Friday November 7, 2014 - 03:26:32 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 07-Nov-2014 -0325 GMT
Dow (17,554, +0.40%) has crossed and closed above 17500, making its highest all-time closing ever. We expect the trend of newer highs to continue through November. The next target for Dow up move is 17,910 and 18,040.
Nikkei (16,882.12, +0.55%) is consolidating after huge moves after substantial Yen-depreciation in shortest possible time frame. We expect new highs to be made very soon. The level of 17500 may offer some token resistance but given the substantial boost to the corporate bottom lines due to Yen-depreciation these resistances will be mere token pauses. The next stop in Nikkei above 17500 would be 17850 and extending up to 18,250.
The rally in Dax (9,377.41, +0.66%) is slow and measured, given the slowing economy but is helped by global equity euphoria. Dax is still working through its long-term bearish formation, and move above 9600 would indicate failure of this bearish chart formation. Above 9600, we should see a new high above 9900. Importantly, the failure of year-long bearish consolidation could potentially ignite massive long-term rally above 9900.
Shanghai (2,431.24, +0.26%) seems to have made a short term bottom at 2400, and above this level we should see a new high. 2600 should be achievable in few weeks. A minor resistance is at 2515, and a stronger resistance is at 2556.
Nifty (8,338.30, +0.17%) is trading sideways and is likely to target 8500 soon. Continuation of global equity rallies will be very helpful.
Commodity price structure remains vulnerable to another loop down.
Down fall in precious metal prices are the function of rising U.S Dollar. So, we donít see possibilities of recovery in Gold (1140.75) prices. Itís falling in vertical manner from the areas of 1250 and may move down further towards 1110. Intraday key resistances are 1155 and 1160. Silver (15.30) broke down the range of 15.80-16.20 and moved sharply towards 15.10, inching closer towards our downside target of 14.60. in case of a pull back 15.50-.60 would act as the resistance levels.
Keeping the broader bearish trend intact Nymex WTI (77.65) is trading below 79 levels. Structural change in prevailing trend has not been seen yet. So, we believe it is headed for the down side target of 74-75. Bear ruling continues in Brent (82.44) also, can come up against a key support level of 79.
Copper (3.0235) staged a bounce back almost from the levels of 2.95. Prices are following a down trending structure. Hence, a rise towards 3.06 and 3.10 is going to be another sell short opportunity for the bears.
The Dollar seems to grow stronger by the day these days!
There seems to be no stopping the rise in Dollar-Yen (115.30) at the moment as it has now risen past the 78.6% retracement (113.94) of the fall from 126.14 (Jun-07) to 75.57 (Oct-11). We may well target 120 in the medium term.
The fall in the Euro (1.2380) after Draghi's press conference yesterday and its continued bearishness towards 1.22 has led to some profit-taking in the Euro-Yen (142.75) which has been rising relentlessly since 134.14 (16-Oct) and saw a high of 144.22 yesterday. Some consolidation below 145 could be seen in this pair, driven largely by Euro weakness. This could, however, slow down the rise in Dollar-Yen a little bit.
Like the Euro, the Pound (1.5835) is also very bearish and targets 1.5720, the 61.8% retracement of the rise from 1.4813 (Jul-13) to 1.7190 (Jul-14). The Aussie (0.8554) also continues to trend down strongly alongwith commodities and target 0.8435 week.
Dollar-Rupee which had closed at 61.4150 on Wednesday, might move up towards 61.50-60 on the overall Dollar strength globally.
Bond yields have not reacted as much to the ECB Meeting yesterday as the currency markets have.
Draghi did not announce any QE but hinted there was no discord in the ECB Governing Council, contrary to earlier reports that many were unwilling to back him on QE.
Although the Euro (1.2384) has dropped quite a bit, German and French yields have not dipped much. The German 5Yr (0.12%) is down from 0.122% while the 10Yr (0.827%) is down from 0.83%. The trend remains down, however, with the 5Yr targeting near 0.05%, possibly 0.0%.
The Japanese yields have dropped a bit, especially 30Yr (1.527%), which is down from 1.583% last week. Further downside possible across the Curve.
Bucking the trend, US yields have actually moved up by 3-5bp across the Curve. Some more upside is possible for the next few days before yields start coming off again within the overall Curve flattening trend that can go on for some more weeks.
The pressure on the RBI to lower interest rates is growing by the day. The shape of the 10Yr GOI chart (currently 8.20%) suggests deeper decline towards 8.0% might also be possible.
9:30 GMT or 15:00 IST UK Trade Balance
...Expected -9.4 £ (Bln) ...Previous -9.1 £ (Bln)
13:30 GMT or 19:00 IST US NFP
...Expected 229 K ...Previous 248 K
13:30 GMT or 19:00 IST US Unemployment Rate
...Expected 5.90 % ...Previous 5.90 %
13:30 GMT or 19:00 IST CA Labour Force
...Expected 0.40 K ...Previous 74.10 K
Australia Labour Force
...Expected 10.3 K ...Previous -54.1 K ...Actual 24 K
...Expected 0.50 % ...Previous 0.50 % ...Actual 0.50 %
...Expected 0.05 % ...Previous 0.05 % ...Actual 0.05 %
...Expected 59.2 ...Previous 58.6 ...Actual 51.2