Thursday November 20, 2014 - 04:12:57 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 20-Nov-2014 -0412 GMT
Equity markets have rallied for long now on back of benign Central bank policies but policies are now in a state of flux and equities at new highs. We advise caution until these uncertainties are resolved and we have clarity on policies and market. Avoid new long entries at these levels, and until the current spate of data releases are complete.
Dow (17,685.73, -0.01) is quiet ahead of crucial CPI data releases today. CPI would determine the direction of FED's policies on interest rates. The first major support comes in at 17,400 and 17,280. Lower CPI number today would have positive impact on the equities on expectation of more aggressive FED stimulus.
Nikkei (17,305.49, +0.10%) was unable to go past 17,500 levels. Nikkei is consolidating within the range of 17,500-17,000; a breakout above 17,500 would see an immediate target of 17,700.
Shanghai (2,449.93, -0.04%) in short term charts is now testing the bottom of triple-tops at 2,450. If the level of 2450-55 holds, index is likely to drop to 2,400 levels. However, for long term, the trend is bullish, and corrections are an opportunities to buy.
The wave structures in Dax (9,472.80, +0.17%) remain in corrective mode, and seemingly with no real threat of attack of Bear-pivot at 9,700. For the day, we expect 9,550 resistance to hold and Dax fall back to 9,350 areas.
Nifty (8,382.30, -0.52%) dropped in late hours of trade. We expect yesterday's bottom at 8,360 to hold for the day, and Nifty move up to 8,450 in short term.
Yesterday Gold (1180.11) retreated from 1200 levels on reports that Swiss support for a referendum to require country’s central bank to hold 20% of its Gold reserves wanes, but weakening Dollar Index (within corrective range against the primary uptrend) helped the recovery from day’s low. 1170-1200 may act as today’s range. No change is been observed in Silver (16.04) price trend. One should not expect corrective bounce while it is trading below 16.80 levels.
Brent (78.04) ended below 80 levels as the rebound fizzles from days high of 79.45 levels. But, our view that it would test resistances of 80-81 is still valid as the support level of 77 is intact. Nymex WTI(74.58) short term bulls found an intraday ground at 73.90. One should keep an eye on the crucial support level of 73.20. But, it’s difficult to predict the next course of move while it is oscillating in the range of 73.20-76.50.
Copper (3.0345) struggling below resistance of 3.10. Keeping the downtrending channel intact price is oscillating in a tight range of 2.95-3.10, since last couple of weeks.
Euro (1.2538) tested the resistance of 1.26 but was unable to cross. These channeled formations are likely to continue for some more time. However, longer the Euro trades below 1.2600 more the balance will shift downwards to more bearish levels.
Pound (1.5665) bounced again from 1.56 levels, in a tweezers formation. This could indicate some bottom formation in progress. The break below 1.56 would open the target of 1.5475. New short-term positions should not be taken at these levels.
Yen (118.15) has broken above 118 levels. We expect this area to offer tough resistance and possibly stop the Yen-decline for some weeks or months.
Rupee (61.96) has crossed above its resistances of 61.85-90. We expect USDINR to touch the resistance of 62.10-20. If the area of 62.10-20 holds, we could drop back to 61.70.
Aussie (0.8609) bounced off from its crucial support at 0.8582. A sustained trade below 0.8582 should see Aussie decline picking up steam. Our first target on the decline would be 0.8500-0.8490.
Bonds yields slightly higher in the USA (10Yr 2.35%, up from 2.32%) and much higher in Germany (10Yr 0.848%, up from 0.801%). The German-US 10Yr Spread is up from -1.52% to -1.50%. But, theGerman-US 2Yr Spread remains steady at -0.54%.
The US Housing Starts (1009K for Oct-14) came off a bit from the upwardly revised 1038K for Sep, but the overall trend is up unless we see a figure below 950K in the coming months. Still the economy as a whole is still in a slow and nascent recovery. Bond yields are unlikely to shoot up strongly. The more sensitive 2Yr (0.52%) has important Resistance near 0.54-0.55%, which can hold on first testing at least.
The 2Yr Swap Cost (0.2105%) has chances of seeing a further dip towards 0.17% from where it could be bid up again in the medium term.
Japanese yields are a little lower (10Yr 0.48% from 0.49% earlier, 30yr 1.4075% from 1.413% earlier) in line with expectations. The 10-5Yr Spread (0.3590%) remains well above 0.33% for now, though.
Support at 8.15% is holding on the Indian 10Yr GOI (8.1636%) for now. A rise past 8.18% is needed (at the least) to suggest further rise towards 8.25%. Need to watch the market action at 8.18%.
13:30 GMT or 19:00 IST US Core CPI (MoM)
...Expected -0.10 % ...Previous 0.08 %
15:00 GMT or 20:30 IST US Philifed Index
...Expected 18.90 ...Previous 20.70
15:00 GMT or 20:30 IST US Existing Home Sales
...Expected 5160 K ...Previous 5170 K
...Expected <0.10 % ...Previous <0.10 % ...Actual <0.10 %
UK BOE Bank Rate Votes
...Expected 2-0-7 ...Previous 2-0-7 ...Actual 2-0-7
UK BOE Minutes
...Expected 0-0-9 ...Previous 0-0-9 ...Actual 0-0-9
EU EA (17) Curr Acct Bal
...Previous 22.8 EUR Bln ...Actual 30.0 EUR Bln
US Housing Starts
...Expected 1025 K ...Previous 1038 K ...Actual 1009 K
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