Tuesday July 15, 2014 - 03:58:23 GMT
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FX Thoughts for the Day - www.fxthoughts.com
Morning Briefing : 15-Jul-2014 -0357 GMT
BOJ keeps its record stimulus unchanged. ECB President assures of their readiness to provide big stimulus. So even the US QE ending doesn’t mean the easy money is going to stop any soon. The bull markets may continue for long.
Dow (17055.42, +0.66%) bounced closer to 17100 remaining in the range of 16800-17150 as expected but any failure now to break above 17150 may keep it without momentum and keep the rangebound action intact. The Dax (9783.01, +1.21%) has rallied from 9600 levels in sync with other markets but it needs a firm break above 9800-30 to extend it.
Nikkei (15416.66, +0.78%) is settled in the range of 15000-500 and even any extension of the range now could be small and slow with the range dominating for a few sessions more. The Shanghai (2067.44, +0.04%) is testing the upper end of the contracting range right now and a break above 2080-90 would signal a considerable bullish reversal towards 2140-80.
Nifty (7454.15, -0.07%) has firmly closed below 7500 and in a show of extreme weakness but right now the bulls may attempt a bounce or even a reversal from the current levels or from slightly lower 7400 levels, as both Nifty & BankNifty are hitting the earlier swing lows and supports.
Commodities are all trading low. Possibility of the oils to bounce while metals face resistances near current levels.
Gold (1307.18) and Silver (20.90) retreated sharply amidst a rise in equities globally. Testing the 21-day MA, will Gold bounce back? Or head towards 1300 to resume the longer term downtrend? A break below 1300 could take it to 1290 if it is unable to bounce back to 1350 levels. Silver is testing crucial resistance on the daily line charts and if that holds may well see a fall towards 19.6-18.5.
Copper (3.2295) is fluctuating in the 3.22-3.26 region unable to decide further direction. While it is thus paused it may consolidate sideways for some sessions. Trading just below resistance near 3.32-3.33, it may eventually fall to 3.20-3.15 if it is unable to break 3.33-3.34 levels.
Nymex WTI (100.85) doesn’t seem to pause just now but while above 100, there is some room for it to bounce. Note that a fall below 100 may face the danger of seeing 98-96 levels. The short term downfall is still in force. Bulls nowhere to be seen just now.
Brent (106.85) has a possibility of a bounce from the crucial support near 106 which if holds may take it to 108-109 in the near term. However a failure to bounce from 106 (if seen) may lead to a sharp fall to 104-103 levels. Need to keep an eye for a couple of sessions.
Euro stood firm even when the ECB president said clearly that this strength was a concern for the economic recovery of the Eurozone. In effect, nearly all the majors are trading quietly with no volatility visible anywhere at this moment.
Euro (1.36114) has been consolidating in the broader range of 1.35-1.37 for the last 6 weeks and may continue doing so. Now it is struggling near 1.3640 which may determine its success or failure to reach 1.37 levels.
Dollar-Yen (101.63) continues to trade sideways in the old range of 101.20-102.75 just as expected after the false break down t 101.07 and there is still no sign of a break coming. Euro-Yen (138.37) is back into the old range but currently it has created a narrow contracting range of 137.40-139.00 with the possibility of an extension to 140 or 136.
Pound (1.7080) is correcting longer than anticipated and showing signs of a possible fall to the strong support of 1.70 levels it trades below 1.7060 while the medium term uptrend remains intact.
Aussie (0.9397) is stuck in the band of 0.9320-0.9500 for the last 5 weeks. A break above 0.9525 may result in a rally towards 0.98 but a break below 0.9320 would result in a drop to the long term support of 0.92. Expect sideways move to continue till a breakout takes place in either direction.
Dollar-Rupee (60.07)once again failed to break above our 60.26 to confirm strength after testing the upper end of the range, signaling further sideways movement in the band of 59.50-60.25, with the possibility of an extension to 59.15 or 60.40.
Indian Inflation, both WPI (5.43%) and CPI (7.31%), came in lower than expected yesterday. The 10Yr GOI (8.78%) can come off a bit and the Indo-US 10Yr Spread (6.24%) could also dip. Both might be good for the Rupee.
The US 5Yr (1.67%) has moved up 2bp while the 10Yr (2.54%) and 30Yr (3.36%) have moved up 1bp. The picture remains the same, suggestive of higher Yields in coming months.
The German-US 10Yr Spread (-1.33%) has dipped by 1bp. Keep an eye on the 10Yr German Bund Yield (1.21%). Should it break below 1.20%, there will be further decline in the offing. To prevent such a decline, the 10Yr needs to bounce now, else the 1.20% is in danger of breaking. Such a sub-1.20% break would cast fresh gloom over Europe.
UK Gilt yields have been coming off after meeting Resistance earlier last week and can dip some more. The 5Yr (1.99%) may have room to dip towards 1.80, maybe lower as well.
The Japanese Yield Curve is seeing strange movements. The 30Yr (1.69%) is rising vis-a-vis the 10Yr (0.53%) and the 5Yr (0.15%) while the 10Yr is dipping vis-a-vis the 5Yr. Click on http://www.kshitij.com/graphgallery/jpydiff.shtml#sindiff
2:00 GMT or 7:30 IST CN Foreign Direct Investments (YoY, May)
...Previous 2.80 % ...Actual 2.2 %
3:00 GMT or 8:30 IST BOJ Meeting
...Previous - <0.10 %
8:30 GMT or 14:00 IST UK CPI Y/Y
...Expected 1.60 % ...Previous 1.50 %
12:30 GMT or 18:00 IST US Retail Sales
...Expected 0.47 % ...Previous 0.40 %
IN WPI (Jun'14)
...Previous 6.01 % ...Expected 5.6 % ...Actual 5.43%
EU IND Prodn (MoM)
...Expected -1.2 % ...Previous 0.80 % ...Actual -1.08 %
EU IND Prodn (YoY)
...Expected 0.5 % ...Previous 1.30 % ...Actual 0.40 %
IN CPI (May'14)
...Previous 8.28 % ...Expected 7.5 % ...Actual 7.31 %