Monday September 1, 2014 - 03:40:08 GMT
Share This Story
FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 01-Sep-2014 -0340GMT
With the US market closed today on account of Labor Day, the other markets are expected to trade very quietly in the absence of any cue. The Indian market may rally on the back of a strong Q2 GDP at 5.7% (yoy), fastest growth in more than two years.
Dow (17098.45, +0.11%) is stalling in a narrow range of 150 points in 17000-150 after testing the life high last week. The trend remains firmly up but to extend the rise, the bulls must break above 17300-400 soon. Dax (9470.17, +0.08%) has faced selling pressure exactly from our resistance zone of 9600-800 and remains under pressure below this supply zone. Only a break above 9800 would reverse the downtrend and signal a rally towards 10600-700.
Nikkei (15468.43, +0.28%) has broken the 4-day narrow range of 15500-650 on the downside and may test 15200-100 in the short term. The Shanghai (2221.07, +0.17%) has bounced sharply after retesting our support at 2190 but still needs to break above 2260-70 to begin the next phase of the major rise. Till a breakout takes place, expect fluctuations in the range of 2170-2270.
Nifty (7954.35, +0.23%) tested 7970 once again on the last trading day. Based on the global cues today, a break above 7970 can take the index to our old target of 8000-20 and then even 8075-90.
Gold (1286.75) is trading lower after a short upward correction from 1271. We may see a rise towards 1300 before falling back to 1280 in the near term while the longer term remains bearish. Gold-WTI ratio (13.42) has fallen from resistance at 14 but may bounce back from 13.3-13.4 levels to target 14.5-15 levels.
Silver (19.474) looks positive in the near term while support near 19.26-27 holds well. A rise towards 19.75-20 may be seen. Gold-Silver ratio (66.044) is rising targeting 66.75 in the near term. It may remain in the 65.76-66.74 region in the coming sessions.
Nymex WTI (95.84) has risen sharply against our bearish view as the support near 92.5 holds well. This has initiated a fresh rise upwards and may target levels of 98-100 in the coming sessions.
Brent (103.27) is also rising and is currently testing the 21-day MA. Note that an important resistance is coming up near 104 which if holds may push it back to 102-101; else a break above 104 may take it to test the next resistance level at 105. 104 and 105 are crucial resistance levels and possibility of these levels to hold look much stronger for now.
Copper (3.1695) is trying to rise towards 3.20 again. It seems to be fluctuating in the 3.09-3.20 region in the near term and need to break on either side to clarify further move. Ranged moves to be seen in the coming sessions.
Euro keeps taking hits from various fronts like US data to the speculation that the QE from the ECB may come this week. The divergence between the US & Eurozone economies is getting more and more clearly reflected in the respective currencies.
Euro (1.3123) crashed exactly from our resistance at 1.3220 to reach our medium term target of 1.31. Now it is very close to the long term support zone of 1.3050-3000 though no sign of strength is visible. Letís see if any short covering emerges from these levels.
Dollar-Yen (104.17) is close to hit a new 7-month high above 104.26 but still needs a break above 104.50 to gather bullish momentum for reaching higher levels. The grinding price action without any kind of directional move in Euro-Yen (136.69) actually shows the relative uniformity between Euro & Yen as both weakened simultaneously. The pair remains weak below 138 and the range of 136-138 may sustain for a few sessions more.
Pound (1.6596) is stuck within a very narrow range of 1.6540-1.6620 and even a break above 1.66 could not boost the pair. The downtrend remains firm and any bounce may face selling pressure from 1.6700-50 levels.
Aussie (0.9338) is testing the August high at 0.9375 levels but the lack of momentum doesnít promise much more immediate upside. A failure to break above 0.9375 may drag it down towards 0.9280-50 levels once again.
Dollar-Rupee (60.51) is adamantly stuck in our range of 60.35-70 and only a break beyond this range can produce the next directional move. Till then, expect sideways action.
Raft of central bank meetings this week - Australia tomorrow, Canada on Wednesday and ECB and BOE on Thursday. We are tracking the ECB.
There is confusion whether QE will be announced by the ECB this time or not. Some say it will be announced, given what Draghi said at Jackson Hole. Others see regulatory hurdles to it. Plus, they say TLTRO is still to be implemented and Asset-Backed-Securities (ABS) purchase still needs to be implemented.
We expect this ECB Meeting to be significant and are taking a contrarion call that European yields could move up rather than down. In fact, they are already moving up at the near end of the Curve. The KSHITIJ E-4 Composite 10Yr Yield (1.17%) is testing important Support at current levels while the corresponding 2Yr and 5Yr yields (0.0887% and 0.4177% respectively) have already been moving up since July. The Spain-Germany 10Yr Spread (1.34%) may also be forming a Double Bottom and could rise.
In India, the Indo-US 10Yr Spread (6.22%) has been moving up since 6.07% (21-Aug) and may soon test an important trend Resistance at 6.25%. This is expected to hold and pull Dollar-Rupee down with it when it comes down.
The US is closed today on account of Labour Day.
23:30 GMT or 0500 IST AU PMI
...Previous 50.70 ...Actual 47.3
1:00 GMT or 6:30 IST CN PMI
...Expected 51.20 ...Previous 51.70 ...Actual 51.1
1:35 GMT or 7:05 IST JP PMI
...Expected 52.40 ...Previous 52.40
6:30 GMT or 12:00 IST IN PMI
7:30 GMT or 13:00 IST CH PMI
...Expected53.30 ...Previous 54.30
8:00 GMT or 13:30 IST EU PMI
...Expected 50.80 ...Previous 51.80
8:30 GMT or 14:00 IST UK PMI
...Expected 55.00 ...Previous 55.40 -
UK Cons Conf
...Expected -1 ...Previous -2 ...Actual 1
...Expected 3.70 % ...Previous 3.70 % ...Actual 3.80 %
...Expected 11.50 % ...Previous 11.50 % ...Actual 11.50 %
US Personal Income
...Expected 0.30 % ...Previous 0.46 % ...Actual 0.19 %
US PCE Price Index M/M
...Expected 0.20 % ...Previous 0.43 % ...Actual -0.11 %
...Expected 0.30 % ...Previous 0.40 % ...Actual 0.30 %