STOCKS
Indian equities get a breather, finally. Both Sensex and Nifty 50 has bounced sharply yesterday and have room to move further higher in the near term (see below). Other global indices retain their bullish sentiment.
Dow Jones (25954.44, +63.12, +0.24%) continues to inch higher. It has a resistance near 26050. A strong break above it will pave way for a test of 26200.
DAX (11401.97, +92.76, +0.82%) has gained momentum and is likely to test the key resistance level 11470. Inability to breach it can trigger a pull-back move to 11380.
Nikkei (21376.00, -55.49, -0.26%) has come-off sharply from the intraday high of 21495. Support for the index is in the 21230-21200 region which is likely to limit the downside. An eventual break above 21500 will open doors for a test of 21600 and 21700.
Shanghai (2763.70, +2.49, +0.09%) remains mixed as it has been oscillating between 2735 and 2780 over the last few days. A breakout on either side of 2735 or 2780 will decide the next move. The broader bias remains bullish for a rise to 2800 as long as the index trades above 2700.
The Support at 10600 on the Nifty 50 (10735.45, 131.10, 1.24%) has held very well. A near-term support is at 10680. While above this support, the index can inch further higher to 10,800 in the coming sessions. Sensex (35756.26, +403.65, +1.14%) can test 36000 while it remains above 35570.
COMMODITIES
The rally in gold and silver may pause and an intermediate dip looks likely before the overall uptrend resumes. Oil continues to remain positive and can move up in the coming days.
Gold (1338) seems to be losing pace. A near-term corrective dip to 1330-1327 looks possible before the uptrend resumes targeting 1350-1360.
Silver (16) surged to test 16.2 as expected and has come-off from there. A dip to 15.9-15.8 can be seen in the coming sessions while silver trades below 16.1
Copper (2.90) has risen above the crucial resistance level of 2.89. It has to sustain above 2.89 in order to take the prices further higher to 2.93. A pull-back below 2.89 from current levels can trigger a corrective fall to 2.85 and 2.83
WTI (57.1) has come-off slightly after testing the intermediate resistance at 57.6. While above 56, the outlook will continue to remain bullish for a test of 58-60.
Brent (66.8) sustains above 66 and retains the bullish view for a test of 68-70. A strong break below 66 is needed to drag it to 64.5-64 before we see the above-mentioned rally.
FOREX
We were looking for a dip to 96.00 on the Dollar Index (96.51) yesterday. A low of 96.2860 as been seen so far. The Euro (1.1337) saw a high near 1.1371, just above the 21-day MA, but has dipped back a bit from there.
We had cited Resistances on the Euro, Pound, Aussie and Euro-Yen yesterday. The outlook is now a little mixed in the near term (today). Will the Euro try to break above 1.1375? Will the Dollar Index push lower towards 96.00?
Note that the 96.50-00 region is a crucial Support for the Dollar Index on the Weekly Line chart, which can yet produce a rally towards 98.00. The German-US 2Yr Spread (-3.08%) has a crucial long-term Resistance near current level and the Euro-Yen (125.44) has seen the anticipated rejection from the Resistance at 126. A dip/ fall in these two might keep the Euro (1.1337) below 1.1375. BUT, just in case the Euro manages to break past 1.1375, it would open up the path towards 1.1455 for next week.
Although we were looking for a rise towards 111.50 on Dollar-Yen (110.70) yesterday, it has been unable to break above 111.00 as yet and is not giving clear signals on the upside or downside at the moment.
The Aussie (0.7150) saw a sharp rise to 0.7206 today after a good AU Labour Force data, but has fallen back sharply from there. This is not in keeping with the potential bullishness for 0.7250. But at the same time, the uptrend since 0.7077 is still intact while above 0.7120-10. In any case, with Resistance near 1350-60 on Gold (1341.90) looking good, the upside might be limited for the Aussie, especially if we see the Weekly Candles.
Support at 6.70 continues to look good on the USDCNY (6.7233) and we might even look for a Support at current level as well.
All put together, there are chances that Dollar-Rupee (71.1150 closing yesterday, 71.0650 Offshore today) may have good Support at 71.00 today. IN CASE that breaks, a further dip to 70.90-80 might be considered.
INTEREST RATES
As mentioned above, the German-US 2Yr Spread (-3.06%) has Resistance at -3.05% just overhead and the German-US 10Yr Spread (-2.54%) also has an important Resistance near -2.525% overhead.. Perhaps the market will be wary that the German IFO data on Friday will be soft (our own expectations are lower than those of the market consensus) and might therefore push German yields lower.
Further, the Jan FOMC Minutes have been released, saying that most agree about balance sheet reduction. There has been an uptick of 1bp across the Curve as result, instead of the dip that we were looking for. The Yields are 2Yr 2.50%, 5Yr 2.47%, 10Yr 2.64% and 30Yr 2.99%. Downside might be limited to 2.95% and 2.60% on the 30Yr and 10Yr respectively.
The Indian 10Yr (7.5462%) has managed to remain below 7.60%, in line with expectation. Maybe we can think of a test of 7.50% on the downside as well in the near term?
