ranged in the 3.24-3.26 region for a couple of sessions.
Brent (108.83) has broken well below 110, retracing almost the whole of the recent rally from 107.7-115.7. This is a crucial factor which may reduce Rupee weakness in the near term. It may now target 106 in the coming sessions.
Nymex WTI (103.41) has also been falling which if continues may target 102.3-101.8 levels. Also note that it is currently testing crucial support on the weekly candles which if holds may help it to bounce back a little towards 106-107.
A drop in US treasury yields has kept the Dollar weak but Rupee may strengthen on the back of weakness visible in Brent.
Euro (1.3611) is already facing some supply from 1.3625 levels, even before reaching 1.3640-50. But the bounce in EURGBP (0.7945) from the channel support of 0.7905-0.7900 keeps the Euro bulls surviving, though it must break above 0.7960-70 to make it really meaningful.
With the unchanged policy of BOJ & no additional QE in sight, the upward potential of Dollar-Yen (101.62) is limited and the range of 101.20-102.75 may continue for some more time. The Euro-Yen (138.32) is rangebound in an up-slanted rectangle of 138.00-139.75 with no particular directional clue. Any fresh weakness in Euro may take it to the long term channel support of 137.
Pound (1.7131) is unaffected by all those happenings in ECB or US and keeps trading with a lot of bullish momentum. Now it may reach 1.72 as expected or even higher after the current correction ends.
After the false breakout above 0.9460, Aussie (0.9394) has tested the entire support band of 0.9350-20 and now it must bounce break above 0.9440-60 to keep the already threatened uptrend alive. Bias is neutral.
Dollar-Rupee (59.78) fell to 59.60 levels just as expected and it may continue to trade in the range of 59.50-60.10 till the budget tomorrow.
Surprising that the US Yields (5Yr 1.70%, 10Yr 2.57%, 30Yr 3.39%) are not being able to hold up well or accelerate upwards. Still, they are holding above their important Supports, keeping the long-term view of higher yields alive.
Pound yields (5 Yr 2.03%, 10Yr 2.65%, 20 Yr 3.28%) are starting to come off a little from Resistance levels mentioned a couple of days ago. Japanese yields (5Yr 0.15%, 10 Yr 0.55%, 30Yr 1.70%) are still in a slow but long downtrend. The Japanese 30Yr is moving up compared to the other two, though.
The 10Yr GOI (8.73%) moved back up a bit yesterday. In the big picture, we could be looking at a very broad range of 8.50-9.00%. There is middle-of-the-range Resistance at 8.75%. While that holds, the Yield could dip a little towards 8.50%. A break above 8.75% will need some trigger/ catalyst. The Inflation data on Monday and the Budget tomorrow could push yields either down or up. Expect quiet conditions till then.
1:30 GMT or 7:00 IST CN PPI (YoY)
...Expected -1.1 % ...Previous -1.4 % ...Actual -1.1 %
1:30 GMT or 7:00 IST CN CPI (YoY)
...Expected 2.4 % ...Previous 2.5 % ...Actual 2.3 %
IN Current Account Deficit
IN Railway Budget