Thursday July 10, 2014 - 03:58:09 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 10-Jul-2014 -0357 GMT
The Asia-pac is off the highs now as the Chinese Export rose less than forecasted and the Trade Balance came below expectation this morning.
Dow (16985.61, +0.47%) keeps trading in the month old 300 points range instead and it must break beyond 16800-17120 for a trending move now. The Dax (9808.20, +0.36%) 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 (15265.16, -0.24%) 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 (2039.07, +0.02%) keeps trading in a contracting range for the last few months where the range has narrowed with the breakout levels coming at 2000 & 2075.It is weakening after the break below 2050 as expected and may reach 2020 soon.
Nifty (7585, -0.50%) has closed not very far from the intermediate support zone of 7550-15 and a break below this could invite a fall to 7200-7100. If a bounce materializes now or not depends on the budget. Keep watching BankNifty for early clues as it is testing the major support zone of 14900-700.
Metals are bullish in the near term while the oil market is trading low.
Gold (1329.54) has risen well yesterday breaking above 1325 after the release of the FED minutes, bringing Dollar under pressure. We may see some bullishness coming in for Gold in the coming sessions which may take it higher towards 1340-1350. Gold-WTI (13.05) ratio is also rallying upward after breaking the initial channel support near 12.5 and may now target 13.5 from where it may fall back towards 12.
Silver (21.197) has been rising but with lower momentum. It may remain ranged with an upper target of 21.5 for now. Gold-Silver ratio (62.73) is also ranged in the 62.5-63 region after the recent fall from 67 levels. Sideways consolidation may continue for some more sessions.
Copper (3.2470) is ranged near 3.24-3.25 region. Is this a start of a new correction or will it bounce to 3.32-3.33? Note that it had made an intra-day high of 3.30 on Monday which has held strongly. There is also a possibility that it may remain ranged in the 3.24-3.26 region for a couple of sessions.
Brent (108.14) has been falling sharply and may target support at 106 in the near term while Nymex WTI (101.80) has also fallen sharply yesterday and is trading near our expected levels. Need to watch if it continues falling from here towards 101.65-100.94 or bounces up towards 103.5-104.
Even the clearest signs of the QE ending revealed from the FOMC minutes are not being able to help the Dollar bulls as Euro bounces with the Pound already trading at the higher levels.
Euro (1.3648) has been taken to 1.3640-50 as expected by the bulls survived by the bounce in EURGBP (0.7956) from the channel support of 0.7905-0.7900 as mentioned earlier and a break above 0.7970 may result in further rally in Euro.
With the unchanged policy of BOJ & no additional QE in sight, the upward potential of Dollar-Yen (101.51) is limited and the range of 101.20-102.75 may continue for some more time. The Euro-Yen (138.55) 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 (1.7153) is unaffected by all those happenings in ECB or US and keeps consolidating at the higher levels. Now it may reach 1.72 as expected or even higher after the current correction ends.
Aussie (0.9408) has made a high at 0.9456 and that may be the end of the bounce for now. It may drop towards 0.9350-0.9300 once again now before attempting any new high.
Dollar-Rupee (59.75) ended the day absolutely flat while trading inside the range of 59.50-60.10. Today the budget may result in an extension to either 59.15-59.00 or 60.50.
US Yields could start reclaiming advantage soon. Indian rates await Budget and Inflation data.
Indian 14-day Mibor (8.56%) is testing a long-term uptrend line coming up from near 4% in 2010. Should it bounce, it would negate chances of near-term fall in interest rates. Take a look at
The Budget today and the CPI/ WPI data next week are going to be drivers. The 10Yr GOI (8.73%) has been showing hesitation in coming down over the last couple of days, waiting for the Budget. A Deficit of more than 4.7% will not be taken kindly by the market.
Looking at the US-Japan yield spreads after a long time. The 10Yr Spread (2.01%) has decent Support between current levels and 1.95% and could move up in the long-term. That could provide Support to Dollar-Yen (101.52) in the long-term.
The German-US Spreads (2Yr -0.47%, 10Yr -1.33%) have increased a bit in the last couple of days, helping Euro-Dollar to move up to 1.3645. Fresh decline, if coming, should starts from near current levels very soon. Watch that.
The US Yield Curve (10-5 Yr Spread 0.88%) is close to testing the previous low of 0.85% (July-2012) and can bounce from there.
1:30 GMT or 7:00 IST Australia Labour Force
...Expected 12.3 K ...Previous -5.1 K ...Actual 15.9 K
2:00 GMT or 7:30 IST CN Trade Bal
...Previous - 35.92 $ Bln ...Actual 31.6 $ BLN ...Expected 37.3 $ Bln
6:30 GMT or 12:00 IST IN Trade Bal (MoM)
...Expected -11.50 $ Bln ...Previous -11.23 $ Bln -
8:30 GMT or 14:00 IST UK Trade Balance
...Expected -9.0 £ Bln ...Previous -8.9 £ Bln -
11:00 GMT or 16:30 IST BOE Mtg
...Expected 0.50 %... Previous 0.50 %
CN PPI (YoY)
...Expected -1.1 % ...Previous -1.4 % ...Actual -1.1 %
CN CPI (YoY)
...Expected 2.4 % ...Previous 2.5 % ...Actual 2.3 %