STOCKS
Ugh! Huge volatility in the Dow. Closed at 23323.66 (below the crucial 23500), giving up on an intra-day high of 24057.34. The intra-day low was 23162.64. This forces us to look for downside targets now, with 23500 becoming a crucial Resistance now, but we are unable to figure out a downside target yet.
The Fed did raise rates by 25bp last night, and did reduce its dot-plot to 2 hikes in 2019 from the earlier 3 hikes, but the market might have been wanting to see 1.
Asian markets have reacted negatively. The Nikkei (20747) continues to decline, targeting 20000-19500. Immediate Support might be at 20400. The Shanghai (2531, -0.73%) is also bearish. Break below 2525 would open up 2450.
Even the DAX (10766.21, +25.32, +0.24%), which managed a meagre gain yesterday is likely to start falling again, targeting 10500-400.
The Nifty (10967.30, +58.60, +0.54%) had closed higher yesterday, but is reported to be trading lower near 10897 on the SGX today, below the crucial 10925 level. This is in line with our reading yesterday that, “If the global environment does not improve after the FOMC today, there could be a danger of the Nifty succumbing to bearishness as well.”
COMMODITIES
Markets interpret the FOMC statement as “not so dovish” although the expected rate hike of 25bps was made. Worry of slower economic growth in 2019 looms as the Fed mentioned that they would continue to shrink their balance sheet which could be a problem for economic growth according to some economists.
Overall the commodity prices tanked after the FOMC statement and Powell’s press conference before recovering slightly.
Gold (1248.40) tested the expected resistance near 1262 before coming off sharply to current levels of 1248. While 1265/70 holds, Gold could fall further towards 1239-1230 in the near term before again bouncing back from there.
Silver (14.65) is almost stable trading near the upper end of the sideways range of 13.80-15.00. A sharp fall could be expected soon while 15 holds, targeting 14.25-14.00 again.
Copper (2.6765) fell sharply but has support at 2.67 as seen on the 3-day candles. While above 2.65/67, there is scope for a bounce back towards 2.80-2.90 levels in the longer run; else a fall below 2.65 if seen and sustains, could initiate fresh weakness towards 2.50.
Brent (56.55) and Nymex WTI (47.35) did saw a rise towards 58 and 48 respectively but is trading lower today. While they trade below 56.50 and 48, bearishness could be on the cards towards 54-52 and 44-42 in the near term. Some stability could be seen over the next 1-2 sessions. On the WTI 3-day line chart, current level is an important support which if holds could produce a bounce in the near term.
Gold-WTI ratio (26.38) has come off from immediate resistance near 27 and while that holds, it could be bearish towards 25 indicating a fall in Gold and a possible range trade in Crude prices.
FOREX
The FED statement triggered a rise in Dollar index (97.02) to levels above 97 from an intra-day low of 96.55. The narrow contraction in the 96.75-97.30 region is still intact. A few more sessions could see trade within the mentioned range before a sharp break is seen preferably on the downside.
Euro (1.1380) is trading within 1.13-1.12 region and has scope of extending to 1.14 or 1.11 on either side. Immediate view could be a rise towards 1.14 before coming off from there towards 1.12/11.
Dollar Yen (112.43) rose back after testing 112. Note that 112 could provide an immediate support which if holds could lead to a rise back towards 113-114 levels; else a break below 112 could take it down towards 111.50-111.00 in the near term. On the longer term charts, view is bearish after a near term stable movement within 112-115.
Euro-Yen (127.97) has immediate support near 127.0-127.5 and while that holds there is some possibility of a range trade above 127 for a couple of sessions. There is also some possibility of breaking below 127 but that could be seen next week, if 127 fails to produce a bounce back towards 128 or higher.
Pound (1.2617) is bearish while below 1.27. A re-test of 1.2486-1.25 looks possible in the near term.
Aussie (0.7101) has support at 0.71 and further down at 0.7050. Although the currency saw a sharp fall yesterday, there is chance of recovery while the immediate supports hold.
Dollar Rupee (70.40), having tested 69.8450 on the downside closed higher yesterday. A rise back towards 70.60/80 is likely today extending gradually towards 71 in the near term.
INTEREST RATES
After the FOMC disappointed the markets last night, US Yields have fallen at the Far end and the Curve has flattened instead of steepening. The 2Yr (2.66%) has gone up from 2.65%, while the 5Yr has dipped to 2.64%, effectively inverting the 5-2 Spread again to -2bp.
The 10Yr (2.77%) has come down from 2.81% and the 30Yr (2.99%) has come down sharply from 3.06%, both possibly breaking below long-term support trendlines coming up from 2016.
The Indo-US 10Yr Spread (4.45%) is quoting below 4.49%, the support mentioned yesterday. But it could see a bounce today, given the fall in US yields overnight, unless the Indian 10Yr GOI (7.22%), which closed below 7.25% yesterday, sees further decline today. We have to wait and see on that.
