Forex Knowledge 10 MARCH 2014 currency Report.
EQUITIES
A weaker than expected Chinese export and inflations data has soured the mood for the Asian equity markets this morning and most of them are trading in the red.
Nikkei (15121.33, -1.00%) has found selling at our target resistance of 15200-300 as expected and may turn range bound once again inside the broader range of 14600-15300.
Shanghai (2034.10, -1.16%) crashed back to 2030 after failing to break above our resistance of 2080. If 2015-20 holds, we may see some consolidation in the broad range of 2015-2080 before any decisive move.
Nifty (6526.65, +1.96%) reached and closed above our target of 6500. The bullish momentum remains intact above 6340-60 and we may expect further rally to 6650-6700 in the coming days with some consolidation in between.
Dow (16452.72, +0.19%) is consolidating in the band of 16400-600 and it requires a successful break above 16400-600 to rise towards 17000 soon.
COMMODITIES
Metals are trading low hit by the lower than expected China exports.
Gold (1333.59) has been moving sideways for the past few sessions and is trading low for now. But while above support near 1324.44, we expect an eventual rise to 1360. Silver (20.78) fell sharply and may test support near 20.5 from where it may bounce back to 21.5. Further a sustained move above 21.5 could take it higher to 22-22.2.
Copper (3.0425) has been hit hard by the much lower than expected China exports that came in on Friday. The metal slumped to long term support near 3.00 while the bears seem to have gained much force.If this support holds we may see a bounce back to 3.15-3.20 levels in the coming sessions.
Brent (108.64) is trying to rise to resistance near 109.30, after the recent fall. Only a sustained rise above 109.30 would ensure further move toward 110-111.Overall the long term trend remains up.
Nymex WTI (102.5) has risen well but while the resistance near 103 holds, we may expect some ranged moves in the next few sessions.
CURRENCIES
Dollar Index (79.66) is trading below the support zone of 79.80-70 and the door to 79.10-78.60 or even 78 has opened now. Every corrective rally till 80.30-55 may face selling pressure. The long term trend may get severely bearish below 79.10.
The Euro (1.3885) is trading in the major resistance band of 1.3850-85 and if it manages to break above this, it can rise further to 1.3950-1.4050. Above 1.4050-1.41, the long term trend will turn firmly bullish. But, the Bund-Bond Yield Spread is not supportive. So, this needs to be watched.
Dollar-Yen (103.05) has broke above the broader range of 101-103 and reached the 2013 top at 103.75 before coming off the highs a bit. Staying above 102.70-80 will keep the trend up but for rising higher towards 105, a break above 103.75-90 is required.
The Euro-Yen Cross (143.11) broke out of the range of 138.80-141.30 to reach 143. The long term uptrend may have resumed and it may rise further towards 145.50-146 now.
Pound (1.6730) is in a correction of its major uptrend now which may extend to 1.6540-1.65 only if breaks the support of 1.66. It may reach 1.69-1.7050 after the current correction finishes. All the dips till 1.6470-80 may be bought into.
Aussie (0.9046) is testing the support of 0.9050 now after breaking out of the range of 0.89-0.91 on the upside and opened the possibility of a rally towards 0.93 or even more. Only a break below 0.90 will make this false breakout and nullify the bullish scenario.
Dollar-Rupee (61.08) made a low at 60.94 before closing nearly flat. 61.17 is the immediate hurdle now above which it may rise to 61.30-35. The initial sign of a reversal will come only on a break above 61.35.
INTEREST RATES
The US 10Yr (2.77%) is up and trading near the upper boundary of our range of 2.60-2.80%. The US NFP came out at 175K much above the market expectations indicating a positive growth outlook. Breaking above the resistance near 2.75% we may see the yield move past 2.80% in the days to come.
The German 10Yr (1.65%) has remained stable since last week and we may continue to see these levels while below 1.70%. The 10Yr Bund-Bond Spread (-1.12%) remained stable while the Euro (1.3885) continues to trade higher. The 2Yr Bund-Bond Spread (-0.18%) bounced from the support near -0.25% (07-Mar-14) and can now target -0.10%.
The Japan 10Yr (0.62%) is up and while above 0.60% it can target 0.65-0.68%. The US-Japan 10Yr spread (2.15%) is rising is in a perfect correlation with Dollar-Yen (103.05).
India's 10Yr GOI (8.81%) remained stable on Rupee strength. We may see a dip to 8.70-8.65% and maybe 8.60%, otherwise we may see the yields rise again.
EUR/USD Technical
During the early hours of the Asian trading session on Monday, the Euro is slowly edging higher back towards 1.39. Current range: just below 1.39 around 1.3880.
Further levels in both directions:
Below: 1.3700, 1.3500 and 1.3400.Above: 1.3900.
Price: 1.6727
Bias: Cautiously I prefer the rally extending to 1.6800 and 1.6833 but care required
The underlying MT direction is bullish while the daily bias is bullish. Therefore the main risk is higher. Ensure that key supports levels hold. Note key resistance levels that would suggest continuation of the bullish move. Consider confirming this with a bullish set up pattern in price or an indicator. Only consider a possible larger reversal lower should key MT support break and is supported by a bearish set up in price or an indicator.
Consider buy set ups at: 1.6710 - 25
Consider sell set ups at: 1.6785 - 30 or 1.6950 - 60
Daily outlook
The structure has been very complicated and I'm not 100% comfortable. However, I find the bullish option a little more logical than the bearish alternative. This will require the 1.6705 low to remain intact and ideally press back above 1.6750-60 and Friday's 1.6785 high to reach 1.6800. We'll need a correction from there back to 1.6760-75 before heading back above 1.6800 to the 1.6813-33 projection range. Even this would imply a brief correction - perhaps around 30 points (approx) before heading up to 1.6870... I think this will hold but allow for 1.6902.
Below 1.6700 and 1.6680 would risk losses through 1.6640-50 and 1.6615-25 would see losses to the 1.6582 low again… but this will then require a further review… Below 1.6582 would look quite bearish.
Medium Term Outlook
10th March: We have seen grudging and complex gains but overall in line with the underlying rally. This still has some ratcheting gains that should move up through 1.6800-33 to 1.6870 and finally the 1.6956 target.
Only back below 1.6680-00 would risk losses to 1.6582 at least. Note the 1.6540-50 support also
EQUITIES
A weaker than expected Chinese export and inflations data has soured the mood for the Asian equity markets this morning and most of them are trading in the red.
Nikkei (15121.33, -1.00%) has found selling at our target resistance of 15200-300 as expected and may turn range bound once again inside the broader range of 14600-15300.
Shanghai (2034.10, -1.16%) crashed back to 2030 after failing to break above our resistance of 2080. If 2015-20 holds, we may see some consolidation in the broad range of 2015-2080 before any decisive move.
Nifty (6526.65, +1.96%) reached and closed above our target of 6500. The bullish momentum remains intact above 6340-60 and we may expect further rally to 6650-6700 in the coming days with some consolidation in between.
Dow (16452.72, +0.19%) is consolidating in the band of 16400-600 and it requires a successful break above 16400-600 to rise towards 17000 soon.
COMMODITIES
Metals are trading low hit by the lower than expected China exports.
Gold (1333.59) has been moving sideways for the past few sessions and is trading low for now. But while above support near 1324.44, we expect an eventual rise to 1360. Silver (20.78) fell sharply and may test support near 20.5 from where it may bounce back to 21.5. Further a sustained move above 21.5 could take it higher to 22-22.2.
Copper (3.0425) has been hit hard by the much lower than expected China exports that came in on Friday. The metal slumped to long term support near 3.00 while the bears seem to have gained much force.If this support holds we may see a bounce back to 3.15-3.20 levels in the coming sessions.
Brent (108.64) is trying to rise to resistance near 109.30, after the recent fall. Only a sustained rise above 109.30 would ensure further move toward 110-111.Overall the long term trend remains up.
Nymex WTI (102.5) has risen well but while the resistance near 103 holds, we may expect some ranged moves in the next few sessions.
CURRENCIES
Dollar Index (79.66) is trading below the support zone of 79.80-70 and the door to 79.10-78.60 or even 78 has opened now. Every corrective rally till 80.30-55 may face selling pressure. The long term trend may get severely bearish below 79.10.
The Euro (1.3885) is trading in the major resistance band of 1.3850-85 and if it manages to break above this, it can rise further to 1.3950-1.4050. Above 1.4050-1.41, the long term trend will turn firmly bullish. But, the Bund-Bond Yield Spread is not supportive. So, this needs to be watched.
Dollar-Yen (103.05) has broke above the broader range of 101-103 and reached the 2013 top at 103.75 before coming off the highs a bit. Staying above 102.70-80 will keep the trend up but for rising higher towards 105, a break above 103.75-90 is required.
The Euro-Yen Cross (143.11) broke out of the range of 138.80-141.30 to reach 143. The long term uptrend may have resumed and it may rise further towards 145.50-146 now.
Pound (1.6730) is in a correction of its major uptrend now which may extend to 1.6540-1.65 only if breaks the support of 1.66. It may reach 1.69-1.7050 after the current correction finishes. All the dips till 1.6470-80 may be bought into.
Aussie (0.9046) is testing the support of 0.9050 now after breaking out of the range of 0.89-0.91 on the upside and opened the possibility of a rally towards 0.93 or even more. Only a break below 0.90 will make this false breakout and nullify the bullish scenario.
Dollar-Rupee (61.08) made a low at 60.94 before closing nearly flat. 61.17 is the immediate hurdle now above which it may rise to 61.30-35. The initial sign of a reversal will come only on a break above 61.35.
INTEREST RATES
The US 10Yr (2.77%) is up and trading near the upper boundary of our range of 2.60-2.80%. The US NFP came out at 175K much above the market expectations indicating a positive growth outlook. Breaking above the resistance near 2.75% we may see the yield move past 2.80% in the days to come.
The German 10Yr (1.65%) has remained stable since last week and we may continue to see these levels while below 1.70%. The 10Yr Bund-Bond Spread (-1.12%) remained stable while the Euro (1.3885) continues to trade higher. The 2Yr Bund-Bond Spread (-0.18%) bounced from the support near -0.25% (07-Mar-14) and can now target -0.10%.
The Japan 10Yr (0.62%) is up and while above 0.60% it can target 0.65-0.68%. The US-Japan 10Yr spread (2.15%) is rising is in a perfect correlation with Dollar-Yen (103.05).
India's 10Yr GOI (8.81%) remained stable on Rupee strength. We may see a dip to 8.70-8.65% and maybe 8.60%, otherwise we may see the yields rise again.
During the early hours of the Asian trading session on Monday, the Euro is slowly edging higher back towards 1.39. Current range: just below 1.39 around 1.3880.
Further levels in both directions:
Below: 1.3700, 1.3500 and 1.3400.Above: 1.3900.
Bias: Cautiously I prefer the rally extending to 1.6800 and 1.6833 but care required
The underlying MT direction is bullish while the daily bias is bullish. Therefore the main risk is higher. Ensure that key supports levels hold. Note key resistance levels that would suggest continuation of the bullish move. Consider confirming this with a bullish set up pattern in price or an indicator. Only consider a possible larger reversal lower should key MT support break and is supported by a bearish set up in price or an indicator.
Consider buy set ups at: 1.6710 - 25
Consider sell set ups at: 1.6785 - 30 or 1.6950 - 60
Daily outlook
The structure has been very complicated and I'm not 100% comfortable. However, I find the bullish option a little more logical than the bearish alternative. This will require the 1.6705 low to remain intact and ideally press back above 1.6750-60 and Friday's 1.6785 high to reach 1.6800. We'll need a correction from there back to 1.6760-75 before heading back above 1.6800 to the 1.6813-33 projection range. Even this would imply a brief correction - perhaps around 30 points (approx) before heading up to 1.6870... I think this will hold but allow for 1.6902.
Below 1.6700 and 1.6680 would risk losses through 1.6640-50 and 1.6615-25 would see losses to the 1.6582 low again… but this will then require a further review… Below 1.6582 would look quite bearish.
Medium Term Outlook
10th March: We have seen grudging and complex gains but overall in line with the underlying rally. This still has some ratcheting gains that should move up through 1.6800-33 to 1.6870 and finally the 1.6956 target.
Only back below 1.6680-00 would risk losses to 1.6582 at least. Note the 1.6540-50 support also
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