MARKET WATCH MONDAY 10TH NOV. 2014 CURRENCIES Euro (1.2475) got a relief rally on lower-the-expected US non-farms payrolls data. Euro has retraced back to its September-lows of 1.2480, which is now a strong resistance in near term. Failing to cross above 1.2480-1.2500 would lead to another down move possibly targeting 1.2200. Dollar-Yen (114.26) in very short term charts has taken support at 114.00. Break below 114.00 level should increase short-term profit booking; such a move would target a retracement up to 112.50. However, the medium to longer term up trend remains intact and we should see new highs in few weeks. Pound (1.5890) after bouncing from the lows of 1.5790 has been unable to cross 1.5900. The levels of 1.6000 to 1.6100, all the way upto 1.6200, will now offer strong selling pressure, and market is likely to front-run this supply zone near 1.5950. The immediate target of 1.5725 remains on cards; this level will be key pivot in defining the long term trend on Pound. Aussie (0.8668) has traded below its October range (0.8850-0.8680) for three days now. This break in the range is important as it is also a continuation from the bearish flag formation on daily-charts, and break of weekly support last seen in Jan-2014. In longer term, as long as Aussie trades below 0.8800, we have a valid target of 0.8400 and lower. INTEREST RATES Last week, the RBI Dy Gov. HR Khan played down market expectations of an interest rate cut. He said the RBIs models predit inflation at 7% for 2016. In fact, we think there could be chances of 8% as well. If the 10Yr GOI (8.2092%) bounces on this news today, it would arrest the fall that could have otherwise targeted 8.0%. The US yields went up a bit last week, but could start coming off again in the medium term. The long-term Curve flattening trend remains intact, with charts suggesting chances of the 30Yr (3.03%), 10Yr (2.30%) and 5Yr (1.59%) eventually converging between 2.00-2.75% in the long term. While the German-US 2Yr (-0.564%) remains below -0.55% it would be in danger of falling further towards -0.60% and lower. Japanese yields remain in a slow and steady downtrend. The 10Yr (0.48%) could gravitate towards 0.35% over time.
Posted on: Mon, 10 Nov 2014 05:01:05 +0000
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