Wednesday August 20, 2014 - 03:58:02 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 20-Aug-2014 -0357 GMT
The overall sentiment remains positive. The pace of Housing Starts surged by 15.7% and pushed the US market up. The European markets rallied after the UK CPI came at 1.6%, lower than the 1.8% y-o-y total. The Asian markets just consolidate at the higher levels.
Dow (16919.59, +0.48%) has not only got closer to our target area of 16950-17100 but has been registering the fastest rally since early February. This intensity forces to keep the bias predominantly bullish but a closing above17000 would confirm it in a stronger way. On the other hand, despite all its rise, Dax (9334.28, +0.96%) remains structurally weak and more probably the corrective bounce is going to end near the long term resistance in 9400-600 followed by a resumption of the major downtrend.
Nikkei (15439.24, -0.07%) has not made a sustained rally from a V-shaped bottom in the last 12 months and the current bottom at 14750 may not create a sustainable bottom. So another bout if fall looks more likely soon if it fails to break above our resistance area in 15500-50. Shanghai (2241.23, -0.18%) is trading above the previous consolidation zone of 2180-2230 and the bullish momentum targeting 2260-70 remains intact above 2230-25.
Nifty (7897.50, +0.30%) mainly consolidated at the higher levels in a Triangular form and may rally to our target of 7975-8000 after this phase. The bullish momentum remains intact above 7850-40.
Brent (101.54) has been strongly dominated by the bears with no scope of a rise seen just now. Fall towards support zone of 100-98 seems quite possible now which if holds may prevent a fall to 98-96 region.
Nymex WTI (94.38) is fluctuating in the broad 97-94 region and may test support at 94. A bounce from 94 could prevent a possibility of a fall towards longer term support near 93-92 levels. Overall the longer term trend remains up.
Gold (1296.41) is trading lower just above support near 1292.80 while resistance at 1320 still holds well. A fall below 1292 could push it further towards 1280.5 from where we may see a little bounce. Overall the longer term trend is down.
Silver (19.486) is in a perfect down channel since July’14 from a high of 21.5. It may extend its fall towards crucial support at 19-18.5 levels before rebounding back to 20-21 levels. The metal has been consolidating sideways since an year now within the 18.5-23.5 region. Overall longterm trend is down.
Copper (3.0920) is trading in the cucial 3.12-3.07 region for now and may remain stable for a few sessions before bouncing up towards 3.15-3.20.
The Housing data pushed the Dollar Index to a 10-month high and all the Majors got affected. Sterling was hit hard by consecutive release of poor Inflation data and looks the weakest. More Dollar strength can be expected.
Euro (1.3311) is hitting a 10-month low at 1.33 levels as expected. Any lack of buyers or short covering here may take it to our 1.31 levels very soon.
Dollar-Yen (102.94) is trading at the higher end of the range of 101.50-103.00 but despite the weakness of nearly all the Majors, the range bound price action may not end just now. Interestingly, Euro-Yen (137.04) remains stuck just because of very proportionate fall in Euro & Yen with no relative margin. The 3-week range of 135.75-138.00 may not break without any major event.
Pound (1.6613) has fallen victim to the sudden selling pressure discussed yesterday and crashed. The red candles are getting bigger in size lately, suggesting increasing bearish momentum and possible short term target of 1.6525-1.6470.
Aussie (0.9299) faced rejection from 0.9350 levels to remain rangebound in 0.92-0.9350 as expected and may remain in this state for a few more sessions. The probability of the broader range of 0.92-0.95 breaking any soon looks very slim at this moment.
Dollar-Rupee (60.68) spent the session almost unchanged with just a little gain for the Rupee. Chances of hitting the major support area in 60.50-40 remains with the possibility of some short-covering too.
FOMC Minutes due today. And then Jackson Hole two days later will focus on the labour markets. And, Janet Yellen is expected to propound continuance of low rates.
But, the US Yields (5Yr 1.58%, 10Yr 2.40%, 30Yr 2.40%) are all up 1bp across most maturities. The Swap Costs (2yr 0.229%) remain high, however, even though the US CPI (1.86%) came down lower than the expected 1.90%. So, maybe the Swap Costs may start coming down given that Yields appear less likely to rise now than earlier.
The German-US 2Yr Spread (-0.44%) is not being able to rise further and the 10Yr Spread (-1.40%) continues to trend down, keeping the Euro (1.3320) pressured. The UK-US 10Yr Spread (0.00%) can dip into the negative, which could drag the Pound (1.6614) lower as well. The BOE Minutes are also due today.
The Indo-US 10Yr Spread (6.14%) has good Resistance at 6.20% now and while that holds Dollar-Rupee may be a little bearish. MIBOR (3mth 8.95%) and MIFOR (3mth 8.82%) remain constant with an overall bias on the upside, suggesting the market is not at all looking for a rate cut anytime soon.
8:30 GMT or 14:00 IST UK BOE Minutes
...Expected 0-0-9 ...Previous 0-0-9
UK CPI Y/Y
...Expected 1.80 % ...revious 1.90 % ...Actual 1.60 %
EU EA (17) Curr Acct Bal EUR Bln
...Previous 9.30 EUR Bln ...Expected 14.0 EUR Bln ...Actual 20.8 EUR Bln
US Core CPI (MoM)
...Expected 0.20 % ...Previous 0.05 % ...Actual -0.01 %
US Housing Starts
...Expected 970 K ...Previous 945 K ...Actual 1093 K