Thursday December 4, 2014 - 03:30:41 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 04-Dec-2014 -0330 GMT
Dow (17,912.62, +0.16%) made another closing high on strong US economic data. Though this latest push away from the range is a good sign for continuation of up trend, we remain cautious for now. Immediate support is now at 17,750 and possible target of 18,022.
Expected landslide victory for Abe has boosted Nikkei (17,424.13, +0.38%). The targets of 17,850 are complete; our next target is 18,250 and 18,350. 18,020 is a minor resistance.
The remarkable run in Shanghai (2,818.52, +1.40%) continues, it is up another 1.4% as we write. Yesterday, it dipped to 2,740 and bounced from there to present new highs. Such a short turnaround indicates very good momentum of this rally. Our 2,825 target has been achieved. The next targets are 2,910 and 3,000.
Dax (9971.79, +0.38%) is again knocking on the doors of 10,000 levels. Dax saw its highest close since July this year. Dovish Draghi and falling Euro are helping Dax to be buoyant. We expect a break above 10,000-10,034 today and move higher to 10,200 over next few days.
Nifty (8,537.65 +0.15%), it may be fair to assume that the rate-cut-expectation positions would have been squared off by now. 8500 support has held up quite credibly. The short term range is 8500-8550. However, there is still a risk of good amount of profit-booking due to year-end profit booking by FIIs. Longer term remains bullish.
Gold (1208.16) has moved up above 1200 and is held well by the 13-day MA. While above 1200 it may see levels of 1225-1250 soon. Near term looks positive.
Silver (16.44) remains stable after the sharp rise from 14.65 to 16.78 on Tuesday and may now choose to remain ranged in the 16-17 region for a few sessions. We may expect some positive moves in the near term.
Brent (70.35) is trading lower and any break below 67.53 could lead to a danger of seeing 65-63 levels. High possibility of confirming a bottom this month after which we may see some positive upmoves. As said yesterday, some sideways movement in the 67-72 range may remain. Overall long term trend is down.
Nymex WTI(67.70) is stable and may choose to remain in the 65-70 region for now. Need to see a rise towards 75-80 to avoid the danger of falling towards 60. Near term is positive. Saudi Arabiaís expectation of Crude oil price to trade around $60 calmed the nerves of market, as some analyst reports had earlier suggested much steeper fall in Crude.
Copper (2.88) has fallen as expected and may now head lower to 2.85-2.80 levels in a few sessions. Long term trend is down.
Euro (1.2310) is trading near its year lows and is expected to trade weaker ahead of Draghi's press conference. Darghi is expected to be dovish ahead of crucial Christmas retail season. He may also hint at the possible course of ABS purchases in 2015.
Pound-Dollar's (1.5688) rise from 1.5600 was capped by the Chancellor of Exchequer's downgrade of GDP growth in 2.4% (2015) and 2.2% (2016). Downgrades in growth has reduced the probabilities of BOE rate hikes in 2015. For the day, GBPUSD trades within the range of 1.5600-1.5750. Our preferred direction is the break below 1.5600.
Dollar-Yen (119.87) is close to 120.00, the long talked-about target of the market and now a psychological resistance. We have been proven wrong on the 118-resistance and a possibility of the dip to 117-116. Though the trend remains up, we wait and see how it trades near these levels before new trades.
For the day, Dollar-Rupee (61.9050) is expected to drift up due to Dollar strength across major currencies. The resistance above is at 62.10 (minor) and 62.20 (major). The support is at 61.80.
Aussie-Dollar (0.8388) continues its downtrend on commodities fall and dollar strength. For the day, we look for a target of 0.8320, and resistance is at 0.8440. The longer range target of 0.82 remains intact.
Everyone looks to the ECB Meeting today. Draghi has almost said he'll do "whatever it takes" to take inflation up.
Itís interesting that German yields are moving up at the near-end (2Yr -0.0395%, up from -0.10% in the beginning of October) while the 10Yr (0.747%) continues to fall. So, the Curve is flattening as a whole. The 10Yr yields continue to move down for most of the other European countries. But, itís important to note that France (1.016%) has long-term Support coming up near 0.85% and the Greek 10Yr (7.67%) is up 200 bp from levels near 5.67% (end-August). Still, if Draghi steps up monetary stimulus, as he is expected to, 10Yr yields can fall further for most of Europe. The KSHITIJ E-4 and E-7 Composite yields (0.9597% and 1.1132% respectively) have room to fall another 10-20 bp in the coming weeks.
The BOE Meeting is also due today. Rates are expected to remain steady at 0.5% of course. Importantly, UK Gilt yields have risen strongly over the last few days, although the overall trend still points downwards. The 5Yr (1.3645%) has moved up from 1.2550%, which is an important Support now.
Even the US yields have risen strongly over the last few days with the 10Yr (2.28%) up from 2.17% on 28-Nov, although the Curve as a whole continues to flatten.
Indian 10Yr (7.97%) now targets 7.80%, long-term trendline Support, and could reach there in December itself.
0:30 GMT or 6:00 IST Australia Trade Balance
...Expected -1.8 A$ Bln ...Previous -2.3 A$ Bln
12:00 GMT or 17:30 IST BOE Mtg
...Expected 0.5 % ...Previous 0.5 %
12:45 GMT or 18:15 IST ECB Meeting
...Expected 0.05 % ...Previous 0.05 %
...Expected 0.70 % ...Previous 0.50 % ...Actual 0.3 %
...Previous 0.29 % ...Actual 0.63 %
EU Retail Sales
...Expected 0.60 % ...Previous -1.22 % ...Actual 0.41 %
US ADP Emp
...Expected 223 K ...Previous 233 K ...Actual 208 K
...Expected 1.00 % ...Previous 1.00 % ...Actual 1.00 %
IN Services PMI
...Previous 50.00 ...Actual 52.00
CN Services PMI
...Previous 52.90 ...Actual 52.60
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