Thursday September 18, 2014 - 03:30:36 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 18-Sep-2014 -0329 GMT
The QE is ending and rates are most likely to go higher next year. The equity markets took this in their stride as the inflation remains quiet, giving them a breathing pace. The Emerging markets though, may not feel that comfortable.
Dow (17156.85, +0.15%) makes a new life high at 17221 but the closing comes much lower than comfortable for the bulls. Pinocchio Bar coming? Stay cautiously bullish as a break below 16900 now can negate the short term uptrend and introduce a larger corrective period.
Dax (9661.50, +0.30%) tested our resistance at 9690 but may break the 9600-700 range today. A break above 9700 may trigger the expected rally or a break below 9570 may negate the bullish sentiment.
Shanghai (2303.54, -0.19%) is not feeling the effect of the Chinese stimulus yet as it has corrected to our support 2285 and confirmation is needed to conclude that the corrective phase is over. Expect support from 2285-70. The Nikkei (16049.86, +1.01%) is on the verge of breaking above the long term resistance area in 16100-200 and to make a new seven year high above 16320.
Nifty (7975.50, +0.54%) tested our resistance at 7990 in its pullback but structurally remained weak. 7990-8000 remains the immediate resistance while a break below 7925 may open the door towards 7850-7750. Stay cautious until 8050-85 is broken on the upside.
Commodities have all fallen after the FED kept the interest rates lower but have raised its projections for the next year.
Gold (1223.72) and Silver (18.518) were unable to rise signalling that the inherent weakness still persists. Gold is trading below 1225 and while the fall extends, it may soon target crucial levels of 1200. Silver is down to test 18.5 levels again and may see lower levels of 18-17.5 if it is unable to bounce back immediately. Bearishness holds strongly for now.
Nymex WTI (93.91) is trading a bit lower today but is testing the 21-day MA. A rise from here would be confirmed only after a break above 96-97 region. Till then we may see some steady and ranged moves in the 93-95 region. As said earlier, near term target is 96.95 and further 99 on the upside.
Brent (98.47) is also trading a bit lower but may rise towards channel resistance near 101. However a break above 101 if seen may take it higher towards 103.65 in the near term.
Copper (3.1260) has fallen sharply and may keep fluctuating for some more time in the near future. Near term is quite unclear for now while the longer term trend is down.
The FOMC meet resulted in a destroyer form of the Dollar Index (84.6260) and all the Majors, even EM currencies, are routed. But the long term resistance area of 84.75-85 is still not broken and the Dollar may be much over-extended to break it right now. So a pullback in Dollar and bounce for the majors? These two days will show.
Euro (1.2869) broke the Bear Pennant and crashed to 1.2832 in a big selloff. The long term support are of 1.2780-40 is very close now but there is no sign of the bearish momentum slowing down yet.
Dollar-Yen (108.57) is testing the long term resistance band in 108-109 and a successful break, looking highly probable, may take it to 112.70 immediately and then target 118. The Euro-Yen Cross (139.75) is close to achieving our target of 140. Letís watch the price action there if it can continue the rally to 141 immediately.
The Pound (1.6268) spiked to 1.6358 before coming down again. the sentiment here is being driven by the Scotland independence vote and expect more volatility in the coming sessions as it searches for range boundaries.
Yesterday it was discussed how technically damaged Aussie (0.8969) was and then in the later hours, it crashed to 0.8938, just 18 pips away from our target band of 0.8920-0.8890. Perhaps some pause coming now?
Dollar-Rupee (60.9150) traded quietly as expected and tested our support at 60.90-85. With all the EM currencies weakening considerably, a retest of 61.15 can be expected now.
The US 5Yr(1.83%) and US 10Yr(2.62%) have risen from 1.77% and 2.58% respectively after the FED kept interest rates lower. If the US 10 Yr continues to rise in the near term, it may target resistance near 3.00%s which if holds may bring it back to 2.50% else a break above 2.60% may take it towards the longer term resistance near 3.00%.
The German 2Yr(-0.070%) and 5Yr(0.204%)have fallen, 10Yr (1.05%)is stable and the 30-Yr (1.98%) has risen quite a bit. The 30-Yr seems to be rising sharply now amongst the other yields. Although the German-US 2Yr spread has bounced from -0.42% in August, the longer term trend is firmly down bringing in more possibility of further fall. Euro (1.2867) has fallen sharply with the yields and may remain ranged for a few sessions now.
The Indian 10Yr (8.497%) is stable for now and may remain in the 8.47-8.54% region for sometime before clarifying further moves. The Indo-US 10 Yr (5.93%) is in a near term downtrend and may range in the 5.95-5.90% zone for a couple of sessions now.
8:30 GMT or 14:00 IST SNB Meeting
...Expected < 0.25 % ...Previous <0.25 %
12:30 GMT or 18:00 IST US Housing Starts
...Expected 1040 K ...Previous 1093 K
14:00 GMT or 19:30 IST US Philifed Index
...Expected 22.80 ...Previous 28.00
UK BOE Minutes
...Expected 0-0-9 ...Previous 0-0-9 ...Actual 0-0-9
...Expected 6.30 % ...Previous 6.40 % ...Actual 6.20 %
EU CPI (YoY)
...Expected 0.40 % ...Previous 0.38 % ...Actual 0.37 %
US Core CPI (MoM)
...Expected 0.2 % ...Previous 0.04 % ...Actual -0.2 %
US Current Account Balance
...Expected -114 $ Bln ...Previous -111.18 $ Bln ...Actual -99 $ Bln
US FOMC Meeting
...Expected <0.25 % ...Previous <0.25 % ...Actual <0.25 %