Wednesday September 3, 2014 - 03:51:05 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 03-Sep-2014 -0350 GMT
The US equity markets ignored the strong Manufacturing data and went nowhere. Ignoring good data is never a good sign. On the other hand, Shanghai keeps the Asian sentiment positive, a market that has ignored a lot of bad news in the last few months and is rising fast now.
Dow (17067.56, -0.18%) is stalling for the third consecutive session in the narrow range of 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 (9507.02, +0.30%) is in a short term corrective mode for the last week and stuck in 9400-600. Only a break above 9800 would reverse the downtrend and signal a rally towards 10600-700.
Nikkei (15786.61, +0.75%) has reached 15800 levels as expected and a break above 15950 will bring 16150-300, the 2013 high, into consideration. The Shanghai (2282.20, +0.71%) has broken above 2260-70 firmly to signal the next phase of the rise. Now the targets of 2330 and 2450 open up, expected to be achieved soon.
Nifty (8083.05, +0.69%) has achieved our immediate target of 8075-90 and on a closing above 8100, may reach 8190-8300 as mentioned earlier. The bullish momentum remains intact above 8000.
Globally all commodities have fallen sharply. May remain stable or see some short term upward correction while the longer term is firmly bearish.
Gold (1267.49) has dropped sharply to test crucial support at 1262.90 which may hold prices for a few sessions. However a break below 1262 if seen could be very dangerous for the metal taking it to lower levels of 1250-1240. Gold-WTI ratio (13.56) has risen from support near 13.5 s expected and may now indicate a little upward correction for Gold. May expect a possibility of a rebound from 13 to target 14 again.
Silver (19.21) has also fallen to lower levels. A slight upward correction towards 19.5 could be seen before again falling towards 19-18.5 levels. Long term remains bearish. Gold-Silver ratio (65.95) remained stable as both the metals fell sharply maintaining the ratio to remain ranged. Sideways consolidation within 66.73-65.768 could be seen for a few sessions before falling towards 65.06-64.4.
Nymex WTI (93.31) has fallen sharply from the crucial 95.84 levels as expected. The Crude is trying hard to rise but is strongly under the influence of the bears. It has fallen to test our target support of 92.5 which may hold prices for a few sessions now. In the longer run we may see more downfalls.
Brent (100.71) came off sharply after testing the 21-day MA near 103.3. There may be some correction now towards 102 but in the longer term we may see levels of 99.66-98.74. Moves are bearish.
Copper (3.1595) remains stable for now. The levels of 3.10-3.23 may hold in the near term.
The expected big moves materialized in Yen & Pound as Dollar (82.99) literally crushed these currencies. But Euro is silent before the ECB meet and that can be the biggest influence of Rupee for the day.
Euro (1.3133) keeps hitting new lows while waiting for the ECB meet, though the bearish momentum is low for the moment. We will see if any short covering emerges from the long term support levels of 1.3050-1.30 after the meet.
Dollar-Yen (105.19) almost tested the 6-year high of 105.44 and the bullish momentum is increasing. A firm closing above 105.40-50 could signal a rally to the long term resistance at 108-109. Euro-Yen (138.16) managed to break above 138 after a month and a half. Now just a small move above 138.50-65 is required to fully negate any potential weakness and activate the targets of 140-141.
Pound (1.6467) crashed to our initial target of 1.6460 just as expected and no sign of let off is seen till now. A break below 1.6460 will keep it on course to our next target of 1.6360.
Aussie (0.9276) is tantalizingly close to 0.9250 once again but the sideways movement may continue for a while more in the range of 0.92-0.9375.
Dollar-Rupee (60.68) tested the upper end of the old range of 60.35-70 and while a break above 60.70 opens up targets of 60.90-61.20, the breakout may not be that easy to come. We may see another rangebound day in the same 60.35-70 ahead of the ECB meet.
Reserve Bank of Australia (RBA) meeting yesterday kept the interest rates stable at 2.5%.
The German 2Yr (-0.0335%) is a little higher today which should impact the Euro (1.3130) positively. The German-US 2Yr (-0.56%) is testing support near -0.55% and may see a bounce towards -0.50 to -0.45% in the near term. On the other hand the German-US 10 Yr yield has been falling sharply and my continue to fall in the near term.
The US 2Yr (0.53%) is at crucial resistance levels currently. If this holds we may see the yield fall towards 0.40% In the near term. The 5yr (1.69%) is also nearing resistance near 1.72% which if holds may come down to 1.65%. The US 10-5 yr differential (0.74%) may rise a little more towards 0.76% while in a longer term downtrend.
In India, the 10Yr GOI (8.5191%) has dipped further and the Indo-US 10Yr Spread (6.09%) has also come off.