STOCKS
The market is testing the water in the new year and it might be good to be neither too bullish or bearish for a few days.
Contrary to the expectation yesterday, the Sensex (35891.52, -38.52) and Nifty (10792.50, -117.60) closed lower. There is a chance of Support coming in at current levels today, but if broken, the indices could fall further towards 35500 and 10700 in the near term, before producing a bounce towards 36500 and 11000 in the medium term.
Shanghai(2472) is seeing immediate support at 2450 and could ranging between 2550-2450 while that holds, but we cannot fully rule out a final fall towards 2425-2400 yet. That said, the long-term could be bullish on resolution of the US-China trade talks.
Kospi(2012) resembles Shanghai and may be further bearish towards 2000 or even 1900. The latter is a good Support for a goodish bounce in the longer term.
The Dax (10580.19, +21.23) has bounced from support at 10387 yesterday. We are unsure of movement here, whether there will be a rally towards 10900 or if it will merely move sideways between 10300-700 for some time.
Dow Jones(23346.24) saw a minor rally yesterday, and has some chances of moving up a little more towards 24000 in the near term.
COMMODITIES
Crude prices are almost stable while Gold and Silver has risen sharply to test resistances. Copper on the other hand looks bearish for the near to medium term.
Brent (54.59) and Nymex WTI (45.84) have risen slightly, attempting to rise above the immediate resistances near 56 and 48 respectively. While the long term supports at 50 and 42 holds respectively, a small rise in the near term could be possible towards 58 and 50 respectively before coming off from there.
Gold (1290.80) has risen sharply to test the immediate resistance on the daily candles. If it manages to sustain above 1290, it could head towards upper resistance zone of 1300-1320 before coming off from there. Either a dip from current levels towards 1270 or a rise towards 1300 could be the next course of movement. Watch price movement at current levels. Weekly line chart indicates bullishness towards 1350 for the longer term.
Silver (15.66) has resistance at current levels on the daily candles which if holds could produce a decent fall to 15.25-15.10 levels. Else a further rise towards 15.8 looks likely.
Copper (2.6105) has fallen sharply breaking below the 3-day and weekly supports near 2.65. Now while the price trades lower there could be some decent support at 2.60. Failure to bounce from 2.60 would make it bearish in the medium term towards 2.55/50. Watch price action near 2.60.
FOREX
Volatility triggers into the currency markets post the New Year holidays. Flash Crash seen on major currencies (AUDUSD, EURJPY, GBPUSD, USDJPY) but have recovered from there. The China Manufacturing PMI for Dec’18 came out lower at 49.7 from 50.20in Nov’18.
Dollar Index (96.53) is trading within the downward channel of 97.25-95.75 on the daily candles. A break on either side is important to determine the further course of direction. Upper resistance above 97.25 is seen at 98. The index may head higher towards 97.25 or even 98 in the near term.
Euro (1.1361) has held our expected resistance near 1.15 and has dropped from there. Immediate daily support at 1.13 could hold for now and produce a bounce back towards 1.14-1.1440 levels. Lower support is visible at 1.12 but we need to see a break below 1.13 for the Euro to move lower. For now, we may expect a bounce from 1.13.
Dollar Yen (107.06) tested 104.74 on the downside in a flash crash before recovering to current levels. 107 is an important levels from where a bounce if seen could take the pair higher towards 109-110+ again; else a fall below 107, if seen and sustains could make it vulnerable to a sharp fall towards 104.50-102.50 levels in the medium term. It is important to watch price action near 107 over today and tomorrow.
Euro-Yen (121.77) is testing medium term support on the 3-day line chart and while that holds, we could see a bounce from here in the coming sessions. Failure to bounce from 121 to higher levels could make it bearish for the longer run towards 119.
Pound (1.2547) has come off sharply contrary to our expectation of a rise from 1.27. while below 1.2750 (immediate resistance now), Pound could head lower towards 1.2350 before bouncing back from there back towards 1.25-1.27 in the longer term. Near term looks bearish while below 1.2750-1.2700.
Aussie (0.6941) has support at 0.67. While below 0.70, a fall back towards 0.68 looks likely. A break above 0.70 is needed to initiate bullishness for the medium term.
Dollar Rupee (70.18) closed higher yesterday surprising with a sharp move above 70. Near term resistance at 70.30/40 is likely to hold and push the price back towards 70 and lower. 69.20-69.00 remains intact for the medium term, while Rupee could trade in the 70.20-69.80 region in the next few sessions. NDF is trading at 69.98, indicating a possible gap down opening today near 70. Dip back to levels below 70 looks likely for the rest of the sessions this week.
INTEREST RATES
US Yields have dipped some more across the Curve. US 2Yr (2.47%, from 2.49% and 2.52%), the 5Yr (2.46%, from 2.51%), 10Y (2.62%, from 2.68%) and 30Yr (2.95%, from 3.01%) are all down a bit.
Importantly, the 5Yr (2.46%) again trades 1bp lower than the 2Yr, but has an important long-term Support at the current level, coming up from near 0.90% in 2016. We could see a bounce towards 2.60%, if this holds. This is something to watch over the next couple of days.
The 10-2Yr Spread (0.14%, down from 0.19%, 0.20%) has fallen back below 0.16%, in line with expectation.
Also as expected, the German-US 2yr Spread (-3.10%, up a bit from -3.12%) might try and rise towards -3.00% if the US Yields fall further. But there is a strong Resistance there, which could push the Spread down again, given that the German 10Yr (0.168%) could itself be headed lower towards 0.10%.
The Indian 10yr GOI (7.3546%, down from 7.422%) fell back yesterday, in line with the longer term trend which points down towards 7.10-00%.
