Friday July 25, 2014 - 03:24:10 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 25-Jul-2014 -0323 GMT
Nothing, repeat nothing really happened in the US markets even after the jobless claims coming at 284k against 308k expected or the Markit PMI coming at 56.3 vs 57.5 expected and the nothing happening state spread into nearly all the markets except China, where perhaps a baby bull is trying to emerge.
Dow (17083.80, -0.02%) keeps trading sideways without any kind of momentum and the range, slightly modified to 16850-17200, prevails for now and a break is required for a trending move. The Dax (9794.06, +0.42%) has reached 9800 as expected after bouncing back nearly from the long term support of 9500-9350. If any dip now is contained within 9500, then a bullish setup will be created.
Nikkei (15360.56, +0.50%) has reached a steady state with contracting volatility and the 5 week long range of 15000-500 may still remain unbroken. Shanghai (2112.49, +0.35%) is targeting 2150-80 now after registering its first higher high in the last 18 months which is a very significant signal. Any dip now should get support from 2090-75.
Nifty (7830.60, +0.45%) may enter our target area of 7850-7900 this morning. The bullish bias remains fully intact above 7775.
Gold (1293.19) has been falling as expected, resuming the longer term downtrend and targeting 1290. While below 1300 there is a possibility of seeing 1280-1260 on the downside. Global equities are rallying up and the Dollar seems positive which may lead to Gold trading at lower levels for now. Watch for support near 1290.
Silver (20.46) dropped sharply yesterday and may soon test support near 20.108. The current correction may extend in the near term. Overall long term trend is down.
Copper (3.2590) stretches its rally upwards as expected and may now reach our earlier target of 3.32-3.33. Near term is bullish.
Nymex WTI (102.02) is trading between crucial support and resistance levels of 101.8 and 103.3 respectively. But while the overall trend remains up, we may see an eventual rise towards 104.29.
Brent (107.16) is highly whip-sawing in the 106-108.6 region and a break on either side seems difficult for now. Near term direction is unclear for now. Need to wait and watch for a few sessions. Overall longterm uptrend still persists.
Right now, the weakness in Euro/Pound and even Aussie resulting in Dollar strength bodes well for the US economy. Keep an eye on the Japanese CPI which should bring some movement in the quiet Yen.
Euro (1.3466) has already tested the selling pressure at the higher levels and looks ready for a journey to 1.33 or 1.31 in the next few days. Any attempt to bounce will face supply from 1.3475-1.3500 and 1.3550-60.
Dollar-Yen (101.55), just like Nikkei, continues trading sideways in the range of 101-102, which still shows no sign of breaking. On a break above 101.90, some more bounce to 102.25-50 may be seen. Euro-Yen (137.07) is standing firm on the back of a static Euro and weakening Yen but it may still drop further if fails to overcome 1.3770 levels in the coming days.
It was mentioned just yesterday that Pound (1.6986) is correcting for far longer than normal and today it is trading below 1.70 levels. If the prior pattern is maintained, then this ongoing correction may end near 1.6890 levels before reversing for another new high.
Aussie (0.9403) has been rejected from the higher levels just as expected and the 5-week long band of 0.9320-0.9500 may continue for a few more days.
Dollar-Rupee (60.12) may trade above the 60.00 levels and attempt 60.15-20 as per the cue from the other EM currencies. The range of 60.00-50 is expected to be intact for today.
The German 10Yr Bund Yield (1.18%) bounced off and rose by 4bps while the German-US 10 Yr (-1.33%) is stable but is vulnerable to a fall further towards -1.4%. The real corporate lending spreads at record highs had kept the European yields at lower levels but now a little bounce is seen which if holds may help the Euro (1.34650) gain some strength. Else the yields are vulnerable to a further fall.
The US 30Yr (3.29%), 5Yr (1.70%) and the 10Yr (2.50%) have all risen sharply and may stretch this rise for a few more sessions. The US 10Yr-5Yr (0.80%) yield differential has bounced up but with the 5-Yr yield rising sharply this has come down a bit. Overall we may see a rise in the US yields.
The US-Japenese 10Yr Yield (1.97%) has also risen as the support near 1.92% holds well and may target 2.0% in the near term.
The 10Yr GOI-US Spread (6.14%) has been falling sharply this week just as expected and while the Us yields keeps increasing and the Indian 10Yr GOI (8.64%) keeps falling, the Rupee should see some strength coming in. The trend seems to continue for a few more sessions next week.
8:00 GMT or 13:30 IST GER IFO Business Climate
...Expected 109.5 ...Previous 109.70
8:00 GMT or 13:30 IST GER IFO Business Situations
...Expected 114.5 ...Previous 114.80
8:00 GMT or 13:30 IST GER IFO Business Expectations
...Expected 104.5 ...Previous 104.80
8:30 GMT or 14:00 IST UK GDP
...Expected 0.80 % ...Previous 0.77 %
12:30 GMT or 18:00 IST US Durable Goods Orders
...Expected 0.70 % ...Previous -1.01 %
...Expected 51.9 ...Previous 51.50 ...Actual 50.8
US New Home Sales
...Expected 485 K ...Previous 442 K ...Actual 4060 K