STOCKS
Although the indices have risen in the near term, there are resistances overhead which poses threat for the medium term. If the resistances hold, the bears could gain strength and reverse the current uptrend. Need to be cautious at current levels.
Dow (25306.83, -0.579%) surprisingly fell from just above 25500 instead of moving up further. Especially after the long sideways range in the last 6-months, we had expected the index to gain bullish strength and rally towards 26000. We need to see if the index moves back in the next few sessions or falls below 25250 to resume range trade below 25250.
Dax (12798.20, -0.48%) has dipped slightly but is within a near term channel uptrend as seen on the daily candles. While support near 12700 holds, Dax could again move back to 12900-13000 in the medium term.
Nikkei (22470.58, -0.33%) has scope on the downside towards 22000 in the near term. But the index could spend some time in the 22200-22800 region before coming off to lower levels. Looking at the 3-day candle chart, Nikkei seems to making a medium term top followed by a sharp down move in the coming weeks.
Shanghai (2863.99, -0.18%) is trading just below resistance zone of 2950-2900 which is likely to hold and keep the index lower for the near term. If the resistance holds strong, Shanghai could come off towards 2800 or lower in the near term.
Nifty (11319.55, +0.37%) is nearing long term resistance near 11400-11500 region and if that holds, we could see a sharp correction from there towards 11000 or lower in the medium term. We advise to remain cautious and to keep a close watch of price action in the 11400-11500 region.
COMMODITIES
Nymex WTI (70.14, +0.01%) and Brent (75.44, +0.63%) have both bounced from support levels on the longer term charts and look bullish in the medium term. Brent could move up towards 78 while WTI may rise towards 72.
Gold (1229.920, -0.13%) is in a sideways range and may continue for some more time before it decides on further direction.
Copper (2.7925, +0.02%) may see a dip towards 2.70 before again rising back towards 2.90 in the longer run.
FOREX
Euro (1.1707): Euro again moved up yesterday, seeing a high near 1.1720. It could test resistance near 1.174 on daily candles today and then again dip back towards lower levels. Our expectation has been that the BoJ and FOMC meets this week could weaken the Euro (provided there is a hawkish tilt to both the Central Banks’ policy statements). If that happens, support at 1.1625-1.1600 could be tested in the next 2-3 sessions. A break of this support by next week is also a possibility.
Dollar Index (94.38): Dollar Index fell yesterday and is currently testing support near 94.30-35 on daily candles. We are currently expecting this support to hold and for the FOMC meet tomorrow to strengthen the Dollar Index. If that happens, a rise from current support towards 95.0-95.5 is likely. As mentioned yesterday, the 95.5-96.0 resistance zone is important and a breach above that is uncertain. If it happens, it could make the Index bullish for the next 1-2 months.
Dollar Yen (110.99): As markets await the BoJ policy (expected anytime now), Dollar Yen continues to trade quietly near the trendline support at 111. Higher up, there is crucial resistance near 112.5 on weekly candles. Lower down, there are interim supports at 110.5 and 110.0. If the BoJ initiates or indicates any sort of tightening to its monetary policy, then we could see Yen strengthen towards 110 in the next 1-2 sessions. Currently, this view is more preferred.
Euro Yen (129.93): Euro Yen could dip below support (129.75-129.50) on daily candles once again today, as the EURUSD is expected to move lower from resistance while Dollar Yen could also dip. A dip towards 1.16 and 110 for EURUSD and Dollar Yen respectively imply a target near 127.5 for Euro Yen. Crucial horizontal support on weekly line chart near 127 would have to be broken for medium term bearishness to be confirmed.
Pound (1.3120): The BOE meeting on Thursday is expected to see a historic rate hike, which seems to have been already factored in by the markets. Even though the broader trend for Pound looks bearish, we still need to see if Pound can decisively break below the 89 weeks MA (1.312) and then, below the horizontal support near 1.3050 on weekly candles. A break below these levels could even happen this week, in spite of the BOE policy release.
Dollar Rupee (68.675): Dollar Rupee is likely to trade sideways. A test of 68.50 could be expected while Nifty strengthens towards 11400
INTEREST RATES
Repeating yesterday’s comment: The FOMC and BoJ meetings will be crucial for yields. Last week’s surge in global bond yields was primarily due to rumours that the BoJ might be thinking of bringing in some tightening to its loose monetary policy. Any such indication in its policy today could lead to a further bond selloff, thereby raising US and Japanese yields. Moreover, the FOMC is expected to be hawkish (although a rate hike is not expected in this meet).
Japanese 10 year yield (0.09%) is still trading slightly above resistance on short-term chart. The breach of resistance could sustain if the BoJ indicates any tightening in today’s policy statement.
US 10 year yield (2.97%), 30 Year (3.10%), 5 Year (2.85%), 2 Year (2.66%):
The US 5 year yield has broken above horizontal resistance near 2.82%-2.83%. Moreover, the US 10 year yield might just break above 3% if the BoJ and FOMC both appear hawkish to the markets. The possibility of the US 10 year yield testing 2.85%-2.80% on the downside is now reducing.
German 10 year bond yield (0.45%) – The German 10 year yield is testing crucial resistance near 0.45% on short term chart and could dip from here. In case it breaches 0.45%, it could become bullish towards 0.55%-0.60%.
