Monday July 28, 2014 - 04:16:09 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 28-Jul-2014 -0415 GMT
The US market corrected not on geopolitical concerns but from the earnings disappointments and the Eurozone is still struggling with how much sanction Russia should get. The Indian market lies at the middle point of a cautious global market and a possibly new bull market emerging in China.
Dow (16960.57, -0.72%) maintained the pattern of alternate weeks coming negative, visible since early June. With the lower end of the 2 month long range at 16850 providing support, it may bounce towards 17200-30 once again. The Dax (9644.01, -1.53%) wiped off its previous 3 days gains in a single session but the important thing remains to be seen is when the buyers emerge from the long term support area of 9500-350 which is not expected to be broken at the first attempt.
Nikkei (15531.01, +0.47%) is trading at a 6 month high but it still needs to trade above 15600 to sustain the higher levels, otherwise it may return to test the 15300-100 levels again. Shanghai (2171.12, +2.09%) has achieved our initial target of 2150 and is very close to the next target of 2180. The expected bull market may have begun and now, a closing above 2135-40 this month may take it to the final long term challenge at 2260-70.
Nifty (7790.45, -0.51%) produced the first correction of more than 60 points from 7840, and as a result, 7750 turns out to be the make or break short term support for the Nifty bulls. Bias remains bullish above 7750 but a break below 7750 may target 7710 & 7660.
Gold (1302.92) bounced up sharply on Friday from 1287 as expected but while below 1325, bearish pressure still exists. Falling to 1280-1260 seems a possibility in the near term while the overall trend remains down.
Silver (20.573) is also trading up but remains bearish in the near term. It may soon test support near 20.108 while the current correction may extend in the near term. Overall long term trend is down.
Copper (3.2285) also dropped and may target 3.17-3.18 and while that holds, near term looks bullish.
Nymex WTI (101.53) has been highly fluctuating in the 101-103.5 region for a few sessions now. Immediate support near 101.15 is seen from where it may bounce back towards 104-104.29.
Brent (107.98) continues to whip-saw in the 106-108.6 region and a break on either side seems difficult for now keeping the near term direction unclear. Need to wait and watch for a few sessions. Overall longterm uptrend still persists.
The Dollar strength is visible everywhere now but the possibility a short term top this week may not be totally ruled out. Enjoy the Dollar rally but with a bit of caution.
Euro (1.3430) is trading at an 8 month low 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.
Dollar-Yen (101.80) continues trading sideways in the range of 101-102, which still shows no sign of breaking. On a break above 102, some more bounce to 102.25-50 may be seen. Euro-Yen (136.72) is trading sideways in 1.3630-1.3730 on the back of equally weakening Euro and a weak Yen but it may still drop further if fails to overcome 1.3770 levels in the coming days.
Pound (1.6975) has created a Marubozu weekly candle with strong bearish implication in the short term. If the prior pattern is maintained, then this ongoing correction may end near 1.6890 levels before reversing for another new high.
Aussie (0.9395) 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 (60.1025) remains stuck in the range of 60.00-50 which may at most extend to 59.75-60.50 till the Fed meet on Wednesday night or even the RBI meet next week.
The German 10Yr Bund Yield (1.15%) has fallen a bit. The German-US 10 Yr (-1.33%) is stable but is vulnerable to a fall further towards -1.4%. The European yields are lower and may continue so while Euro (1.3431) is weakening.
The US 30Yr (3.25%), 5Yr (1.69%) and the 10Yr (2.48%) have all come down after seeing a consistent rise last week. The US 10Yr-5Yr (0.79%) yield differential has also come off by 1bps. Rates may remain stable now.
The 10Yr GOI-US Spread (6.19%) has risen from 6.14% last week and while the US yields and the Indian 10Yr GOI (8.67%) rises, the Rupee should now start seeing some weakness coming in during the week.
No major data release today.
GER IFO Business Climate
...Expected 109.5 ...Previous 109.70 ...Actual 108.00
GER IFO Business Situations
...Expected 114.5 ...Previous 114.80 ...Actual 112.90
GER IFO Business Expectations
...Expected 104.5 ...Previous 104.80 ...Actual 108.00
...Expected 0.80 % ...Previous 0.77 % ...Actual 0.86 %
US Durable Goods Orders
...Expected 0.70 % ...Previous -0.97 % ...Actual 0.74 %