Sample Category Title

STOCKS

Dow (20975.78, -0.17%) tested 21050 on the upside before coming off from there. Some profit taking is possible in the 21050-21100 region just now with a possible extension of the current rise towards 21200. Some corrective dip is preferred for the medium term before continuation of the long term uptrend.

Dax (12749.12, +0.43%) has enough room on the upside nut we stick to our earlier target of 13000 which could be achieved over today and tomorrow. Thereafter a small dip is possible before moving higher in the longer run.

Shanghai (3082.87, +0.08%) is almost ranged within the 3100-3060 region and a break on the down side is needed to accelerate a fall towards 3000. Else some sideways consolidation is possible in the medium term.

Nikkei (19903.06, +0.30%) is close to testing our first target resistance near 20010 and while that holds, a small dip is possible back towards 19500. Else a sharp and sustained break above 20010 may take it higher towards 20800 in the longer term.

Nifty (9316.85, +0.03%) may continue to be trapped in the 9400-9260 region. We may possibly expect a sharper move in the next couple of weeks.

COMMODITIES

Recent strength in Dollar index had pulled down Bullion near their key support areas. Gold (1222) is hovering around its crucial support of 1220. Recent trading range could be 1187-1220. We will remain bearish on gold while it is trading below 1260 but chances of a short term bounce back towards 1240 can't be ruled out due to oversold condition.

Silver (16.19) is trading within the range of 15.80-16.90.The bias will remain bearish while it is trading below 17.50 levels.

Copper (2.50) is hovering around its crucial support of 2.48-50 and if these levels hold then we might see a bounce towards 2.60 region. But we will remain bearish on copper while t is trading below 2.67-72 levels.

Brent (548.98) and WTI (46.18) both had moved lower in line with our expectation. They are within their trading ranges of 46.62-49.50 and 43.75-47.15 respectively. Brent and WTI may consolidate within these levels for few more sessions though the possibility of a corrective bounce towards resistance can't be ruled out. We have U.S weekly crude inventory today at 8:00 pm with an expectation of decrease by 2 million barrels. If the actual figure could match the expectation then we might see some short term rally in both Brent and WTI.

FOREX

Dollar gathers strength and after a pause after the 3-day rally, may rise further which implies weakness for the majors. Indian currency segment is closed for the day due to Buddha Purnima.

Dollar Index (99.43) has broken above the resistance of 99.50, signaling a near term bullish reversal which may take it to 100.00-50 after the current correction ends by 99.25-00.

Euro (1.0894) has broken the support of 1.0880 before a minor recovery and now some more downside may be pending, with the possibility of sideways consolidation negated. The current bounce may be limited to 1.0940-60 from where the next rejection may come for the downside target 1.0800 levels.

Dollar Yen (113.77) has registered a high of 114.33 so far, close to our target of 114.60 but the higher targets of 114.60-115.00 may still be achieved if it manages to stay above the support of 113.30-10. Bias bullish till 113.10.

Pound (1.2946) remains in a sleeping mode though the bullish momentum is still intact. Immediate resistance is modified to 1.3030 and support comes up at 1.2900 and 1.2850.Repeat - bias remains bullish with a fair possibility of horizontal trading in 1.2850-1.3050 in the near term.

Aussie (0.7356) continues its downside journey with the upside for the week possibly limited to 0.7430. Target on the lower side remains unchanged at 0.7300.

INTEREST RATES

The US yields are all stable. The 10- 5Yr (0.47%) has fallen slightly and could come down to test 0.46-0.45% before bouncing back again

The German-US 2yr (-2.01%) is testing short term channel support and while it holds, we could see a bounce back towards -1.95% and if that happens, we could see a rise in Euro in the coming sessions.

The Japan-US 10Yr (2.35%) has reached our initial target and could now see a small dip in the next couple of sessions. This could pull down Dollar-Yen for a short time before rallying towards higher levels.

The rising UK-US 10Yr (-1.19%) indicates a rise in Pound too in the near term. The yield spread could move up towards -1.15% in the coming sessions.

Nearer term $ index outlook :

In the May 2nd email, affirmed the view over the last few weeks of a major bottoming (eventual gains above the Jan high at 103.80), adding that any further near term downside would be limited and part of this bottoming. The market did slip to a marginal new low at 98.55 on May 5th, testing that long mentioned falling support line from Feb and has reversed higher since (see daily chart below). Note too I have been discussing (and often do across markets) that there was "still no confirmation of even a short term low", leaving open scope for more bottoming. In this case, the bounce over the last few days is occurring in 5 waves/impulsive (see hourly chart/2nd chart below) and along with positive technicals (see buy mode on the daily macd) greatly increases the likelihood that the final low in price is indeed in place at (larger bottoms begin with smaller ones, see hourly chart/2nd chart below). Nearby resistance is seen at 99.60/75, 99.90/05 (50% retracement from the Apr 10th high at 101.35) and the bigger picture, bearish trendline from Jan (currently at 100.80/95). Nearby support is seen at 99.05/20 and 98.40/55 (both the recent low and that falling support line from Feb). Bottom line : view over last few weeks of an important bottoming (and eventual gains above 103.80) remains and with the final low finally seen in place.

Strategy/position:

Reached the buy target from the May 2nd email at 98.75 on May 5th and for now, continue to stop on a close 20 ticks below that falling support line from Feb. However, will want to switch to a more aggressive, trailing stop on further gains to maintain a good risk/reward in the position.

Long term outlook:

No change as that view of a more major bottoming and eventual gains above the Jan high at 103.80 remains. Note that the decline from Jan is seen as a correction (wave 4 in the rally form the May 2016 low at 91.90) and targets those new highs (within wave 5), while the market also tested that longer term, nearly 2 year bull trendline at the recent lows (see daily chart/3rd chart below). Also interesting to note that many important lows have occurred in May over the last number of years (see weekly chart/4th chart below) and with all adding to the view the important low is in place. From a very long term perspective however, the gains above that 103.80 high may be limited and part of a more major topping (years ?). Lots of long term negatives add to this risk and include bearish long term technicals and the failure to build in the Jan upside break of the Mar/Dec 2015 peaks at 100.50/poor upside momentum. Note too that new highs above 103.80 would be seen as the final upleg in the rally from May 2016 (wave 5) as well as the final upleg in the whole really from the May 2011 low at 72.70 (wave V). And finally, very long term resistance is just above that 103.80 high at the ceiling of the 6 year bullish channel (currently at 104.75/25) and would an "ideal" area to form that more major (potentially multi-year) top (see weekly chart/4th chart below). At this point however, this is just a longer term risk to be aware of and will be looking to reassess on gains above 103.80 (more info available at this time). Bottom line : downside action since Jan seen as a large correction and with an eventual resumption of the longer term gains above 103.80 ahead (and may have finally completed the bottom).

Strategy/position:

Also switched the longer term bias to bullish on May 5th at 98.75.

Current:

Near term : reached buy target from May 2nd email on May 5th at 98.75.
Last : short Apr 11 at 100.75, took prof Apr 26 above multi-day t-line (98.80, closed 99.05, 170 ticks).

Longer term : bull bias May 5th at 98.75 for eventual gains above 103.80.
Last: :bull bias Feb 7th at 100.35 to neutral Mar 28th at 99.75.

The USD/JPY resistance level that we had been trading both sides of has broken out and as you can see from the two charts below, broke out of a flag too:

USD/JPY Weekly:

I say it's a flag because of the higher time frame bullish trend line that we have on the weekly chart but being so subjective, you can really call it whatever you want.

For me, it's all about keeping my levels as simple and obvious as possible so I can day-trade them after zooming in intraday.

Speaking of an intraday chart, lets have a look at the breakout:

USD/JPY 4 Hourly:

Japanese Yen

The relatively tranquil waters of the Korean Peninsula turned stormy early this morning when the North Korean ambassador told the UK press of plans to go ahead with its sixth nuclear test. The boom that was heard across currency markets early this morning was the USDJPY toppling from 114.30 to sub 113.80, as dollar-yen dealers were whipped into a frenzy, reducing topside USDJPY exposure on the geopolitical headline.

Look for North Korea headlines to sway short term USDJPY sentiment, but ultimately, the recovery of risk appetite should send the JPY lower, and with even greater velocity, if US yields continue to climb.

Australian Dollar

Commodity currencies were already warranting a high degree of attention as the markets weighed in on China's growth, amidst a tightening of financial provisions. Despite commodity concerns, the Aussie dollar was a key event overnight, trading to a low at .7335 dispirited by weak retail sales data, which could certainly pressure the RBA into action. RBA speculation is rife this morning with rate cut chatter filling the airwaves as retail consumption is a key metric for the RBA policy view

While there was a little cheer from the AUD post-federal budget, I think dealers will look past the event and focus on a drop in domestic consumption data and the plight of commodities. With iron ore prices looking for a base, I would expect pressure on the AUDUSD to continue.

China's April CPI and PPI reports will be the primary focus for local traders today.

Euro

Before the North Korean sabre rattling, US dollar yields were climbing, leading to notable moves in G10 as the greenback roared back to life. While the dollar move has been broad based, but with the EURUSD making an all too significant close below 1.0950 early this week, recently minted pre-election euro longs headed for the exits. While the French election outcome should be good for both risk and the Euro, the EURUSD bulls appear to be exercising a high degree of caution before they ultimately leg back into positions likely targeting retrace of the post round one election move (1.0840-20) support levels.

Ceteris Paribus, what does it mean? Read on. How good is good enough? That's the growth question in 2017 and the answer is increasingly that mediocre is an FX winner. The pound was the top performer and the only currency to have risen against the USD on Tuesday, while the Swiss franc lagged. China inflation data is up next. USDJPY was stopped out and a new JPY trade was issued. Below is the Premium video, dissecting the spectacular fall in volatility relative to lack of gains in the Dow over the last 14 days.

The US dollar flexed its muscles for the second day on Tuesday. USD/JPY climbed above 114.00 before closing just below on North Korea nuclear test worries. EUR/USD sank below 1.09 as the Macron trade continued to unwind.

At the end of the day, the FX market is a beauty contest. But in 2017 it's more of a small town pageant than Miss Universe. US economic data has been mediocre for weeks and the Atlanta Fed cut its Q2 GDP forecast Tuesday. Yet, Ceteris Paribus (holding other things equal in Latin), growth around 2% with a central bank hiking rates and no obvious domestic risks is good enough for the US dollar, assuming no real developments elsewhere. We will need at least 4 weeks before judging whether Macron's presidential success translates into parliamentary success.

In addition, it's the second week of the month and that means the US economic calendar is light and broader market volatility is ultra low. Meanwhile, Fed officials continue to brush off weak growth in a sign that they want to hike in June.

The main event on the upcoming calendar is the China CPI for April. The consensus is for a 1.1% y/y rise, that's an increase from 0.9% in March. With inflation so low, the latest moves by Chinese officials to cool the economy seemingly don't make sense. But the 'dual mandate' of China's government isn't just economic growth, equally important is stability and efforts to curb credit growth are more about attempting to de-risk the economy.

Gold continues to lose ground this week, and has lost close to 1 percent on Tuesday. In the North American session, the price for one ounce of spot gold is $1217.38, its lowest level since March 15. There are no major releases in the US on the schedule. There was more good news on the employment front, as JOLTS Jobs Openings remained unchanged at 5.74 million, above the estimate of 5.67 million.

Gold prices have dropped sharply in May, sliding 4.2 percent. The metal lost ground last week following the Federal Reserve rate statement, which was more hawkish than expected. Although the US economy had some hiccups in the first quarter, Fed policymakers chose to focus on the positive, and this immediately increased the likelihood of a June rate hike. This triggered a negative reaction from gold, which trades inversely to interest rate moves. The odds of a June hike have moved even higher this week, following strong US employment numbers in April. Nonfarm Payrolls improved to 211 thousand, easily beating the forecast of 194 thousand. The unemployment rate fell to an impressive 4.4%, compared to the estimate of 4.6%. This was the lowest rate since May 2007. Wage growth remained weak at 0.3%, but still matched the forecast. Still, with such little slack in the labor markets, we should see wage growth start to move higher. If that happens sooner rather than later, the Fed could raise rates three more times in 2017. As things stand now, two more moves is the likely scenario. Currently, the likelihood of a rate hike stands at 87%, according to the CME Group, and that figure could continue to rise.

Election campaigns often lead to volatility in gold prices, due to market uncertainty about the outcome. However, that was not the case in the French presidential election, as there were no real surprises in the outcome, save for the fact that Emmanuel Macron's margin of victory for was larger than expected. Throughout the second round of the election campaign, opinion polls showed Macron with a comfortable 20-point edge, and in the end, he beat expectations, beating Marie Le Pen by a margin of 64% to 36%. Although Macron certainly "won big", it should be noted that fully one third of French voters either abstained or voted a blank ballot as a protest vote. This means that Macron was viewed by many voters as a default choice, as he was seen as more palatable than Le Pen, head of the extremist right-wing party National Front. The markets won't have much time to dwell on this election, with parliamentary elections slated for mid-June. Macron's En Marche! party is barely a year old and is unlikely to win a majority, which would mean a power-sharing setup in parliament, likely between Macron's party and the center-right. One important factor in the presidential election was that in both rounds, opinion polls were surprisingly accurate – the concern that many voters would vote Le Pen but wouldn't admit it to the pollsters did not occur. (In the US election, a sizeable numbers of Trump voters were embarrassed to admit so before the vote, thus skewing opinion polls in favor of Hillary Clinton.) Similar to the presidential election, opinion polls during the election campaign will be important as fundamental releases and should be treated as market-movers.

GBP/USD is unchanged in the Tuesday session. In North American trade, GBP/USD is trading at 1.2940. On the release front, British BRC Retail Sales Monitor impressed with a gain of 5.6 percent. Over in the US, there was another strong employment report, as JOLTS Jobs Openings remained unchanged at 5.74 million, above the estimate of 5.67 million.

There was good news on the consumer spending front in the UK, as retail sales in BRC stores jumped 5.6% compared to a year ago. The sharp increase underscores that consumer spending remains resilient, but there are growing concerns that this trend will change in 2017. Analysts point to two major areas of concern. First, the weak British pound means that consumer purchasing power has decreased, since imported goods have become more expensive. Second, the triggering of Article 50 and the upcoming negotiations with the EU over Brexit is causing uncertainty about the economy and jobs, and this means that consumers will be holding back on buying major items. If consumer spending, a key driver of economic growth, weakens, the pound could follow suit and lose ground.

With the US posting strong employment numbers in April, it's a good bet that the Federal Reserve will raise rates at the June policy meeting. Nonfarm Payrolls improved to 211 thousand, easily beating the forecast of 194 thousand. The unemployment rate fell to an impressive 4.4%, compared to the estimate of 4.6%. This was the lowest rate since May 2007. Wage growth remained weak at 0.3%, but still matched the forecast. Still, with such little slack in the labor markets, we should see wage growth start to move higher. If that happens sooner rather than later, the Fed could raise rates three more times in 2017. As things stand now, two more moves is the likely scenario. The strong job numbers have cemented a rate hike in June, as the odds of a June hike continue to rise and are currently at 87%, according to the CME Group.

USD/CHF - 1.0060

Most recent candlesticks pattern : N/A

Trend                                    : Near term up

Tenkan-Sen level                  : 1.0028

Kijun-Sen level                    : 1.0015

Ichimoku cloud top                 : 0.9926

Ichimoku cloud bottom              : 0.9919

Original strategy :

Buy at 0.9980, Target: 1.0080, Stop: 0.9945

Position : -

Target :  -

Stop : -

New strategy  :

Buy at 0.9980, Target: 1.0080, Stop: 0.9945

Position : -

Target :  -

Stop : -

As the greenback has rallied yesterday and broke above indicated resistance at 0.9966-69, adding credence to our view that low has been formed at 0.9859 and suggesting recent decline from 1.0108 top has ended, hence consolidation with upside bias remains for further gain to 1.0067 resistance, however, near term overbought condition should prevent sharp move beyond previous resistance at 1.0090 and price should falter below chart point at 1.0108, bring retreat later.

In view of this, would not chase this rise here and we are looking to buy dollar on dips as 0.9980 should limit downside. Below previous resistance at 0.9957 would defer and suggest top is possibly formed, bring test of 0.9920-25 but break of previous resistance at 0.9903 is needed to add credence to this view, brig further fall to 0.9880-85.

EUR/USD - 1.0890

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 1.0900

Kijun-Sen level                  : 1.0911

Ichimoku cloud top             : 1.0972

Ichimoku cloud bottom      : 1.0971

Original strategy  :

Sell at 1.0970, Target: 1.0870, Stop: 1.1005

Position : -

Target :  -

Stop : -

New strategy  :

Sell at 1.0970, Target: 1.0870, Stop: 1.1005

Position : -

Target :  -

Stop : -

Euro’s selloff after yesterday’s initial brief rise to 1.1025 suggests top has been formed there and consolidation with mild downside bias is seen for further fall to 1.0870-75 support, however, a sustained break below there is needed to add credence to this view, bring retracement of recent rise to 1.0851 support and possibly towards 1.0825-30 but reckon 1.0800 would hold from here due to near term overbought condition.

In view of this, we are looking to sell euro on recovery as 1.0970-80 should limit upside. Above resistance at 1.0997 would bring retest of said yesterday’s high at 1.1025, however, break there is needed to signal recent upmove from 1.0340 low has resumed for headway to 1.1050 but reckon upside would be limited to 1.1065-70 (61.8% projection of 1.0602-1.0951 measuring from 1.0851).

USD/JPY - 114.09

Most recent candlesticks pattern   : N/A

Trend                      : Near term up

Tenkan-Sen level              : 113.85

Kijun-Sen level                  : 113.47

Ichimoku cloud top             : 112.65

Ichimoku cloud bottom      : 112.57

Original strategy  :

Buy at 113.35, Target: 114.45, Stop: 113.00

Position :  -

Target :  -

Stop : -

New strategy  :

Buy at 113.35, Target: 114.45, Stop: 113.00

Position :  -

Target :  -

Stop : -

As dollar’s upmove has gathered momentum, suggesting recent upmove is still in progress and bullishness remains for further gain to 114.25-30 (100% projection of 110.87-113.05 measuring from 112.09) and then 114.50-55 (100% projection of 108.13-111.78 measuring from 110.87), however, near term overbought condition should limit upside to 114.75-80 and price should falter below 115.00, bring retreat later.

In view of this, would not chase this rise here and would be prudent to buy dollar on pullback as the Kijun-Sen (now at 113.31) should contain downside. Only below previous resistance at 113.05 would defer and suggest top is formed, bring correction of recent upmove to 112.70-80 but reckon support at 112.39 would remain intact.