Friday August 22, 2014 - 03:51:19 GMT
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Morning Briefing : 22-Aug-2014 -0351 GMT
The European markets recovered a bit on the back of a better than expected Flash PMI of Germany (52) and the US markets hit a new high on strong Home Sales data. So the markets are in a heady state while waiting for the Yellen & Draghi speech tonight at Jackson Hole.
Dow (17039.49, +0.36%) didnít hit a new high last night despite S&P 500 (1992.37, +0.29%) made a new life high. Short term trend could be determined by Jackson Hole tonight. Observe the price action at the next resistance area in 17300-400. Dax (9401.53, +0.93%) is rising in a Bear Flag and 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 (15604.82, +0.12%) continues to rally despite our reservations but looks a bit overstretched. The uptrend remains intact above 15000 levels and higher levels are to be expected, perhaps with a little correction. The corrective phase of Shanghai (2226.19, -0.19%) continues as the break below 2225 has robbed the immediate bullish momentum. But the bulls remain dominant above 2200-2190 and no shorts are advised.
Nifty (7891.10, +0.20%) retains its uptrend in all time frames till now and the target of 8000 is not hurt as long as the index stays above 7850-40. Keep an eye on BankNifty (15686.40, +1.32%) if it manages to break above 15750 for a strong rally aiding Nifty.
Gold and Silver bearish while Brent, WTI and Copper looks bullish in the near term.
Silver (19.47) is heading lower towards crucial 18.5 from where may bounce back again to 20-21.5 levels. Gold-Silver ratio (65.65) has fallen sharply and may continue so to target 65.07-64.46 levels.
Gold (1278.48) has fallen sharply to test crucial support near 1275. A fall below 1275 could initiate a sharp fall downwards to 1240. We could see a little bounce from current levels before breaking 1275. Longer term looks bearish. Gold-WTI ratio (13.83) has come off from resistance near 14 and may target 13.5-13 in the coming sessions. So while Gold looks bearish will WTI remain ranged or start rising eventually? Need to watch the Crude closely.
Nymex WTI (93.80) has risen yesterday but while below 97.5 there is a fair possibility to test support near 92-90 before rebounding from there. The range of 97-90 is to hold for some time now.
Brent (102.49) ha risen from support near 101 and may remain in the 101-103 region before rising sharply towards 105-106 levels. Brent-WTI spread (8.88) has broken above resistance of 8.5 and is heading towards 10-11. Brent could soon start rising against WTI in the near term.
Copper (3.1835) bounced up sharply yesterday from crucial support near 3.08-3.09 in line with our expectation and is targeting 3.20-3.25 in the coming sessions. Near term is bullish.
Except Aussie, no currency looks strong enough against the Dollar despite the pause. The Jackson Hole meet tonight is going to big deal for the Currency traders globally and may affect the Rupee too next week.
Euro (1.3280) has taken the first pause after three days of incessant fall ahead of the Jackson Hole meet but still looks destined for our target of 1.31. Resistance at 1.3330-50 and support in 1.3250-25.
Dollar-Yen (103.81) is consolidating near the minor resistance at 104.10-20 as expected with the uptrend fully intact. Interestingly, Euro-Yen (137.87) is hitting the upper end of the 3-week range of 135.75-138. A successful break above 138 would signal a rally towards 139.00-25, even 140.
Pound (1.6579) has taken a minor pause near our short term target of 1.6525-1.6470. But any attempt to bounce will face selling pressure from 1.6650-6700.
Aussie (0.9316) bounced back on the back of strong Chine equities just as expected and kept the range of 0.92-0.95 intact. Play the range as long as it remains unbroken.
Dollar-Rupee (60.67) spent another day in a sideways trend. It may weaken a bit today as Dollar has corrected a bit against nearly all the Majors. Keep an eye on the major support at 60.50-40.
There's been a $2.7 bln investment into Indian Debt, reportedly by Franklin Templeton yesterday, in anticipation of a rating upgrade for India. This figure does not seem to have impacted the markets yesterday - Rupee was stable at 60.67 and the 10Yr GOI yield in fact rose a bit to 8.51%. It is to be seen if the market reacts today.
The RBI, in its Annual Report yesterday, has said that its 8% CPI target for Jan-15 might be achievable but there could be risk to the 6% CPI target for Jan-16.
The US Yield Curve has flattened again yesterday. While the 5Yr (1.63%) dipped by 1bp, the 10Yr (2.41%) and 30Yr (3.19%) have dropped sharply from 2.44% and 3.23% respectively. Outlook remains unclear to us at the moment. Maybe we will get some perspective from Jackson Hole.
The German-US 2Yr Spread (-0.452%) has risen yesterday from -0.48% earlier, contrary to our expectation of further decline. The Euro (1.3283) has also seen a bit of short-covering with the rise in the Spread.