Thursday July 17, 2014 - 03:46:47 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 17-Jul-2014 -0346 GMT
The Chinese GDP meeting the government expectations coupled with the optimism expressed by Janet Yellen produced sharp rallies in Europe & US, even if not that much in Asia.
Dow (17138.20, +0.45%) is gathering bullish momentum after many sessions and may reach 17300-50 now with the major support coming up too at 16800 levels. The Dax (9859.27, +1.44%) has bounced sharply but requires to trade above yesterday’s high at 9871 to extend the rally and attempt a reversal. Otherwise the bears may attack from the current levels right now.
Nikkei (15410.68, +0.20%) is settled in the range of 15000-500 and the last 3 sessions don’t show any great upward momentum with the possibility of a downmove inside the range increasing. The Shanghai (2057.47, -0.47%) failed to break above the upper end of the contracting range at 2080-90 which would signal a considerable bullish reversal towards 2140-80. This signals a continuation of the broader range of 2000-2090.
Nifty (7624.40, +1.30%) tested the 7630 levels too after overcoming the initial selling pressure faced at 7570. The bias remains bullish but a correction of 40-60 points can be expected now before the next upmove.
Gold (1302.10) had slid on Monday after Yellen said that the hike in interest rates may happen sooner than expected. But has the metal ended its short term correction? It has bounced up after testing crucial weekly support near 1290 and may once again target 1300 in the coming sessions. If it bounces sharply from here we may once again negate resumption of longer term downtrend.
Silver (20.79) has bounced a bit from support near 20.5-20.6 levels reversing the near term bearish view. If it is able to bounce back to 21.5-22.5 levels, it may signal fresh bulls coming in.
Copper (3.2130) has been ranged above 3.20 but has moved a bit lower as the resistance near 3.30 holds well. It may eventually fall to 3.20-3.15 in the near term.
Nymex WTI (101.48) has moved up bouncing from support near 98 just as expected and may now target 103-104 levels in the near term. Brent (107.20) is gearing up for a sharp upmove now targeting 109-110 levels. Overall the longer term sideways trend persists.
The growing divergence in monetary policy outlooks and economic activity has strongly pulled down the Euro which is testing a very important support area, potentially trend decider for Dollar. That is the currency to watch for now.
Euro (1.3528) is closer to the long term support area of 1.3500-1.3475 now, below which the gate towards 1.3300 opens up. If the bulls have to survive, they must produce a bounce from this area immediately.
Dollar-Yen (101.54) continues to trade sideways in the old range of 101.20-102.75 just as expected after the false break down to 101.07 and there is still no sign of a break of the range coming. Euro-Yen (137.38) is close to 137 now on the back of a severely weak Euro and a break below 137 may take it to the final long term support area of 136.20-135.50.
Pound (1.7139) rallied sharply exactly from our support at 1.7060 and hit a new high at 1.7191. This high of 1.7191 must be breached to continue the rally or the chances of a rangebound movement in 1.7050-1.7200 will increase.
Aussie (0.9359) is trying to bounce from the lower end of the 5-week long band of 0.9320-0.9500. Now a break below 0.9320 would result in a drop to the long term support of 0.9240-0.9200.
There is not a single new word to be added on Dollar-Rupee (60.12) which failed thrice in as many days to break above our 60.26 to confirm strength, signaling further sideways movement in the band of 59.50-60.25.
The German 10Yr (1.19%) is trading below the crucial level of 1.20% now and there could be danger of further decline if there is no bounce soon. Watch this.
Even the German-Japanese 10Yr Yield Spread (0.66%) is now trading below an imporant long-term Support-turned-Resistance near 0.71%. Although the trend remains downward, Support near current level on the EURJPY (137.40) could produce a corrective bounce.
Waiting for US yields to rise seems to be like waiting for the glaciers to melt. Importantly, the 10-5Yr Spread (0.83%) is now lower than the previous low of 0.82% seen on 01-Jun-12, but might see a sharp bounce. Note, that the 2Yr Swap Cost (0.17915%) has moved up sharply over the last few days, from the levels of 0.1238%, as per our suggestion around 3rd and 4th July.
Indian 10Yr GOI (8.73%) trades lower than the 8.79-8.80% seen after the Budget and the Indo-US 10Yr Spread (6.20%) has also come off from strong Resistance at 6.25% and 6.20%. Expect the Resistances to hold, especially on the Indo-US Spread, especially if the US 10Yr moves up.
9:00 GMT or 14:30 IST EU CPI (YoY)
...Expected 0.50 % ...Previous 0.49 %
12:30 GMT or 18:00 IST US Housing Starts (Mln)
...Expected 1020 K ...Previous 1001 K
14:00 GMT or 19:30 IST US Philifed Index
...Expected 15.6...Previous 17.80
...Expected 6.5 % ...Previous 6.60 % ...Actual 6.5 %
CN Ind Prodn (YoY)
...Expected 9.0 % ...Previous 8.80 % ...Actual 9.2 %
CN Retail Sales (YoY)
...Expected 12.5 % ...Previous 12.50 % ...Actual 12.4 %
CN GDP (YoY)
...Expected 7.4 % ...Previous 7.40 % ...Actual 7.5 %
IN Trade Bal (MoM)
...Expected 9.9 $ Bln ...Previous 11.23 $ Bln ...Actual 11.76 $ Bln
EU Trade Bal
...Previous 15.20 EUR Bln ...Expected 16.3 EUR Bln ...Actual 15.3 EUR Bln
US PPI ex Food & Energy (MoM)
...Expected 0.20 % ...Previous -0.11 % ...Actual 0.11 %
US Industrial Production
...Expected 0.4 % ...Previous 0.5 % ...Actual 0.2 %
US Capacity Utilization
...Expected 79.4 % ...Previous 79.10 % ...Actual 79.1 %
US TICS (Net foreign purch of long-term Sec)
...Expected 27.4 $ Bln ...Previous -24.16 $ Bln ...Actual 19.40 $ Bln
...Expected 1.00 % ...Previous 1.00 % ...Actual 1.00 %