STOCKS
Dow (22268.34, +0.29%) looks strongly bullish just now and has been rising fast targeting 22400-22500 levels in the near term. Dax (12518.81, -0.17%) on the other hand is stable below 12600. A break on the upside could take it higher towards 12750-13000 levels in the coming sessions.
Nikkei (19909.50, +0.52%) could test 20050 on the upside before again coming off from there. Near term looks bullish followed by a dip or sideways consolidation for sometime. While Dollar Yen trades higher, Nikkei could continue to remain bullish in the near term.
Shanghai (3364.14, +0.31%) has bounced back from levels near 3350 and while that holds, we may see a rise towards 3400 in the near term. A break below 3350, if seen could take the index lower towards 3325. Need to watch price action at current levels.
Nifty (10085.40, -0.01%) could possibly remain trapped within 10050-10140 region for a couple of more sessions. Thereafter preference is for a fall towards 9950 before again rising afresh towards 10150.
COMMODITIES
Brent (55.72) has been rising in line with our expectations and could rise towards 56.65 in the coming sessions. WTI (49.91) is stable just now and could possibly trade sideways for a couple of sessions before moving up towards 51. Near term is likely to remain bullish.
Gold (1318) and Silver (17.598) have risen slightly compared to previous levels. But overall the precious metals do not look very strong just now. For Gold 1320-1315 levels are important and if it breaks on the downside, we may expect a test of 1300-1296 in the coming sessions. Silver is also testing support at current levels. While that holds, the price could bounce back towards 17.50-18.00 else we will have to focus on lower levels.
Copper (2.98) is trading at immediate support near 2.95. In case that holds, we may expect a bounce back towards 3.05 or even higher. Watch price action near current levels.
FOREX
Dollar Index (91.85) pushed lower by strong rise in the Pound (1.3596) and stability in the Euro (1.1949) despite weakness in the Yen (111.21).
As expected, the Euro (1.1949) rose again on Friday, seeing a high near 1.1987. Two possibilities from here – either further sustained rise past 1.2035-50, or range trade between 1.2000 and 1.1850. The first three days may be quiet, waiting for the FOMC on Wednesday.
Further strong rise in the Pound (1.3596) on Friday to a high of 1.3616, breaking strongly above our projected resistance at 1.3415-65. We’re not sure where the Pound will go from here, but it would be good to watch Resistances on the UK Gilt yields (see Interest Rates below) for clues.
Dollar-Yen (111.21) rose past our projected range high of 110.70 on Friday to a high of 111.33. Going forward, if it now rises further past 111.50, it would have potential to rise towards 113.50 as well. Otherwise, it could dip back to 110.50 or lower. Watch for a couple of days. Weakness in the Yen has pulled Euro-Yen (132.85) higher, past the resistance at 132 that was holding for most of last week. There is another crucial Resistance near the current level. Let us see how it behaves today.
The Aussie (0.8027) has obliged by moving up to our target of 0.8025. Look for further strength towards 0.8060 this week.
Dollar-Yuan (USDCNY = 6.5469) looks poised to rise towards 6.5750 enroute to 6.60, which may take some time. As expected, Dollar-Rupee (64.0750) continues to trade sideways and might even dip a bit towards 64.02 today on account of the dip in the Dollar Index.
INTEREST RATES
Although UK Gilts have shot up since last Thursday, after the BOE meeting, there are crucial Resistances near the current levels on the UK 10Yr (1.30%) and near 0.75% on the UK 5Yr (0.72%). These need to be watched for a couple of days at least. Note, at the same time, that the UK Libors have also moved up since Thursday.
The US FOMC comes up Wednesday and the BOJ meeting is on Thursday. For now, Resistance at 2.80% is holding well on the US 30Yr (2.77%) and the 10Yr (2.20%) is also not looking very perky. These depict the market’s lack of conviction about the Fed’s intentions to hike rates. However, given that the US CPI (1.93%) has moved up again and that Brent (55.73) trades higher, we would think that the Fed may be more likely to lean towards tightening, and even talk about balance sheet normalisation.
The Japanese 10Yr (0.01%) looks well set to continue to respect its long-term trend Resistance coming down from levels just below 1.90% in March 2008.
The German-US 10Yr Spread (-1.77%) continues to hold above -1.79%, and is supportive of Euro strength overall.
