Monday November 17, 2014 - 03:58:02 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 17-Nov-2014 -0358 GMT
Expect much volatility in this data-packed week. Though we have started off on wrong foot with highly unexpected and bad GDP data of Japan, the general consensus is for better US data this week. Europe is expected to perform only marginally well. This tilts the global equities balance in favor of US. Could we see some short-term decoupling here?
We also expect some institutional profit booking ahead of Thanksgiving.
Dow (17,634.74, -0.10%) remains in the range and is expected to resolve its narrow range this week on back of data releases. 17,400 would the immediate support, followed by 17150. 17,800 and 17,900 remains our targets. Our short to medium term bullishness will be void if Dow falls below 17,000.
Japanese Preliminary GDP came in at -0.4% against the expected 0.5%, while previous reading was also revised downwards. The annualized GDP fell by 1.6% against the expected rise of 2.1%. This highly unexpected data has blunted the Nikkei move and also the Yen. Importantly, the short to medium trends of both Nikkei and Yen, come under serious question.
Nikkei (17,126.20, -2.08%) fell heavily in morning trades, while it is still holding above the psychological mark of 17,000. Technically, 16,800 is the first support that could hold the market in short term. Though measures like pension fund allocation reforms have long term benefit for Nikkei, in short term, the recessionary news may hold sway.
Another day and another attempt by Shanghai (2,485.75, +0.28%) at 2,508 levels, and another failure.Shanghai composite has been uninterrupted run from the levels of 2000 since mid-June 2014, a gain of around 25%, and may it is time for it consolidate. We expect the trend to continue for now and are not bearish, though we will closely watch for any signs of reversals.
Dax (9252.94, +0.05%) has been weak as usual continuing its weak-consolidation but topping-formation. If the equity markets turn down from here, ahead of data heavy weak, Dax would be the best-sell trade.
For the day, Nifty (8,389.90, +0.38%) is expected to stay low on global cues. We continue to expect 8,500 targets in near term.
Through study should lead you to believe that precious metals would not do well because of rising Dollar index. But that does not mean Precious Metals are not able to produce a corrective bounce.
Gold (1186.65) was hesitant to go down below 1130 that level finally supported the intraday bounce. 1200 is there to resists the corrective wave. Our down side 1110 remains same. Silver (16.28) gave a strong pull back from the levels of 15, and trading above 15.80. Shorter term price structure suggests this corrective wave may go up to 16.80 levels before it runs for our down side target of 14.60.
Brent (78.96) could see some follow through buying on previous sessionís pull back. This bounce back from over sold zone may travel to 80 to 81 levels. Nymex WTI (75.40) moved up sharply. It has to move beyond 76.50-60 levels to hold this pull back valid for coming sessions.
Copper (3.0470) is moving nowhere, uneventful movements in the range of 2.95-3.05 is intact.
Euro (1.2557) has bounced from the support of 1.24; we expect it to test 1.2600-1.2620 resistance today or tomorrow. The longer term trend remains to downside but in shorter term we may see resolution of positive divergences on technical charts.
Pound (1.5713) broke through all its supports during the fall but bounced from 1.5600 levels, against the expected 1.55 levels. It will have tough time to climb through its previous supports-turned-resistances. Major resistances / supply zone now exist between 1.60-1.62 levels, and immediate resistance is at 1.5725, 1.5870 and 1.5950.
Yen (115.90) made a new top at 117 before falling on the bad GDP data. Yen has always gained in the recessionary times and this time it should be no different. However, what remains to be seen is if the GDP contraction will continue despite the substantial Yen-depreciation. Hence, next quarter's data will be very keenly watched. The development ties in with our expectation, noted on 14th, as expect Yen to trade sideways (and consolidate) in the large range of 112-117 (mid-115) for longer term.
Rupee (61.72) spiked in late hours of trade on Friday. We expect it to consolidate near 61.60-61.80 for some time.
We have been consistently wrong in reading Aussie (0.8789) this last week. Aussie has now broken back into the range, and we think the 'breakout' was just an expansion of the range than anything else. We expect it to trade within the large ranges for sometime. In this case, we do not expect to see our target of 0.84 in near term.
JGB10 (0.46%) has fallen heavily from 0.538% to 0.46%. The supports exist at 46.2 and a much stronger support exists at 0.439%. A break and sustain below these levels, would indicate the lower growth expectations for future. However, we feel the worse is over and the markets are likely to reverse from here. For medium to long term JGB 10Yrs is a good buy at these levels.
US treasury Bonds (10y: 2.2860) (5y: 1.5699) was unable to break above 2.40. It is now close to its downside target of 2.25%. For the day, we expect a target of 2.25% and a resistance at 2.32%.
GOI10 (8.2150%) is expected to consolidate around 8.21-8.22 levels before we move higher into 8.30s. Much will depend on the outlook on RBI's rate cut.
GER10 (0.7835%) has closed near the bottom and support of 0.76. We expect the Bund-Bond differential to have bottomed out near the current levels, and this should support German yields. This should also benefit Euro in near term.
23:50 GMT or 5:20 IST JP GDP
...Expected 0.5% ...Previous -1.8% ...Actual -0.4 %
10:00 GMT or 15:30 IST EU Trade Bal
...Expected 16.20 EUR Bln ...Previous 15.8 EUR Bln
14:15 GMT or 19:45 IST US Industrial Production
...Expected 0.20 % ...Previous 1.06 %
14:15 GMT or 19:45 IST US Capacity Utilization
...Expected 79.3 % ...Previous 79.3 %
...Expected 2.20 % ...Previous 2.38 % ...Actual 1.77 %
...Expected 0.70 % ...Previous 0.70 % ...Actual 0.80 %
EU CPI (YoY)
...Expected 0.40 % ...Previous 0.31 % ...Actual 0.37 %
US Retail Sales (MoM)
...Expected 0.21 % ...Previous -0.38 % ...Actual 0.27 %
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