Wednesday December 24, 2014 - 03:35:57 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 24-Dec-2014 -0336 GMT
US Q3 GDP was revised to a spectacular 5% from the initial estimates of 3.9% and 4.3%. These revisions are good for equities, however also points to the fact the US economy is recovering faster than many have expected. This brings the FEDís rate hike in 2015, a near certainty, and probably even shifts the dates closer.
Dow (18,024.17, +0.36%) reached new highs and above 18,000 though on a low volume day. The ranges were largely intact with minor moves. While these growth rates are good for long term price-earnings while the stronger dollar and almost imminent rate hikes in mid-2015 could spoil the scene.
Nikkei (17,823.55, +1.07%) gained with depreciating Yen. A good US economy is good for Japan, Japan's main trading partner. In medium term, We expect Nikkei to trade within the broad range of 18,000 to 16,500.
Increased margining requirements to curb speculation are having a bearish impact on Shanghai(2,990.10, -1.40%). We expect the markets to test 2,900 levels in short term. The long term trend remains bullish, and any corrections in medium term is a good opportunity to buy.
Dax (9,922.11, +0.57%) had a slow day however the underlying sentiment continues to be bullish. The Weaker Euro, impending ECB's QE and a better export market in US keep the index buoyant. We expect the index break into new highs in January.
Its an option expiry day on Nifty (8,267.00, -0.68%) today. Though index could be more choppy than expected, open interest suggests we may see a close near the 8,300 strike.
Gold (1177.54) is heading towards next support levels near 1165 from where we may see a short term bounce back to 1195-1200. Till then we may see some fluctuation in the 1165-1200 zone.
Silver (15.735) is stable for now and has a possibility of seeing lower levels of 15.25-15 levels in the coming weeks.
Nymex WTI (56.80-) and Brent (61.38) are trading lower and has been ranged sideways for quite some sessions now. We may see the ranged move extended till the end of the month and may see fresh directional signal is seen. Overall trend remains down.
Copper (2.9020) has been fluctuating in the 2.95-2.85 region as expected and may continue for some more time. No major movement expected as of now.
Much better than expected US GDP revision boosted Dollar Index (90.06) to the highs of 90.16 levels last seen in early 2006.
Euro (1.2173) continues to make new lows near the fag end of the year and below important long term averages. The bearish implications for 2015 are becoming clearer. The next important supports are at 1.2150 and 1.2120.
Pound-Dollar's (1.5505) too fell to new longs and with an uncertain break from the range. 1.5550 and 1.5600 are the immediate resistances. We could see a retest of these resistances, and possibly move back into the range of 1.5600-1.5750.
Dollar-Yen (120.44) drifted up on general Dollar bullishness. The resistances are at 121.10 (minor) and 121.50 (important). The immediate bias is bearish with a possible drop to 119.00 and 118.50, which are also the key supports. Long term trend, however, remains bullish.
Dollar-RUPEE (63.28) is likely to move up to 63.50 again on the broad Dollar strength. However, the broad range expectations of 63.90 to 62.83 remains intact, and we do not expect a breakout ahead of long holidays.
Aussie-Dollar (0.8108) weakened on Dollar strength but the break down was half-hearted on account of low volumes. The trend support at 0.8080 should hold in short term.
Markets seem to stabilize before the holidays. We are unlikely to see large moves until the holidays are over.
The US treasury yields are almost stable with the short term yields increasing and the longer term decreasing clearly into mid-term curve flattening.
The German yields and the UK Gilts are also stable for now. The Russian Ruble has been strengthening for 3 consecutive sessions now and may see some recovery in the near term.
Indian 10Yr GOI (7.9217%) has been ranged in the 7.92-7.96 zone but while below 8% we may see 7.8% in the near term.
No major data release today.
...Expected 0.70 % ...Previous 0.86 % ...Actual 0.67 %
US Personal Income
...Expected 0.60 % ...Previous 0.3 % ...Actual 0.4 %
US PCE Price Index M/M
...Expected 0.1 % ...Previous 0.2 % ...Actual 0.0 %
US Durable Goods Orders
...Expected 3.00 % ...Previous 0.3 % ...Actual -0.7 %
...Expected 4.30 % ...Previous 3.9 % ...Actual 5.0 %
...Expected 0.1 % ...Previous 0.4 % ...Actual 0.3 %
US New Home Sales
...Expected 461 K ...Previous 445 K ...Actual 438 K
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