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Friday May 23, 2014 - 03:29:10 GMT
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Morning Briefing : 23-May-2014 -0329 GMT

GOOD MORNING!

STOCKS
It is a quiet day so far for the markets with neither the military coup in Thailand nor the Ukrainian unrest producing any ripples. Most of the markets are in a short term range but keep an eye on Nikkei for a possible bullish reversal.

The Dow (16543.08, +0.06%) is moving sideways in the range of 16300-16600 as expected after bouncing from the support zone of 16350-300. The downtrend is not reversed yet and we may expect the sideways to continue.

The Dax (9720.91, +0.24%) keeps trading in 9500-9800 but it must break above 9800 to overcome the current weakness and resume the major uptrend. Till then, a retest of 9400 remains a distinct possibility.

The Nikkei (14476.22, +0.97%) is at a 4-week high and now a break above 16650 may trigger a short term reversal and a rally towards 15200-300 or even higher. The Shanghai (2019.13, -0.11%) couldn’t advance beyond 2042 and came down. The sideways move in the broader range of 1990-2080 may continue for some more time in a base-building process. Supports are at 2010-1990.

Nifty (7276.40, +0.32%) may have made a very important top at 7563 which may not be broken soon. Still the bears would need a break below 7200-7190 and then finally 7080 to really confirm the loss of bullish momentum. The structure doesn’t yet support any fast rise but we keep an eye on any possible base development.

COMMODITIES
Precious metals are consolidating sideways while Copper is on a rally upwards. Crude oils may see some near term correction before resuming the rise further.

Gold (1294.96) tried to rise above 1300 but came back to test channel support near 1290 as Dollar strengthens against major currencies. Near term consolidation may continue but further direction cannot be ensured unless a sustainable break on either side of the 1280-1310 regions is seen.

Silver (19.443) is stable for now and while below 19.66, it may range within 19-19.5 levels.

Copper (3.1415) has bounced from support near 3.12 and may target 3.20-3.25 while above 3.15. The upward rally may continue as the recent uptrend is in force.

Brent (110.37) came off after making an intra-day high at 111.04 and if this holds we may see a danger of a sharp fall to 109-108 levels. Else, a rise above 110.58 would take it higher to 112. Need to keep an eye on the levels. Overall longterm uptrend persists.

Nymex WTI (103.68) is on a steady rise and if this continues it may target 105.22 in the near term. But there is also a possibility of a fall from current levels as it is testing resistance on the weekly charts. There might be little correction before resuming the rise towards 105.22.

FOREX
Though not that successful against the EM currencies like Rupee or Real, Dollar is strengthening against nearly all major currencies now. Keep an eye on the lows of the last week for all the pairs. Nearly all of them are important supports.

The Euro (1.3651) keeps trading at a 3-month low and any bounce is expected to face selling pressure. It is testing a minor swing low at 1.3630 to keep the possibility of a rise alive but more fall is to be expected towards sub-1.35 as long as it stays below 1.3800.

Dollar-Yen (101.78) bears failed to break the long term support of 100.70-60 and got hit by a sharp bounce as expected. A break above 101.75-102.00 may bring back uptrend and extend the rally further towards 103.00.

The Euro-Yen (138.94) 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 Pound (1.6869), the strongest among the major currencies now, looks set for further rise to 1.70-71 as long it trades above 1.6730. Only a break below 1.6730 could negate the uptrend and then a dip to sub-1.6600 levels would be on cards.

The Aussie (0.9247) is trying to stay above the major support area of 0.9200-0.9150 after the sharp fall. But the current structure hints at more downmove towards 0.8950 on a break below 0.9150.

Dollar-Rupee (58.4675) looks set to hit a new low below 58.37 and on a break of 58.35, may test the major support zone of 58.10-57.90 soon. 58.85-90 and 59.20-30 remains the most important resistance area to keep under watch on any bounce.

INTEREST RATES
The US yields saw a good rise yesterday. While the 10Yr (2.56%) has broken above the resistance near 2.53%, the 5Yr (1.55%) is trading at the crucial resistance zone at current levels as seen in the daily charts. The 30Yr (3.42%) has bounced from the support at 3.38%. With the yield spreads on a steady rise (30-10Yr at 0.87%, 10-5Yr at 1.01% and the 30-5Yr at 1.87%) after bouncing from long term supports in the 1st week of May we can expect the yields to rise.

The German –US 2Yr spread (-0.27%) trades lower as the Euro (1.3651) continues its fall towards support near 1.36 as seen the line charts. The German 10Yr (1.37%) was unchanged and may target 1.45% if it is able to maintain the rise otherwise a fall to 1.25%-1.20% can be expected.

The US-Japan 10Yr yield differential (1.96%) continues to rise today also, testing the 55 Week MA support at current levels and can rise further up as the Dollar-Yen (101.78) saw a good rise from the lows near 100.81. The Japan 10Yr (0.60%) has come to test resistance at current levels and may target 0.62-0.63% if the resistance breaks.

Contrary to our expectations of a bounce from current levels, both the 10Yr GOI (8.71%) and the Indo-US 10Yr yield spread (6.16%) have broken below the supports mentioned yesterday. We see a support coming up for the yield spread near 6.10% and can expect a bounce from there.

DATA TODAY

8:00 GMT or 13:30 IST GER IFO Business Climate
...Expected 111.00 ...Previous 111.20

8:00 GMT or 13:30 IST GER IFO Business Situations
...Expected 115.60 ...Previous 115.30

8:00 GMT or 13:30 IST GER IFO Business Expectations
...Expected 106.90 ...Previous 107.30

14:00 GMT or 19:30 IST US New Home Sales
...Expected 426 K ...Previous 384 K

12:30 GMT or 18:00 IST CA Inflation Y/Y
...Previous - 1.30 %

DATA YESTERDAY

CN Manufacturing PMI (P)
...Expected 48.10 ...Previous 48.10 ...Actual 49.70

UK GDP
...Expected 0.80 % ...Previous 0.86 % ...Actual 0.86 %

US Existing Home Sales
...Expected 4710 K ...Previous 4590 K ...Actual 4650 K

 

 

 

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