Wednesday October 29, 2014 - 03:50:18 GMT
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Morning Briefing : 29-Oct-2014 -0350 GMT
Volatility across markets has reduced considerably in run-up to FOMC meeting. Markets will be closely watching for any clues to possible FED action in tackling stronger dollar and low inflation concerns.
The Dow (17,005.75, +1.12%) has just nudged past the minor resistance at 17000, this supply zone of 17000-150 should pause the markets for today as it waits for FOMC. The stronger supply area at 17500 will come into play on any bullish move post-FOMC.
Dax (9068.19, +1.86%) rallied smartly making new swing highs and is now close to testing the resistance at 9100. If the resistance of 9100 holds, we could see a retracement to 8800 levels or even to stronger support area of 8650.
Shanghai (2355.6, +0.72%) has bounced from an oversold territory. The levels of 2270-60 remain immediate support, and break of these levels would imply a larger downside to 2200 or lower.
Nikkei (15541.20, +1.38%) move on back of BOJ stimulus hopes have not reduced the structural weakness in the chart formations. 15600 remains a immediate and crucial hurdle to cross for bulls, and later a much stronger supply zone at 15750-15900 will have to be tackled. It is too early to call for a rally, as long a Nikkei trades below these levels.
Nifty (8027.60, +0.45%) has been having tough time to cross 6050, a break above the levels of 8050-70 would be short term bullish. Bulls have their first support at 7990, and much better support at 7935-15.
Gold (1230.01) is ranged for now. May see a rise to 1260 before falling sharply towards 1240-1230 again. There is a possibility of retesting 1180 levels in the near term which can only be negated on a sustained rise above 1260. Silver (17.23) continues to consolidate for now with a possibility of moving towards 17-16.5 in the near term. Near term is bearish.
Nymex WTI (81.68) is trading a bit higher but is held below the 13-day MA. While the movements are short and narrowing, we need to see if it is able to bounce from current levels towards 84 or break below 80 to target 78-76 levels. We may soon expect the price to bottom out near 78-76 region.
Brent (86.27) is testing immediate resistance on the daily and may fall a bit towards 85-84. Very tight movement indeed since the last 2-weeks in the 84-86 region. Sideways consolidation to continue for sometime.
Copper (3.0795) has come off from channel resistance near 3.0960. But the rise does not seem to have ended yet. A bit of correction towards 3.05-3.03 and we may see a retest of 3.096-3.10 levels. Fluctuation in the broad 2.90-3.10 region may continue in the near term.
Mixed moves in currencies. Dollar a tad weaker against the Euro and Pound, but weaker against the Yen. Aussie and Rupee remain stable. Overall conditions remain quiet in currencies for now.
The Euro (1.2738) showed more strength than we thought yesterday, rising to 1.2765 in US trade, coming up from Support at 1.2685. However, the overall bearishness still remains while below 1.2780, although a test thereof is a possibility now.
The Pound (1.6130) also rose to 1.6182 yesterday, testing the cup-handle neckline mentioned yesterday. A test of 1.62 is possible now while above 1.6100. We will have to then see whether we get a further rise to 1.63 or not.
Some strength for the Dollar came in against the Yen (108.14), as Dollar-Yen rose after a false dip to 107.69. The 107.80-70 region offers intra-day Support now and a test of 108.50 could be possible, which would challenge our bearishness from yesterday. Should the Nikkei (15541, +1.38%) manage to rise past the 15600 Resistance mentioned yesterday, it would help Dollar-Yen move up as well. Watch this.
The EUR-JPY Cross (137.75) is close to testing our Resistance target at 138 and could take a pause there for a while.
The Aussie (0.8867) is close to testing the upper end of the 0.8650-8900 range mentioned yesterday and has greater chances of falling back towards 0.8775 and lower, within the range. Sideways trade could last for some more days.
Finally, Dollar-Rupee (61.325) is likely to remain quiet today as well, between 61.10-55, as mentioned yesterday. Note, we think 61.10 is going to be a strong enough Support.
Markets await the FOMC tonight. Importantly, the US 2Yr (0.42%) has risen well from the 0.38% earlier. Yields are slightly higher generally, but still below important Resistances like 2.35-40% on the 10Yr and 1.56% on the 5Yr. The wordings of the FOMC statement will be important as it tries to balance the end of QE with overall dovishness.
The German-US Spreads (2Yr -0.47%, 10Yr -1.41%) have dipped a bit more yesterday, not supporting the rise in the Euro (1.2738) seen last night. The US-Japan 10Yr spread (1.83%) tests Resistance as mentioned yesterday, not really supporting a further rise in the Dollar-Yen (108.14). A fresh dip in the Spread from here could pull Dollar-Yen down with it again. Let us see. Interesting play going on here.
In India, the 10Yr GOI (8.322%) trades just above 8.30% and seems to be itching to test 8.25%. FIIs are buying debt, so pressure would be mounting on the RBI to cut rates.
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