STOCKS
Equities are mixed. Dow, Shanghai and Nifty could trade lower in the near term while Dax and Nikkei looks bullish.
Dow (20855.73, -0.33%) is in the correction phase and could possibly extend towards 20750-20700 levels before bouncing back from there. In case 20700 breaks on the downside, we will have to be ready to see some more fall in the medium term towards 20500. But while 20700 holds, we remain bullish.
Dax (11967.31, +0.01%) looks bullish for the near term. Immediate support seen near 11920 which if holds could take it higher towards 12100-12200; else a fall towards 11800 is possible before a sharp bounce is seen. Watch price action near current levels.
Looking at the sharp rise in the US-Japan 10yr yield spread (Refer Interest Rates section below), we could possibly expect a rise in Dollar-Yen which could pull up Nikkei (19283.10, +0.15%) to higher levels of 19400-19600. Nikkei is trading low and could re-test levels near 19000 before bouncing back from there towards 19400-19600 levels again. In that case the 21-MA seen on the 3-day line charts could act as a good support just now.
Shanghai (3214.32, -0.81%) could be heading towards immediate resistance near 3250 and may not break above 3250 just now (we may negate the higher levels of 3275 that was mentioned yesterday). A small corrective dip from 3250 looks more likely just now.
Looking at the big sharp fall in Brent Crude (see commodities section below) and expecting some weakness in the Indian Rupee, there could be some fall in Nifty (8924.30, -0.25%) too today. A fall towards 8800 is likely within the next couple of sessions. That makes the resistance near 8970-9000 more stronger just now and could hold for some more time.
COMMODITIES
Gold (1206) has shifted into a new bearish trading zone of 1128-1226. We will remain bearish while it is trading below 1226. Today’s ECB press conference at 7.00 pm IST could influence the price.
Silver (17.25) is also trading below 17.45. A new trading band has been formed between 15.70-17.75. Bias will remain bearish while it is trading below 17.75.
Copper (2.60) is hovering around its crucial support of 2.60. A close below that could open up 2.53. We think the downward momentum has weakened a bit and copper may consolidate between 2.55-2.60 for few more day before its next upward rally. We have US unemployment claims at 7:00 pm IST, which may add some more clarity.
We have clearly mentioned that any increase in US crude inventory would be bearish for Brent (53.48)and WTI(50.58). Yesterday, the inventory was 8.2M barrel plus and Brent and WTI both has fallen almost 5%. Next level of support for brent are at 51.35 and 48.87 and for WTI 48.90 and 46.35 respectively.
FOREX
Possibly, the market is going Short Euro (1.0537) into the ECB Meeting as it approaches the lower end of oura range 1.0500-1.0630. We note that the EURUSD is responding a little more to the German-US 10 Yr Spread than to the German-US 2 Yr Spread. The chances of a bottom in the Spreads and hence, in Euro can’t be ruled out in the near term but the meet should be the immediate trend decider. (Check the Interest Rates section)
The Dollar Index (102.15) broke above the minor resistance of 102.00 sooner than expected on the back of very strong private sector employment data. It remains to be seen if it manages to rise and sustain above 102.30, which will enable it to rise further towards 102.70-103.00 in the next few sessions.
Dollar-Yen (114.44) remains stable in the range of 113-115 just as expected and the overnight rise from 113.60 to 114.80 remains just an oscillation inside the said range. The range is expected to remain unchanged for the rest of the week.
Pound (1.2167) trades just above the interim support of 1.2150 so far but the major downtrend remains strong and it is not clear if the expected consolidation in 1.2150-1.2300 will take place or the decline will continue towards 1.20 levels.
Aussie (0.7518) has come down from 0.7630 levels as expected but the volatility hasn’t come down as thought previously. A break below 0.75 can open up lower targets of 0.7350-00 levels in the near term.
Dollar-Rupee (66.70) is trading at 66.80 in the NDF market. Support comes at 66.60-50 and resistance at 66.95. Bias turning neutral from strong bearish and prefer to play the range till a breakout on the upside which may come soon, within the next 1-3 trading sessions.
INTEREST RATES
Going into the ECB Meeting today, the German Yield Curve (German 10-2 Yr spread, 1.229%) is steeper than the US Yield Curve (US 10-2 Yr spread, 1.21%). If this were to correct, it would imply that the German near-end may rise more than the US near-end. If so, the German-US 2 Yr Spread could try and find a bottom.
The US 5Yr (2.10%), 10YR (2.56%) and the 30Yr (3.15%) are trading higher than previous levels of 2.07%, 2.54% and 3.14% respectively and may continue to rise for the next 2-3 sessions.
The US-UK 10Yr (-1.35%) and the Pound are moving closely and looks bearish for the near term. This may indicate that the Pound may soon target levels of 1.21-1.20.
Looking at the sharp rise in the US-Japan 10YR (2.48%), we could possibly see a rise in Nikkei and Dollar-Yen in the near term. But that could be short lived as there is resistance on the 10YR spread near 2.52/53% levels from where a fall may be expected in the medium term.
