STOCKS
Fresh 4-month lows seen in Nikkei, while Shanghai could see a short dip in the coming sessions. Dow may remain sideways while Dax looks bullish.
Dow (20591.86, -0.29%) came down slightly yesterday. 20500-20410 region is an important near term support zone. Some sideways consolidation is expected in the broad 20780-20410 region for the coming sessions.
Dax (12154.70, +0.13%) is holding above the 12049 support and could move higher towards 12400 in the coming sessions before seeing a sharp corrective fall.
Shanghai (3272.94, -0.03%) is trading along the upper end of the daily channel resistance. A fall towards 3250 is expected in the next few sessions.
Nikkei (18342.22, -1.13%) has been coming down in line with our expectations. A fall towards 18200-18000 is on the cards for the near term. This could also pull down Dollar-Yen in the coming sessions.
Nifty (9203.45, -0.36%) tested 9162 yesterday before losing above 9200. As mentioned yesterday the 9120/30 level is an important support and while that holds, near term looks bullish.
COMMODITIES
Our interim target of 1290-1301 is almost achieved with an intraday high of 1289 in Gold so far. A correction towards 1260-65 can be expected due to near-term overbought condition. We have been expecting 1260 for gold to hold as buyers are taking every dip as a further opportunity for buying. 1301 could be a level where the price action has to be checked to assess the chances of further bounce to 1328 to 1350 levels.
Silver (18.53) is hovering around its crucial resistance of 18.50-55 levels. Immediate trading range could be 18.30-19 but a close below 18.30 could open up 17.70 as well. We need to wait for confirmation for immediate directional clarity.
Copper (2.55) has been stuck in the range of 2.55-2.70, which may go on for some time. In the medium term 2.55-57 are going to be a strong support now but a close below that could open up 2.50 and 2.45 levels respectively. Gradual buying at 2.55 levels can’t be ruled out due to near term oversold condition.
Brent (55.83) and WTI (53.08) are trading within the range of 55-57 and 51.70-54.80 respectively. A decrease (-2.2M B) in U.S. weekly crude oil inventory could opened up higher levels of 57 for Brent and 54 for WTI. The trend is bullish in the near term time frame and any corrective fall due to overbought condition may add fresh longs at the lower levels.
FOREX
The US President sees the Dollar as too strong and China is no longer a currency manipulator, a 180 degree turnaround from the elections rhetoric heard just a few months back. These comments have triggered a massive selling in Dollar and have strengthened all the majors against Dollar across the board.
The grinding decline in Dollar Index (100.04) gathered downside momentum after Trump comments of Dollar being too strong. To keep the chances of any recovery open, the immediate support of 99.80 must hold and a rise above 100.40 has to materialize. Otherwise, the decline may extend to 99.00, a very important support.
Contrary to expectations, Euro (1.0674) bounced strongly instead of retesting the support of 1.0550. If it manages to rally above the resistance of 1.0700, then further rise to 1.0780 levels can be seen in the next few days.
Dollar Yen (108.83) keeps falling in line with expectations and now it is approaching the long term support area of 108.40-25 which may hold and trigger a bounce. In case, the support of 108.40-25 fails to hold, lower supports of 107.85-50 may be tested.
Pound (1.2563) has rallied strongly like the other majors on the back of Dollar weakness but the major resistance 1.2600 is expected to hold and keep it in the broader range of 1.2350-1.2600.
Aussie (0.7576), contrary to expectations, has bounced back in a very sharp manner as the Feb’17 employment data beat the expectations by a huge margin. If it sustains above the resistance at the current levels, may rise higher to 0.7640-75.
Dollar-Rupee (64.68) is trading at 64.52 in the NDF this morning. Despite repeated attempts yesterday, it failed to close above the resistance of 64.70 which increased the chances of sideways consolidation in 64.20-70 for the rest of the week as expected. As discussed previously, a breakout of this near term range might take place next week.
INTEREST RATES
The US yields have broken below the immediate support levels and are oversold at current levels. We may expect a bounce back in the next couple of sessions. The 10yr (2.23%) may be expected to recover from levels near 2.20%.
The US-Japan 10Yr (2.22%) has broken below the horizontal support levels after a initiation of a bearish signal in Nikkei. Together the yield spread and Nikkei looks bearish for the near term and could push down Dollar-Yen to lower levels. (Refer to currencies section)
The German-US 2Yr (-2.05%) and 10Yr (-2.03%) continues to move up and could test immediate resistance levels near -2% on both the yield spreads. A rejection is expected from -2% which could again bring in some weakness in the Euro.
The UK-US 10YR (-1.19%) is headed towards -1.13% in the near term from where a fall is expected. Pound could witness some sideways consolidation in the coming sessions followed by another down leg.
