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Wednesday May 21, 2014 - 03:43:18 GMT
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Morning Briefing : 21-May-2014 -0342 GMT

GOOD MORNING!

STOCKS
BOJ keeps the monetary policy unchanged which really didnít affect the markets. Except Nifty, nearly all the markets are in either a trendless market or in a trend without any momentum, no matter if it is up or down. That increases the probability of any surprise counter-trend move. Keep alert.

The Dow (16374.31, -0.83%) has negated the uptrend as expected. A break below 16350-300 may signal further fall to 16000 levels where the price action could indicate if it is an Expanding Triangle or not.

The Dax (9639.08, -0.21%) must break above the old high around 9800 levels to overcome the current weakness and resume the major uptrend. Till then, a retest of 9400 remains a distinct possibility.

The Nikkei (14036.20, -0.28%) remains in a downtrend but the bearish momentum is not strong even after the BOJ policy announcement. The risk of testing the support of 13850 remains intact but keep an eye for any sharp spike up. The Shanghai (2016.93, +0.44%) is trying to bounce from our support of 1995 but requires a break above 2036-38 to weaken the bears even a little.

Nifty (7275.50, +0.16%) structure hints at further correction towards 7100 and 6900 but in this kind of a bull market where the hot money is searching for every possible avenue to enter, as evident from the spurt even in the junk stocks; one runs the risk of seeing sudden spike on the upside while waiting for the correction to end.

COMMODITIES
Metals are stable while the Oil market may strengthen in the near term. Need to look at crucial resistance in Gold and Silver on the daily charts.

Gold (1294.149) and Silver (19.432) are stable for now and may continue to remain ranged but are currently testing channel resistance near current levels. The Gold-Silver ratio (66.55) has been overall rising since mid-Feb'2014 and may target higher towards 67.50 in the near term. This may suggest a near term rise in Gold while Silver may remain range-bound. Overall long term trend is down.

Copper (3.1410) bounced from support near 3.11 and continues to rally towards 3.20-3.25 while in the near term uptrend. It may thereafter come off from channel resistance near 3.25 to test 3.10.

Brent (109.87) is on a rise targeting 110.58 in the near term while WTI (102.91) may head towards 105.2 if it breaks 103.7 in the near term. Near term is bullish for now.

FOREX
Keep an eye on the lows of the last week for all the pairs. Nearly all of them are important supports.

Dollar-Yen (101.21) made a low at 101.10 near the major support of 101.20. It is a crucial time as the bears must push it down to the long term support at 100.70-60 or else they may run the risk of a sudden upward move anytime.

The Euro-Yen (138.70) is in a confirmed major downtrend now. It is testing an important Support here around 138.70-30 and could attempt a bit of a bounce. But unless Resistance at 140 is broken, there could be chances of further fall to test 200-day MA at 137.94 or even lower towards 136.

The Euro (1.3702) is showing no evidence of strength even after holding above the support of 1.3650. Though the possibility of rise still survives above 1.3650, expect more vertical fall towards sub-1.35 on a break below 1.3650.

The Pound (1.6840) has bounced sharply from 1.6731 and keeps the long-term uptrend intact. But a break below 1.6730 could negate the uptrend and then a dip to sub-1.6600 levels would be on cards.

The Aussie (0.9233) has broken below 0.93 sharply and currently testing the major support area of 0.9200-0.9150. But the current structure hints at possible downmove towards 0.8950 on a break below 0.9150.

For Dollar-Rupee (58.63), keep an eye on 58.55-50 tomorrow. The bounce may still extend to 58.90-59.00 if Dollar Rupee manages to stay above it this morning. Below 58.50, the downtrend may resume its power.

INTEREST RATES
The US 10-5Yr yield differential (1.01%) remained stable after the bounce from the support at 0.97% but the US yields saw a drop. The 5Yr (1.51%) came off from the resistance near 1.55% and may target lower levels and the 10Yr (2.52%) is trading below resistance but a further rise in the differential can take the 10Yr higher.

The German ĖUS 2Yr spread (-0.25%) has remained stable as the Euro (1.3702) continues to test the support near 1.37. A bounce in the Euro from here and we may see the spread go up to -0.20%. The German 10Yr (1.35%) remained unchanged and may target lower levels of 1.25%-1.20%.

The BOJ Monetary Policy Meeting just concluded and no changes were made in the policy as expected. The US-Japan 10Yr yield differential (1.92%) is down after the slight drop in the US yields and is now trading below the 55 week MA and can target 1.85%.

The 10Yr GOI (8.86%) remained unchanged after the bounce from the 200 Day MA support last week. The MIBOR (See http://www.kshitij.com/graphgallery/mibor.shtml#mibor) and the MIFOR (See http://www.kshitij.com/graphgallery/mifor.shtml#mifor) are also testing important long term trend support at current levels and can rise from here. So the chances of a fall in the Interest Rates are very less.

DATA TODAY

3:00 GMT or 8:30 IST BOJ Meeting
...Expected <0.10 % ...Previous <0.10 % ...Actual <0.10 %

8:30 GMT or 14:00 IST UK BOE Minutes
...Expected 0-0-9 % ...Previous 0-0-9 %

DATA YESTERDAY

UK CPI Y/Y
...Expected 1.70 % ...Previous 1.60 % ...Actual 2.00 %

 

 

 

 

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