Thursday June 12, 2014 - 03:52:36 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 12-Jun-2014 -0351 GMT
The drop in World Bank’s forecast for growth in 2014 from 3.2% to 2.8% has affected nearly all the global markets including the lowest volatile market of the US and the Asia-Pac is feeling the heat too.
It was mentioned that the price action in Dow (16843.88, -0.60%) is somewhat reminiscent of the September 2012 top, warranting caution and now the biggest single-day correction in last 1 month has emerged. Only on a break below 16800, this correction will extend to the major support area in 16600-300. The Dax (9949.81, -0.79%) has corrected too but the immediate trendline support at 9850 may come in aid for the bulls. Another push up to 10300-400 remains on cards as long as it stays above 9800-700.
The Nikkei (14952.77, -0.77%) correction has extended to 14850 already and the correction may go on for some more time. The Shanghai (2048.97, -0.29%) has been trying to rise in a weak manner for the last 2 sessions but that is getting resisted at the prior highs in 2055-61. This 2055-61 area must be firmly broken to signal a good rally.
Nifty (7626.85, -0.39%) lost all of its intraday gains just after touching 7700, implying that as expected, the correction from 7680 was unfinished and may finish at 7540. Keep an eye on 7580 as now a break below 7580 may signal a corrective mode or at least a sideways mode.
Gold (1260.44) is trading above crucial 1260 levels, and if this sustains we may see 1280 in the coming sessions. Near term is bullish while the overall long term is still bearish.
Silver (19.18) made a high of 19.33 yesterday but came off from there slightly. It may target 19.4-19.5 in the coming sessions and a break above 19.5 may take it higher towards 20-20.5. But there are chances of resistance near 19.5 holding which would then keep the prices ranged below 19.5.
Nymex WTI (104.61) has moved up and is targeting 105.22-105.25 in the near term while the overall trend remains up.
Brent (110.35) is in the last leg of the contracting movement that started in 2012. It is ranged in a very narrow 108.5-111 region and as said earlier, any break on either side of the range may initiate a sharp movement. Bias is bullish with a near term target of 112.
Copper (3.0425) is ranged within the 3.01-3.07 region and may continue to consolidate sideways for a few sessions before deciding its further direction. A fall towards 2.95-2.90 is not fully negated yet. We need to wait and watch for any signal of further movement. Overall long term trend remains down.
Euro (1.3545) has lost nearly all of the latest gain after creating the major bottom at 1.35, contrary to our expectation. We must watch the price action at the support area of 1.3500-3475 now before taking any stance though the bullish view is still not negated fully.
Dollar-Yen (102.10) has tested exactly the support area of 101.95-85 but the Dollar bulls need a break above the 9 week long range of 101-103 to resume the rally. The Euro-Yen (138.30) is trying to bounce on the back of somewhat firmer Euro but the downside risk of testing 137 levels is clearly there.
Pound (1.6800) is still contained inside the previous week’s range but is approaching the upper end of the range and the break out level at 1.6850 once again. Keep an eye on 1.6690-40 for support and 1.6850 for resistance.
The Aussie (0.9374) has tested but failed to break above 0.9410, the last swing high, to confirm the intermediate uptrend. 2-34 days of consolidation before any breakout would be more beneficial for the bulls.
No cue is coming from anywhere for any decisive move in Dollar-Rupee (59.27) which spent another sideways session with the uptrend fully intact. We still wait for a break above 59.45 to confirm the next phase of rally and the major support remains unchanged at 59.00.
The US 5Yr (1.71%), 10Yr (2.64%) and the 30Yr (3.47) have all gone up. The US 10-5Yr yield spread (0.94%) has been falling sharply since Nov’13 and may either remain ranged in the 1.0-0.9 region or come off further towards 0.87 in the coming weeks. There is little more room for the yields to rise in the coming sessions while the market awaits the US CPI next week.
The German – US 2Yr differential (-0.38%) has dropped beyond the support near -0.28% but is nearing another support at -0.40-0.50% on the weekly from where it may bounce back. The Euro (1.3542) saw a slight up move from support near 1.3520. If the bounce sustains and the Euro strengthens, we may see the yield differential go up. The German 10Yr (1.402%) has moved up well from support near 1.37-1.40% and may now move higher.
The US-Japan 10Yr yield differential (2.04%) is rising and has broken above resistance near 2.0% as the Dollar-Yen (102.10) also moved up a bit from 101.85. The Japan 10-5Yr yield spread (0.573%) and the Japan 10Yr (0.60%) have risen and are testing resistance near current levels.
The 10Yr GOI (8.54%) has stretched its fall further and may test 8.5% before bouncing from there. A break below 8.50% may push it to 8.30-8.28% in the mid-term.
1:30 GMT or 7:00 IST Australia Labour Force
...Expected 10.30 K ...Previous 10.30 K ...Actual -4.8 K
9:00 GMT or 14:30 IST EU IND Prodn (MoM)
...Expected 0.40 % ...Previous -0.33 %
9:00 GMT or 14:30 IST EU IND Prodn (YoY)
...Expected 0.90 % ...Previous 0.49 %
12:00 GMT or 17:30 IST IN IIP (Mar'14)
...Previous - -0.50 %
12:00 GMT or 17:30 IST IN CPI (Apr'14)
...Previous - 8.59 %
12:30 GMT or 18:00 IST US Retail Sales
...Expected 1.59 % ...Previous -0.02 %
...Expected 6.70 % ...Previous 6.80 % ...Actual 6.60 %
IN Trade Bal (MoM)
...Previous -10.10 $ Bln ...Actual 11.23 $ Bln
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