Forex Knowledge 3 MARCH 2014 currency Report.
EQUITIES
Equities seem to be at least a little vulnerable to profit-taking/ sell-off globally as reaction to the Russia-Ukraine-Crimea situation
Most Asia-Pac indices are lower today, ranging from -0.11% (New Zealand) to -1.81% (Japan). Only the Shanghai (2068, +0.57%) is trading higher, holding above technical Support at 2025, despite the still contractionary PMI released today at 48.5. That said, it may remain vulnerable on the downside while below 2100. The Nikkei (14573) is trading just below an important near-term trend support at 14600. A sustained close below 14600 could push the market down sharply. Resistance seen in the 15000-200 region now.
We have to see how the Nifty (6276.95) opens today, but it too could be vulnerable to profit-taking today, given the Resistance at 6300.
The Dow Futures (16197) are trading 0.67% lower today. The Dow (1632.17) saw mild profit-taking at our Resistance at 16400 on Friday. The market is in a very delicate position even from a long-term perspective and the next few days may decide if we set off on a multi-month extension of the existing multi-year upmove or we see a serious correction/ reversal. The market is in a flux. Keep your powder dry, options open and do away with your prejudices either way.
COMMODITIES
Precious Metals and the Oil market are trading higher on concern over the Ukraine tensions and the weakening of the Chinese Yuan.
Gold (1342.38) has risen and is targeting 1350-1400 in the near term. Chinese demand for the metal soared indicating bullish expectations for Gold prices. Overall it is in an uptrend.
Silver (21.46) is trading higher and may target resistance near 22.0-22.20 again. But while below 21.50 it may remain stable within 21-21.5 levels.
Copper (3.1700) opened lower on speculation that the weakening Yuan and slowing growth in China may reduce demand for the metal considerably. Currently testing resistance near 3.20 if it is unable to break this level, it could see a danger of a fall to 3.15-3.10. But a rise above 3.20 would give some strength to rise back towards 3.20-3.25.
Brent (110.53) and Nymex WTI (103.78) opened with a gap up on concern over Ukraine tensions. Both WTI and Brent are currently trading just below crucial resistance near 104.4 and 111.28 respectively and may show some ranged moves for some time. But if a break above 111.3 (Brent) and 104.4 (WTI) is seen, we may expect further rise towards 112.5 and 106.
CURRENCIES
Dollar Index (79.8270) is testing the old support zone of 79.80-70 as expected. Holding 79.70, it may attempt to rise to 80.45-50 again but a break below 79.70 may drag it down to 79.10-78.90.
The Euro (1.3780) has reached 1.3825 in a sharp rally and now the major trend may be determined by its success or failure to break above 1.3850.
Dollar-Yen (101.46) is trading below the previous 3 weeks low after a gap down open and the medium term downtrend asserted itself. Bulls will be totally out of the game below 101.15 and then a retest of 100.80 and even lower may come.
The Euro-Yen Cross (139.78) reached our target of 141 before retreating to consolidate between 138.80-141.30 once again which may continue for some more time.
Pound (1.6747) is in a small 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 (0.8917) remains in a broad range of 0.89-0.91 and only a breakout from this range may give a trending move with a clear direction. It may bounce towards 0.90 once again holding above 0.89.
Dollar-Rupee (61.75) must hold above the support zone of 61.80-70 to keep the possibility of a rally to 62.40 alive. A break below 61.70 may drag it down to the major support of 61.50-40.
INTEREST RATES
US 10Yr (2.61%) looks like it can dip further towards 2.50%, both as a response to Yellen's dovishness and due to "safe haven" flows into Treasuries, given the potential volatility of the Russia-Ukraine faceoff.
The important thing is that the German 10Yr (1.63%) could also come off towards 1.50%. Thus, the German-US 10Yr Spread (-0.98%) could move back down towards -1.00%. Resistance is seen at -0.90%. It is to be seen how much the Euro (1.3780) is able to rise unless it gets support from the Yield Differentials. The US-Japan 10Yr spread (2.03%) is looking bearish overall and a break below 2.0% could push it own towards 1.90%. This could keep push Dollar-Yen (101.44) down towards 100.
There are a number of Central Bank meetings this week - Australia tomorrow, Canada on Wednesday and BOE and ECB on Thursday. BOJ comes in Tuesday next week and we have the FOMC on 19th.
Over the last couple of weeks the GBP/USD has received solid support from the key 1.66 level after it retraced strongly from the resistance level at 1.68 and over the last few days it had been placing upwards pressure on a short term resistance level at 1.67 before finishing out last week moving through to above 1.6750. In early February, the pound enjoyed a very healthy time moving well from the support level at 1.6250 through 1.6450 before pushing on to the multi-year high above 1.680. In late January the pound fell sharply and experienced its worst one week fall this year which resulted in it moving to the six week low near the support level at 1.6250. Over the last few months the pound has established and traded within a trading range roughly around the key level of 1.6450, whilst moving down to support at 1.6250 and up to 1.66 and beyond.
The 1.66 level has become quite significant and has loomed large throughout this year providing some resistance to higher prices. This level has resurfaced again as one of significance and it is now providing solid support. In late November it did well to break through the long term resistance level at 1.6250 which had established itself as a level of significance over the last few months. This level continues to play a role in providing support. In early November, the pound bounced strongly off the support level at 1.59 to return back to above 1.6250.
Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago. For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days. Throughout September the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
EQUITIES
Equities seem to be at least a little vulnerable to profit-taking/ sell-off globally as reaction to the Russia-Ukraine-Crimea situation
Most Asia-Pac indices are lower today, ranging from -0.11% (New Zealand) to -1.81% (Japan). Only the Shanghai (2068, +0.57%) is trading higher, holding above technical Support at 2025, despite the still contractionary PMI released today at 48.5. That said, it may remain vulnerable on the downside while below 2100. The Nikkei (14573) is trading just below an important near-term trend support at 14600. A sustained close below 14600 could push the market down sharply. Resistance seen in the 15000-200 region now.
We have to see how the Nifty (6276.95) opens today, but it too could be vulnerable to profit-taking today, given the Resistance at 6300.
The Dow Futures (16197) are trading 0.67% lower today. The Dow (1632.17) saw mild profit-taking at our Resistance at 16400 on Friday. The market is in a very delicate position even from a long-term perspective and the next few days may decide if we set off on a multi-month extension of the existing multi-year upmove or we see a serious correction/ reversal. The market is in a flux. Keep your powder dry, options open and do away with your prejudices either way.
COMMODITIES
Precious Metals and the Oil market are trading higher on concern over the Ukraine tensions and the weakening of the Chinese Yuan.
Gold (1342.38) has risen and is targeting 1350-1400 in the near term. Chinese demand for the metal soared indicating bullish expectations for Gold prices. Overall it is in an uptrend.
Silver (21.46) is trading higher and may target resistance near 22.0-22.20 again. But while below 21.50 it may remain stable within 21-21.5 levels.
Copper (3.1700) opened lower on speculation that the weakening Yuan and slowing growth in China may reduce demand for the metal considerably. Currently testing resistance near 3.20 if it is unable to break this level, it could see a danger of a fall to 3.15-3.10. But a rise above 3.20 would give some strength to rise back towards 3.20-3.25.
Brent (110.53) and Nymex WTI (103.78) opened with a gap up on concern over Ukraine tensions. Both WTI and Brent are currently trading just below crucial resistance near 104.4 and 111.28 respectively and may show some ranged moves for some time. But if a break above 111.3 (Brent) and 104.4 (WTI) is seen, we may expect further rise towards 112.5 and 106.
CURRENCIES
Dollar Index (79.8270) is testing the old support zone of 79.80-70 as expected. Holding 79.70, it may attempt to rise to 80.45-50 again but a break below 79.70 may drag it down to 79.10-78.90.
The Euro (1.3780) has reached 1.3825 in a sharp rally and now the major trend may be determined by its success or failure to break above 1.3850.
Dollar-Yen (101.46) is trading below the previous 3 weeks low after a gap down open and the medium term downtrend asserted itself. Bulls will be totally out of the game below 101.15 and then a retest of 100.80 and even lower may come.
The Euro-Yen Cross (139.78) reached our target of 141 before retreating to consolidate between 138.80-141.30 once again which may continue for some more time.
Pound (1.6747) is in a small 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 (0.8917) remains in a broad range of 0.89-0.91 and only a breakout from this range may give a trending move with a clear direction. It may bounce towards 0.90 once again holding above 0.89.
Dollar-Rupee (61.75) must hold above the support zone of 61.80-70 to keep the possibility of a rally to 62.40 alive. A break below 61.70 may drag it down to the major support of 61.50-40.
INTEREST RATES
US 10Yr (2.61%) looks like it can dip further towards 2.50%, both as a response to Yellen's dovishness and due to "safe haven" flows into Treasuries, given the potential volatility of the Russia-Ukraine faceoff.
The important thing is that the German 10Yr (1.63%) could also come off towards 1.50%. Thus, the German-US 10Yr Spread (-0.98%) could move back down towards -1.00%. Resistance is seen at -0.90%. It is to be seen how much the Euro (1.3780) is able to rise unless it gets support from the Yield Differentials. The US-Japan 10Yr spread (2.03%) is looking bearish overall and a break below 2.0% could push it own towards 1.90%. This could keep push Dollar-Yen (101.44) down towards 100.
There are a number of Central Bank meetings this week - Australia tomorrow, Canada on Wednesday and BOE and ECB on Thursday. BOJ comes in Tuesday next week and we have the FOMC on 19th.
Over the last couple of weeks the GBP/USD has received solid support from the key 1.66 level after it retraced strongly from the resistance level at 1.68 and over the last few days it had been placing upwards pressure on a short term resistance level at 1.67 before finishing out last week moving through to above 1.6750. In early February, the pound enjoyed a very healthy time moving well from the support level at 1.6250 through 1.6450 before pushing on to the multi-year high above 1.680. In late January the pound fell sharply and experienced its worst one week fall this year which resulted in it moving to the six week low near the support level at 1.6250. Over the last few months the pound has established and traded within a trading range roughly around the key level of 1.6450, whilst moving down to support at 1.6250 and up to 1.66 and beyond.
The 1.66 level has become quite significant and has loomed large throughout this year providing some resistance to higher prices. This level has resurfaced again as one of significance and it is now providing solid support. In late November it did well to break through the long term resistance level at 1.6250 which had established itself as a level of significance over the last few months. This level continues to play a role in providing support. In early November, the pound bounced strongly off the support level at 1.59 to return back to above 1.6250.
Towards the end of October the GBP/USD slowly drifted lower from the strong resistance level at 1.6250 and down to a three week low just around 1.5900 which was recently passed as the pound moved down towards 1.5850 only a week ago. For the week or so before that the pound moved well from the key level at 1.60 back up to the significant level at 1.6250, only again for this level to stand tall and fend off buyers for several days. Throughout September the pound rallied well and surged higher to move back up strongly through numerous levels which was punctuated by a push through to its highest level for the year just above 1.6250 several weeks ago. In the first week of October the pound was easing back towards 1.60 and 1.59 where it established a narrow trading range between before surging back to 1.6250 again.
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