STOCKS
The first FOMC meeting of Trump is going to be important as people have mixed views of what the new era has in store. For Indian investors, the Union Budget could trigger the next course of movement in the Nifty.
Overall equities are in a corrective mode and have fallen sharply in the last couple of sessions. But while the immediate supports hold, we could expect a bounce back to higher levels in the near term. The next couple of sessions would be important.
Nifty (8561.30, -0.83%) fell ahead of the Budget and could possibly bounce back from support near 8500. A break below 8500, could make it vulnerable to a fall towards 8300.
Dow (19864.09, -0.54%) has fallen as expected and could test immediate support at 19720. A bounce from 19672-19720 levels is expected in the near term.
Dax (11535.31,-1.25%) has fallen sharply and is heading towards the 11400 support. Although the price momentum looks very strong just now, in case it breaks below 11400, the correction could be deeper than expected and pull down the index towards 11200. But while 11400 holds, we remain bullish for the medium term.
Nikkei (19040.74) recovered a bit yesterday from levels near 18916. As mentioned yesterday, the 18800-18700 support levels could produce a bounce back towards 19260.
Nifty (8632.75, -0.10%) was almost stable yesterday and could trade within the 8600-8700 region today also. Some volatility may come into the markets after the Budget tomorrow.
COMMODITIES
Gold, Copper and Silver are trading higher on fresh weakness in the US Dollar but there is hardly any movement in the Crude prices. We could possibly expect the Crude prices to remain stable for a few more sessions before giving any further directional cue.
Gold (1210.53) and Silver (17.50) shot up on fresh Dollar weakness and if the Dollar Index doesn’t move back from support near 99.00/50 just now, we could see the Gold prices move up towards 1220-1230 levels.
Brent (55.40) and WTI (52.69) are almost stable and no clarity is visible on immediate direction. We need to see if the FOMC meeting tonight brings any major impact on the crude prices.
Copper (2.7225) has risen in line with our expectation and could test resistance near current levels. A break above 2.75 could turn bullish in the near term taking the prices towards 2.80-2.85 levels, sooner than expected. But while 2.75 holds, we could see a dip back towards 2.60 in the coming sessions.
FOREX
Words from the US Trade Adviser that Euro is significantly undervalued has undermined Dollar strongly and boosted the majors.
Dollar Index (99.65) has suffered a strong decline and it is now testing the major support zone of 99.50-00. The FOMC announcement tonight is expected to set the near term direction but the Dollar bulls need 99.50-00 to hold to keep any bullish possibilities open. On the other hand, a break below 99.00 may damage the technical structure considerably and open up much lower levels till 97.00 in the medium term. Inflection point.
Euro (1.0797) has overshot our target of 1.0750 much sooner than expected as it got a boost from the US Trade Adviser and now faces the higher target/resistance area of 1.0820-50.
Dollar-Yen (113.04) broke below our support of 112.50 temporarily but the quick bounce back helped it to get above 113 once again. It needs a break above the resistance of 113.40 to negate the immediate bearishness and open up 114.00-50.
Pound (1.2566) tested the major support of 1.2400 and recovered strongly. The strong bounce has strengthened the near term bullishness and now it may rise further towards 1.28 in the next few sessions.
Aussie (0.7553) has been resisted twice by the resistance of 0.7600-10 and the upside cap may push it towards 0.7400 in the coming days with a break below 0.75 required to confirm the downtrend.
Contrary to expectations, Dollar-Rupee (67.87) is trading at 67.49 at the NDF, below our near term target/support of 67.70-60. Below the immediate support of 67.40, the decline may extend to 67.25 but a lot of intraday volatility is expected today during the Budget presentation. Prefer to wait and watch.
INTEREST RATES
It is interesting to see that Euro (1.0797) continues to rise despite the German-US 2 Yr yields differential (-1.92%) coming down in the last few sessions and German-US 10Yr (-2.04%) stable just below the resistance of -2.00%. Unless these differentials turn up and rise in the near term, it may be difficult for Euro to sustain the higher levels.
US 30-Yr (3.08%) is stable in the range of 3.00-3.20% with the 5Yr (1.93%) sustaining above the near term support of 1.75%. With the 10Yr (2.48%) close to the immediate support around 2.45-40% too, the sideways phase for the US bonds may continue for the next few sessions even after the FOMC announcement tonight.
With the 10Yr GOI (6.54%) still unable to rise above the major resistance of 6.60-65%, the chances of the yields coming down and strengthening Rupee to a certain extent can’t be ruled out.
