Wednesday December 17, 2014 - 03:25:10 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 17-Dec-2014 -0325 GMT
Twin big and keys risks face global equities today, especially emerging markets.
First, Fed's announcements today are key in how 2015 will be traded and hence how the portfolio allocation and rebalancing would happen in 2015.
Second, The Russian situation has made the risk in the market very murky. Most of the impacts from any actions - devaluations or default or any such, are yet to be priced in. The repercussions of these and where risks will pop-up are frankly unknown.
Dow (17,068.87, -0.65%) closed inside its key support zone of 16,900-17,100. We will watch closely how market plays out in these ranges.
Nikkei (16,792.20, +0.22%) is trading flat as USDJPY halted its decline. For the day, we are likely to see an attempt at retest of 17,000 levels. 16,300 - 16,400 are crucial supports zone on the downside.
Shanghai (3,037.23, +0.52%) is the only global market in green. The next immediate resistance is also the crucial one at 3057. Above 3057, we can expect a retest of 3091 highs. The immediate supports are at 2,990 and 2,955.
Dax (9,563.89, +2.46%) was strong mostly on the excellent German data. As expected Dax bounced off 9,200 and this support zone (9,200-9,000) is likely to hold as long as ECB's QE is on the table. Immediate resistance is at 9,700.
Nifty (8,067.60, -1.85%) reached its supports at 8,050. For the day, as long as it holds above 8,050 we may see a corrective rally up to 8,200 to 8,270.
Globally commodities are trading lower.
Nymex WTI (54.77) continues to fall targeting lower levels of 50-48 in the coming sessions. Brent(59.75) has moved below 60 and may see levels of 55-50 in the coming weeks. A break below levels of 50 could easily take it further down towards 44-40. Strong bears continues to dominate the oil prices.
Gold (1198.38) has been fluctuating highly in the 1237-1180 region and near term looks negative while below 1237-1250 levels. Silver (15.84) has risen a bit after falling for two consecutive sessions. But while resistance near 17.29 holds it may continue to fluctuate in the 15.5-17 region.
Copper (2.8825) is no exception to the falling commodities and is also trading lower. As said earlier the 2.95-2,80 levels may hold for the week.
FOMC will be a big trigger to what will play out in markets for next few days.
Dollar- Ruble continues to be at the center of FX market. Its capitulation continues reaching high of 79.50 (Sep 1st: 37.32. Last trades: 68.32). The situation is uncertain and potentially dangerous.
Euro (1.2503) is still below some key resistances. The profit booking in Dollars and even some safe-haven bids from other currencies seem to be supporting Euro for the moment. The next key resistance is at 1.2560, support at 1.2420.
Pound-Dollar's (1.5725) again trade both high and low of the range (1.5600-1.5750). We await a breakout before taking a call on this pair.
Dollar-Yen (116.80) tested its first important support at 115.50 in volatile trading with Yen catching some safe-haven bids. The range for the day is between 115.50 and 117.50. 118 is the resistance for now. The chart pattern target suggests a drop to 114.50, near its second important support of 114.00.
Dollar-RUPEE (63.54) has weakened along with other currencies and year-end Dollar demand. The next resistances are at 63.90 and 64.50. Support is now at 63.20.
Aussie-Dollar (0.8166) is making new lows. To reiterate deteriorating fiscal situation and drop in resource exports are likely to cap gains and pressure Aussie into 7-handles in 2015.
The US Dollar weakened after November Housing Starts declined by 1.6% ahead of the end of FED meeting today. Markets expect the treasury yields to remain lower as long as the oil prices trade low. The US 2Yr(0.548%), 5Yr (1.15%), 10Yr(2.063%) and 30Yr(2.694%) have all fallen from 0.576%, 1.567%, 2.115% and 2.746% respectively.
UK Gilts also trade lower. It seems to be a powerful downtrend going on for the yields globally, keeping a check on inflation. The UK 5Yr(1.186%), 10Yr(1.770%) and 3Yr(2.506%) have dropped from 1.214%, 1.810% and 2.540% respectively.
Emerging Market Bonds are declining sharply as Russian Rouble takes a toll on the investors. The Rouble rose to 79.51 yesterday, just a day after the central bank unexpectedly rose rates to 17%. The Russian 10Yr(16.75%) shot up sharply from 13.135%.
The German yields are too not in good shape.The German 10Yr(0.596%) has fallen from 0.622%. Also the Spain 10Yr(1.789%) and Italy 10Yr(2.001%) have fallen from 1.796% and 2.005%.The Greece 10Yr(8.905%) on the other hand has sharply risen from 8.720%.
Indian 10Yr GOI (7.9871%) has bounced from levels above 7.8% and may now move up to target 8.0-8.17% in the coming weeks. Rupee sharply weakening towards 64.
9:30 GMT or 15:00 IST UK BOE Minutes
...Expected 0-0-9 ...Previous 0-0-9
9:30 GMT or 15:00 IST UK Unemp
...Expected 5.9 % ...Previous 6.0 %
10:00 GMT or 15:30 IST EU CPI (YoY)
...Expected 0.30 % ...Previous 0.37 %
13:30 GMT or 19:00 IST US Core CPI (MoM)
...Expected 0.10 % ...Previous 0.24 %
13:30 GMT or 19:00 IST US Current Account Balance
...Expected -98.00 $ Bln ...Previous -99.00 $ Bln
19:00 GMT or 0:30 IST US FOMC Meeting
...Expected <0.25 % ...Previous <0.25 %
CN Foreign Direct Investments (YoY, May)
...Previous -1.2 ...Actual 0.7
UK CPI Y/Y
...Expected 1.20 % ...Previous 1.26 % ...Actual 0.94 %
EU Trade Bal
...Expected 18.20 EUR Bln ...Previous 17.70 EUR Bln ...Actual 19.40 EUR Bln
US Housing Starts
...Expected 1040 K ...Previous 1050 K ...Actual 1030 K
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