STOCKS
Dow (21753.31, -1.07%) fell sharply, in line with our doubts as mentioned yesterday. The effort to rise towards 22000 in the last 4-sessions has been invalidated in a single session yesterday, the most important issue being the geopolitical tensions with North Korea. However, the index may not break below 21675 just now and could see some recovery in the coming sessions. A break below 21675 would be an indication of a fresh fall for the medium term.
Dax (12123.71, +0.18%) tested 12200 on the upside but came off from there to close at 12123. Note that 12200-12300 region could be a decent resistance that could push the price back towards 12000 or lower in the near term.
Nikkei (19312.25, -0.38%) is trading at lower levels. There is a fair chance of eventually moving down towards 19100-19000 levels in the next few sessions. Near term looks bearish while the US-Japan 10YR differential (2.05%) is headed lower towards 1.9%. Dollar Yen could also continue to ove down if Nikkei and the yield spread falls sharply.
Shanghai (3366.17, -0.54%) could be trading within 3385-3350 levels for a few sessions, continuing to consolidate sideways.
Nifty (9952.20, +0.40%) was almost stable yesterday and as mentioned yesterday, could be trading within 9850-10050 region in the near term. Unless we see a break below 9800-9750, we remain bullish for the medium term.
COMMODITIES
Gold (1344) moved marginally higher as Dollar index failed to hold 92.50 levels and came down at 92.29 regions. Immediate trading range for Gold is 1280-1350 with an interim support at 1335. Gold is overbought in near term thus we are doubtful on the sustainability beyond 1350-55 regions . Similarly Silver (18.00) has also broken its resistance of 17.95 and heading towards 18.25 and 18.50 regions respectively, but it might face some rejection at 18.25 due to overbought condition. In the medium term, both Gold and Silver are out of their short term bearish channel but the supports of 1280 and 16.90 should hold to keep the bullish momentum intact.
Copper (3.138) moved marginally lower but it is still trading above its immediate support of 3.11-12 levels . The only concern in the short term overbought condition which could be resulted short term profit taking anywhere between 3.12-3.26 levels. But we will remain bullish on copper while it is trading above 2.88 levels in the medium term time frame.
Oil Price moved higher but both Brent (53.14) November contract at ICE and WTI (48.56) October contract at COMEX are trading within the ranges of 50-53.47 and 45.60-50.40 respectively. We will be bullish on the energy pack while Brent and WTI are trading above 52 and 48 regions respectively. We have U.S. Weekly oil inventory tomorrow which may add some more clarity into the price action.
FOREX
Dollar Index (92.31) is a stones’s throw away from our target of 92.00. But, watch Resistance at 92.67 and 93.00 now. The downtrend since December could start unraveling if these are broken.
Although the chances of the Euro (1.1913) rising to 1.20 are still valid, the strength of the upmove could be waning. We have to keep an eye on Support at 1.1870-50 now. Need some carefulness here. Dovishness from Draghi tomorrow could lead to some Euro weakness.
The Euro-Yen (129.50) has come down to our target of 129.45. Now we need to see if the medium-term Support at 129.00 cited yesterday holds good or not. If it holds, we may see a fresh rise towards 131+ going into next week. But, there will be trouble if this Support breaks.
Strength in the Yen (108.70) emanates from the ongoing North Korean issue, which is also reflected in Gold rising to 1344. At the same time, there can be a hope of a rebound in Dollar-Yen if and while the horizontal Support region of 108.25-15 holds. Break thereof, however could be quite bearishness. Need to be very careful here also.
Sharp rise in the Pound (1.3035), breaking out of the indecisive range it has been in over the last few days. This could be significant. A Week Close above 1.30 could lead to a rise to 1.33.
Satisfying rise in the Aussie (0.7994), which saw a high of 0.8028 yesterday. Chances of eventual rise to 0.81 remain valid while above Support at 0.7950 now.
A bit of consolidation coming in on the Chinese Yuan (USDCNY = 6.5321) which bounced a bit from a low of 6.5150 yesterday. Dollar-Rupee (64.1225) may trade between 64.10-20 for some more time, but weakness in Equities could pull it abover 64.20. Be careful.
INTEREST RATES
Contrary to our yesterday’s view, US T Bond yields moved lower along with the benchmark US 10Yr yield (2.06%) yesterday. the 10Yr yield might touch 1.97% as it is trading below 2.08 regions.
EUR/USD is hovering around 1.1900 levels as the German yields has been dipped along with U.S, keeping The German-US 2 Yr Spread (-2.10%)is stable at current levels.We have ECB press conference tomorrow at 6.00 pm IST, which may add some clarity towards the future price action in Euro.
Although not much movement has happened on the German-US 2Yr (-2.08%), the German-Us 10Yr (-1.73%) has risen sharply from channel support and looks strongly bullish just now. In case the spread continues to rise towards -1.70% or higher, it could pull Euro along to higher levels too. Watch the 10Yr spread closely.
Japan 10Yr yield (0.02%) has risen sharply by 2bps while the 30Yr (0.80%) and the 5Yr (-0.14%) are almost stable ust now with no directional clarity.
The US-Japan 10Yr differential (2.05%) has fallen sharply from interim resistance levels, in line with our expectation mainly due to fall in the US 10Yr yield. The spread could head towards 1.9% in the coming sessions indicating a fall in Dollar Yen and Nikkei too in the next few sessions.
The UK 5Yr and 30Yr Gilt Yields (5Yr 0.46% and 30Yr 1.62%) are maintaing their bullish momentum sice last few days.The UK 10Yr (1.07%) is also hovering around its crucial resistance of 1.07-08% levels and a close above that could open up 1.25 levels in medium term time frame.
