Friday December 5, 2014 - 03:37:38 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 05-Dec-2014 -0337 GMT
Dow (17,900.10, -0.07%) is close to double-toppish situation. A stop and reverse at this juncture would be highly bearish for the index. We wait to see how the market plays out and advise caution at these levels.
Nikkei (17,850.91, -0.20%) remains positive on the Abe's re-election hopes, expectations of strong exports on back of strong US economy and weak Yen. Our next targets are 18,250 and 18,350, with 18,020 as minor resistance.
The spectacular Shanghai (2,918.17, +0.63%) juggernaut continues. After a 4% rise yesterday,Shanghai reached its multi-year highs of 2,977 in the morning. Our targets of 2,910 and 3,000 (almost) achieved.
Our targets now are 3,000 and 3,170. At the risk of repetition, we think Shanghai has possibly entered a new bull phase and long term investors should buy into it on any corrections.
Dax (9851.35, -1.21%) broke above 10,000 resistances but with growth downgrades and Draghi's surprising stance on QE dropped Dax back below 10,000. For the day, we look to 9,835 to act as support, and 10,000 as resistance. Our bias remains a break above with timeline now possibly shifting to January on delayed QE expectations.
Nifty (8,564.40, +0.31%) held the supports at 8,500 and was able to crack the 8,550 resistance. For the day, the resistances are at 8,575 and 8,595. If Nifty is unable to clear these resistances, we will expect another round of selling to test 8,500 levels. Below 8,500, the targets will be 8,400-8,375.
Gold (1203.74) and Silver (16.445) are both resting after the sharp rise seen on the first session of the month. Small movements may continue in the near term before further rise is seen.
Brent (69.23) and Nymex WTI (66.48) have fallen again and there seem to be strong bearish pressure on the Crude Oil. Lower break of 67.53 for Brent and 63.75 for WTI could be bearish and could lead to more down fall to levels of 65 and 63 respectively.
Copper (2.9255) seems to be fluctuating in the 2.85-2.95 region and is unable to decide further direction just yet. Longer term trend is down and near term looks a bit bearish.
ECB's Draghi downgraded the GDP growth for 2015 from 1.6% to 1.0% and Inflation for 2015 expectations from 1.3% to 0.7%. Surprisingly, the market understood his responses as, ECB being unable or constrained to implement QE. It is expected the 3 of the 6 members of ECB Governing Council are against QE or asset purchases. Euro rose to 1.2460 on this comment. However, later reports quoting ECB officials that QE measures would be tabled in January meeting weakened Euroback below 1.2400.
Euro (1.2375) might have made a short-term bottom at 1.2300. We wait to see if 1.2300 can hold andEuro push higher to 1.2450. The downgrades however are paint bearish picture for Euro.
Yesterday's low, which is close to our expected target of 1.2250, would now act as important support. The 200-month moving average rests at 1.2237. We expect this zone of 1.2237-1.2277 would now act as strong support. Additional shorts should not be taken at these levels, as markets are likely to see technical bounces.
Pound-Dollar's (1.5656) was able to hold the support at 1.5600. Continuing with our earlier stance, we look for a break below 1.5600. The range-resistance on the top side is 1.5750.
Dollar-Yen (119.88) broke into 120-handle for first time since 2007. Several large hedge funds which bought USDJPY around 0.85s had explicit target of 120.0, they may be booking profit here. This might cap the gains for now. Abe's expected landslide re-election is also boosting Yen-depreciation.
Dollar-Rupee (61.9250) has remained range bound. The price action seems to indicate good support at 61.80s levels. We think 61.70-61.80 would good buy levels, and we could see Dollar-Rupee reach for 62.20-62.35 as the month closes.
Aussie-Dollar (0.8385) is drifting down ever so slightly with lower tops and lower bottoms. The current low is 0.8360. For the day, we expect a trade between 0.8300-0.8400.
ECB cut its growth and inflation for 2015. The threat of lower inflation rates along with falling oil prices worries Draghi. With inflation at its lowest prints in the last few years, the ECB may initiate QE possibly in the early 2015. The BOE rates remained steady at 0.5%.
The German yields have risen. The 2Yr (-0.019%) is up from -0.0395% yesterday while the 10Yr (0.772%) has also risen from 0.747%. France (1.020%) has risen while Greek 10Yr (7.511%) has fallen sharply.
The UK gilts are up after the better House prices came out supporting the BOE stance of keeping the rates unchanged.
Indian 10Yr (7.967%) was flat yesterday while our target of crucial support at 7.80% could be seen this month.
10:00 GMT or 15:30 IST EU GDP
...Previous 0.80 %
13:30 GMT or 19:00 IST US NFP
...Expected 225 K ...Previous 214 K
13:30 GMT or 19:00 IST US Unemployment Rate
...Expected 5.8 % ...Previous 5.8 %
13:30 GMT or 19:00 IST US Trade Balance
...Expected -41.20 $ Bln ...Previous -43.03 $ Bln
13:30 GMT or 19:00 IST CA Labour Force
...Expected 5.3 K ...Previous 43.1 K
Australia Trade Balance
...Expected -1.8 A$ Bln ...Previous -2.2 A$ Bln ...Actual -1.32 A$ Bln
...Expected 0.5 % ...Previous 0.5 % ...Actual 0.5 %
...Expected 0.05 % ...Previous 0.05 % ...Actual 0.05 %
...Expected 52.7 ...Previous 51.20 ...Actual 56.9
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