STOCKS
Minutes from the FED yesterday aided to losses on the US stocks. The unwinding of the $4.5 trln balance sheet indicated in the minutes may lead to more rate hikes this year. Sharp rise seen in Shanghai today while Nikkei seems to have set out on making fresh 4-month lows in the near term.
Dow (20648.15, -0.20%) rose to 20887 yesterday before coming off to close at 20648. As mentioned yesterday, it is trying to move above 20800 but is possibly unable to sustain at those levels. Broadly we may look at the 20980-20400 region to hold in the near term A break on either side would be crucial to decide on further direction. For now some sideways movement is expected.
Dax (12217.54, -0.53%) is trading just above immediate support near 12200. In case that holds, we may see a bounce back towards 12400-12500 levels else a further dip to 12100-12050 is possible before a bounce is seen. Note the resistance on the 3-day candle is holding well for now and indicates a sharp dip in the near term.
Nikkei (18597.51, -1.40%) has shown its very first break out on the downside from its broad sideways consolidation since Dec’16. The 4-month long sideways consolidation seems to have initiated a resolution on the downside by breaking the crucial support near 18650/18600 levels. In case the index sustains below 18600, we could see a fall towards 18200 in the coming sessions. We need to wait and watch for more confirmation.
Shanghai (3276.99, +0.20%) rose sharply nearing immediate resistance near 3300. It could come off from 3300 in the near term.
Nifty (9265.15, +0.30%) is rising as expected and could test 9280-9300 in the coming sessions.
COMMODITIES
Nothing new to add. Gold (1253) and Silver (18.27) are going nowhere as they keep trading in the narrow range of 1237-1263 and 17.94-18.50 respectively, which may continue for some days. Global cues are in favor of gold and silver too as the break below 99.70 for Dollar Index (100.37) could be resulted in good gains for bullion. We have been expecting 1237 for gold and 17.90 for silver to hold for now and gradual buying at lower levels can’t be ruled as buyers are taking every dip as a further opportunity for buying.
Copper (2.66) found support at 2.65 levels in the near term. While 2.65 hold, a bounce to the interim resistance 2.70-72 can be seen. Only above 2.70-72, higher resistances of 2.80 can come into consideration. In the medium term 2.55-57 are going to be a strong support now and the chances of a close above 2.70 have increased.
According to EIA, U.S. weekly crude inventory rose by 1.6M barrels and as a result Brent (52.82) and WTI (50.86) has fallen from their resistance levels of 53.45 and 51.70 respectively. The trend is bearish in the near to medium term time frame. Any corrective bounce may face selling pressure at the higher levels. Increase in U.S. oil inventories is raising a concern whether the United States will remain the world’s biggest oil importer, which is a price supporting indicator, or if its soaring production and bloated stocks lead to lower imports and trigger shipments to the rest of the world, which would weigh on oil markets.
FOREX
The Fed minutes didn’t have any impact in the markets as Dollar continues its rest mode. The Indian markets may move after the RBI meet conclusion today, though no change in rates is expected. Need to see what the central bank says about liquidity and inflation outlook.
Dollar Index (100.50) has been closing exactly at the day’s opening level for the last 4 sessions which indicate total indecision but the lack of selling pressure at the higher levels may push it higher towards 101.00-35 in the next few days.
Euro (1.0671) is in a consolidation mode after the sharp decline last week but the near downtrend may resume next week for the target of 1.0600-0580.
The downside resolution of Nikkei (18597.51, -1.40%) from its 4-month range (Check Equities section) indicates further possible weakness for Dollar-Yen (110.50) but the pair is still holding above our support of 110.10-109.90. These conflicting signals suggest wait and watch for 1-2 sessions though the major trend remains down.
Pound (1.2477) is forming Triangle pattern in the near term, signaling a major expansion of volatility coming by the end of the next week but for a significant trending move, a breakout from the range of 1.2350-1.2600 is required.
Aussie (0.7541) has now achieved our target of 0.7530 and as discussed yesterday, may bounce towards 0.7650-80 in the coming days if 0.7530-00 holds.
Our Resistance at 65.20 mentioned yesterday morning has held well and Dollar-Rupee (64.87) has indeed dipped below 65.00 again and has chances of falling further towards 64.80. Should that break, then levels of 64.60-40 would come into focus.
INTEREST RATES
The FED minutes released yesterday indicated that the officials want to start unwinding the central bank’s massive $4.5 trillion balance sheet this year. This could possibly indicate some more rate hike on its way this year. The current probability of a 75bps rate hike in the 3rd May policy meet is at 96%. The US yields have dipped slightly but while the immediate support below current levels hold, we could see a bounce in the near term.
The US-Japan 10Yr (2.27%) is an a crucial point trading just near the previous low seen in end-Feb. If that holds and is able to produce a bounce, it could prevent further fall in Dollar-Yen and Nikkei but in case it breaks on the downside, we will have to look at further downside levels. Wait and watch for more confirmation.
The 10YR GOI (6.8724%) is holding above immediate support near 6.83% and while that holds, we could possibly see a rise back towards 7% in the near term. In that case some weakness in the Rupee could be expected in the near term.
