Forex Knowledge 3 JUNE 2014 currency Report.
There was literally no change in the US or European markets or even in most of the Asian markets, but our domestic Indices like Nifty enjoyed a great rally ahead of the RBI policy today. The implication of this Policy announcement has multifold implications. Watch out.
The lack of bullish momentum and a contracting range in Dow (16743.63, +0.16%) despite the higher highs and lows can keep the bulls a bit anxious. Keep an eye on 16400 on the downside and 16800-900 on the upside for an explosive breakout beyond this contracting range. The Dax (9950.12, 0.07%) is taking a pause near the minor resistance at 9985-10050 but the major uptrend looks strong enough to push it up to 10300-400.
The Nikkei (15031.23, +0.64%) is getting very close to our target area of 15200-300 as expected, where a short term correction can be expected. Some profit booking may emerge at 15200-300. The Shanghai (2041.67, +0.12%) faced good selling pressure near 2060-65 as expected but the sideways move in the broader range of 1990-2080 may continue for some more time in a base-building process.
Nifty (7362.50, +1.83%) rally to 7360-65, though completely in line with our expectation, has made the picture very unclear for this morning which will be resolved only after the RBI policy. If the 7400-50 area is crossed easily, then the correction is finished and new highs near 7600 can be expected. But a failure near 7400-50 may produce a downmove in a Triangular pattern. No clear bias right now.
COMMODITIES
Gold (1245.56) is trading on lower levels and may either target support near 1230-1225 or remain ranged in the 1240-1260 region. While Silver (18.835) has bounced from just above support near 18.5 and may range in the 18.5-19 region for a couple of sessions before breaking above 19.00. Overall trend remains down. Gold-Silver ratio (65.95) is stable for now within the 66.9-65.75 region but looks bearish in the near term targeting 65.5.
Copper (3.1535) is on an eventual rise towards 3.20-3.25 with decrease in momentum. No major movement expected for now while it is in a near term uptrend.
Brent (108.94) is falling sharply and may test support near 108.5 which if holds may help Brent to bounce back to 110, else the correction may extend downwards to 108-107.5 before starting a fresh rise again.
Nymex WTI (102.51) has also been falling and may test 102 levels for now. A failure to bounce back from 102 may push it down to 101.9-101.5-100 levels. But overall trend remains up with a target of 104.5-105-105.22 on the longer term.
FOREX
Dollar rectified the mixed signal to a clear signal by gaining against almost all the major currencies now. It would be better to follow the Strong Dollar for now until a clear reversal signal emerges.
Euro (1.3602) has been retesting the lows as the ECB is against any kind of strength in Euro. The German CPI coming low is not helping Euro to rise higher either. Unless 1.3640 is broken immediately, the support area of 1.3590-70 runs a risk of breaking down.
Dollar-Yen (102.37) has broken above 102.15 as expected and now it may rise towards the next resistance at 102.75-103.00, even 103.50. The Euro-Yen (139.25) has nearly achieved our initial target of 139.40 but the area of concern for the bulls begins here in the region of 139.40-140.00. Keep an eye for any sudden bear attack.
The weakness and loss of bullish momentum in Pound (1.6746) is pronounced and now a dip to 1.6670-20 can't be ruled out. But it remains to be seen if the last hope for the bulls at 1.66 remains protected or not.
The Aussie (0.9249) remains stuck in the range of 0.92-0.94 for now with no clear short term directional clues. Only a break of this range of 0.92-0.94 may produce any meaningful moves.
Dollar-Rupee (59.15) has broken above 29.20 but could not sustain above it. Still the bullish bias remains intact above 59.02-58.97 and the targets of 59.50-75 remains on course if the RBI doesn't reverse the picture.
INTEREST RATES
RBA and RBI meetings today. Both are expected to not do anything today. The difference is, the first is expected not to raise rates, the second not to lower them. Both would prefer a weaker currency, though.
But, as suggested yesterday, the RBI could announce some measures on the Rupee side. There could be some more relaxation of Gold import restrictions or allowing FIIs to hedge/ trade on the Exchange Futures. Very important will be the RBI's outlook on CPI. The last release was 8.59% and the trend is steadily higher. Given that Forward Premia (6-mths 8.19%) have been moving up over the last couple of weeks, there may be pressure on the 10Yr GOI (8.67%) to rise as well.
Over in Europe, the ECB is keen to talk down the Euro and the German CPI also came in lower than expected. So, the market expects is looking to Draghi really "do what it takes" this time to save Europe from deflation. Lower interest rates/ some sort of QE.
The Bank of England meeting is also due Thursday and the Bank is resisting raising rates.
There was literally no change in the US or European markets or even in most of the Asian markets, but our domestic Indices like Nifty enjoyed a great rally ahead of the RBI policy today. The implication of this Policy announcement has multifold implications. Watch out.
The lack of bullish momentum and a contracting range in Dow (16743.63, +0.16%) despite the higher highs and lows can keep the bulls a bit anxious. Keep an eye on 16400 on the downside and 16800-900 on the upside for an explosive breakout beyond this contracting range. The Dax (9950.12, 0.07%) is taking a pause near the minor resistance at 9985-10050 but the major uptrend looks strong enough to push it up to 10300-400.
The Nikkei (15031.23, +0.64%) is getting very close to our target area of 15200-300 as expected, where a short term correction can be expected. Some profit booking may emerge at 15200-300. The Shanghai (2041.67, +0.12%) faced good selling pressure near 2060-65 as expected but the sideways move in the broader range of 1990-2080 may continue for some more time in a base-building process.
Nifty (7362.50, +1.83%) rally to 7360-65, though completely in line with our expectation, has made the picture very unclear for this morning which will be resolved only after the RBI policy. If the 7400-50 area is crossed easily, then the correction is finished and new highs near 7600 can be expected. But a failure near 7400-50 may produce a downmove in a Triangular pattern. No clear bias right now.
COMMODITIES
Gold (1245.56) is trading on lower levels and may either target support near 1230-1225 or remain ranged in the 1240-1260 region. While Silver (18.835) has bounced from just above support near 18.5 and may range in the 18.5-19 region for a couple of sessions before breaking above 19.00. Overall trend remains down. Gold-Silver ratio (65.95) is stable for now within the 66.9-65.75 region but looks bearish in the near term targeting 65.5.
Copper (3.1535) is on an eventual rise towards 3.20-3.25 with decrease in momentum. No major movement expected for now while it is in a near term uptrend.
Brent (108.94) is falling sharply and may test support near 108.5 which if holds may help Brent to bounce back to 110, else the correction may extend downwards to 108-107.5 before starting a fresh rise again.
Nymex WTI (102.51) has also been falling and may test 102 levels for now. A failure to bounce back from 102 may push it down to 101.9-101.5-100 levels. But overall trend remains up with a target of 104.5-105-105.22 on the longer term.
FOREX
Dollar rectified the mixed signal to a clear signal by gaining against almost all the major currencies now. It would be better to follow the Strong Dollar for now until a clear reversal signal emerges.
Euro (1.3602) has been retesting the lows as the ECB is against any kind of strength in Euro. The German CPI coming low is not helping Euro to rise higher either. Unless 1.3640 is broken immediately, the support area of 1.3590-70 runs a risk of breaking down.
Dollar-Yen (102.37) has broken above 102.15 as expected and now it may rise towards the next resistance at 102.75-103.00, even 103.50. The Euro-Yen (139.25) has nearly achieved our initial target of 139.40 but the area of concern for the bulls begins here in the region of 139.40-140.00. Keep an eye for any sudden bear attack.
The weakness and loss of bullish momentum in Pound (1.6746) is pronounced and now a dip to 1.6670-20 can't be ruled out. But it remains to be seen if the last hope for the bulls at 1.66 remains protected or not.
The Aussie (0.9249) remains stuck in the range of 0.92-0.94 for now with no clear short term directional clues. Only a break of this range of 0.92-0.94 may produce any meaningful moves.
Dollar-Rupee (59.15) has broken above 29.20 but could not sustain above it. Still the bullish bias remains intact above 59.02-58.97 and the targets of 59.50-75 remains on course if the RBI doesn't reverse the picture.
INTEREST RATES
RBA and RBI meetings today. Both are expected to not do anything today. The difference is, the first is expected not to raise rates, the second not to lower them. Both would prefer a weaker currency, though.
But, as suggested yesterday, the RBI could announce some measures on the Rupee side. There could be some more relaxation of Gold import restrictions or allowing FIIs to hedge/ trade on the Exchange Futures. Very important will be the RBI's outlook on CPI. The last release was 8.59% and the trend is steadily higher. Given that Forward Premia (6-mths 8.19%) have been moving up over the last couple of weeks, there may be pressure on the 10Yr GOI (8.67%) to rise as well.
Over in Europe, the ECB is keen to talk down the Euro and the German CPI also came in lower than expected. So, the market expects is looking to Draghi really "do what it takes" this time to save Europe from deflation. Lower interest rates/ some sort of QE.
The Bank of England meeting is also due Thursday and the Bank is resisting raising rates.
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