Tuesday December 9, 2014 - 03:56:03 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 09-Dec-2014 -0356 GMT
Though Equity markets have done well since mid-October with some spectacular gains. We need to be cautious as the momentum is waning. There are first possibilities of reversals especially in US markets.
Such tight is the range on the Dow (17,852.48, -0.59%) that despite its worst fall in many weeks, Dowhardly came off 0.6%. We continue to advise caution as indices are in precarious positions near the top and tight ranges.
For immediate term, one must closely watch the price action in SP500 at 2,048 levels. A break below may signal a large corrective.
Nikkei (17,871.50, -0.36%) came off the highs of 18,000 as USDJPY fell back to its supports. We expect a retest of 18,000 levels, and a break above for the targets of 18,250 and 18,350.
After another remarkable rise Shanghai (3013.98, -0.18%) is consolidating as of morning. All the earlier targets have been met. Next targets on board are 3,062, 3095 and 3170. We have no reason to think this bull run is stopping right now, so we trade with the trend. However, late entrants unless long term investors should use strict stop losses. Any corrections in medium term is an opportunity to buyShanghai.
Bulls successfully held Dax (10,014.99, -0.79%) above 10,000 levels. We expect the bull trend to continue, however suggest a strict stop loss below 9,800 levels.
Nifty (8,438.25, -1.17%) saw one of its steepest fall in many weeks. The support for the day are at 8,435, 8,400 and 8,320. If 8,435 holds in morning trades we may see a bounce to test 8,500 resistances. As mentioned earlier Nifty is vulnerable to year-end profit-booking as it is the best performer for 2014 globally.
Gold (1201.70) and Silver (16.330) are in a stable mode with no major movements happening just now. Small moves may continue now and we may see a rise towards 1225 and 18 respectively in the mid-term.
Brent (65.92) and Nymex WTI (62.65) continues to trade lower with strong bears still on the cards. No immediate signs of reversal and the fall may continue for some more time targeting lower levels of 60and 58 respectively.
Copper (2.9030) continues to fall and while it remains below 2.95 we may expect a downside target of 2.85-2.80 in the coming weeks. Overall trend is down.
Euro (1.2309) made another year-low at 1.2249. The trend continues to be down but with each lower bottom, the momentum is understandably decreasing. Levels of 1.20-1.21 are expected to be very strong support, leading to profit-taking in Dollar gains.
Pound-Dollar's (1.5638) fell to the lows of 1.5540 but is now back into its November ranges. We expect today's trade within the range of 1.5600 to 1.5720.
Dollar-Yen (120.70) as expected retraced to retest 120, giving us opportunity to re-enter long trades. However, due to several factors like hedge fund profit booking, political uncertainties, BOJ reactions, we have to watch out for possible downsides, even to the possibility that USDJPY may have topped at 121.80. Strict stop losses are advised.
Dollar-Rupee (61.83) has dipped to our buy-region of 61.70-61.80. We expect this support to hold, and Dollar-Rupee to move up to 62.20-62.35 by end of December.
Aussie-Dollar (0.8248) trades at the day's low as economic confidence indicators plummet. It is near the target levels of 0.82. However the clamor for rate cuts if translated could take AUDUSD into 70s-handle.
The Japanese bond yields are showing some signs of near term rise while in an overall long term downtrend. The 5Yr (0.083%), 10Yr (0.432%) and 30Yr (1.413%) have risen a bit and may continue so in the near term. The 10Yr yield may rise towards resistance near 0.5 while the 5Yr may move up to 0.1-0.15% before resuming the fall.
The German and Italian yields have fallen sharply on speculation that the ECB will start buying sovereign debt next month. The German 2Yr (-0.037%) is down from -0.013% and the German 10Yr (0.713%) has also fallen from 0.779%. Italian 10Yr yield (1.952%) has fallen 0.24 basis points, lowest in the last few years.
The US bond yields have declined. The 2Yr (0.633%), 5Yr (1.668%), 10Yr (2.263%) and the 30Yr (2.909%) have all fallen from 0.641%, 1.680%, 2.305% and 2.965% respectively.
Indian 10Yr (7.9170%) continues to fall as expected and may soon target our levels of 7.80% in the coming weeks. Rupee may either remain stable or strengthen getting a boost from the yield.
No major data release today.
CN Trade Bal
...Previous 45.4 Bln ...Actual 54.5 Bln ...Expected 44.3 Bln
...Actual -0.5 % ...Expected -0.1 % ...Previous -0.4 %
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