STOCKS
Profit-taking action in most indices. Not very pronounced at the moment, but can gather more steam while important Resistances hold.
Although the Dow (24575.62, +171.14, +0.70%) recovered a bit yesterday after falling a goodish bit the day before, it has good Resistance near 25000 over this week and the next. Could trigger a profit-taking dip towards 24000.
The DAX (11071.54, -18.57, -0.17%), Nikkei (20506.81, -86.91, -0.42%) and Shanghai (2582, +0.07%) also have important Resistances overhead at 11300, 21000 and 2600-60 region respectively. Unless these are broken conclusively, they can push the markets down a bit over the next few weeks before fresh buying emerges at lower levels later on.
Both the Sensex (33108.47, -336.17, -0.92%) and Nifty (10831.50, -91.25, -0.84%) saw a decent dip yesterday, to test near term Supports on the Daily Candles. They might see a small bounce today, but as mentioned, It might be prudent to budget for a corrective dip towards 34000 and 10500 on the Sensex and Nifty respectively in the medium term.
COMMODITIES
The API reported an inventory build of 6.55 mln barrels for the week ending 18th Jan’19 against expectations of a small draw of 42,000 barrels. The US EIA report on crude inventories is due today. Crude prices could trade lower during the day.
Brent (60.94) and WTI (52.41) seem to be holding well below the immediate daily candle resistance near 64 and 56 respectively. While the respective resistances hold, a fall towards 58 and 50 is possible.
Gold (1282.60), Silver (15.36) and Copper (2.6585) are trading lower today.
Copper could possibly hold above 2.65 and bounce back towards 2.70/75 levels in the near term. The price is trading in between the broad 2.55-2.75 region. Failure to hold above 2.65 could pull it to 2.60/55 levels.
Gold, if breaks below 1280, could test 1270-1260 on the downside. 1300-1290 may hold for the near term keeping the price low. A possible weakness in Dollar (refer to Forex section below) could boost a rise in Gold back towards 1290 but we may not expect a rise above 1300 just now. Silver may hold above 15.25.
FOREX
Some weakness in Dollar is expected while Pound, Euro, Yen, Chinese Yuan may see some immediate strength against the US Dollar. ECB Meeting is due today.
Dollar Index (96.10) has dipped a bit while Euro (1.1385) has moved up and is trading above our mentioned support at 1.1350. Euro could trade in the 1.15-1.1350 region for another 1-2 weeks before a sharp move is seen on either side of the range. On the Dollar Index chart, there is immediate resistance near 96.50 which is holding for now. If it continues to hold in the next few session, we could see some weakness in the Dollar Index towards 95.50 or lower. Also the 13-Week Ma is currently holding as resistance on the Dollar Index line chart.
Dollar Yen (109.56) is almost stable. The trend support seems to be holding well as seen on the 3-day line chart. Slow and gradual rise to 110.5-111.0 levels is a possibility in the medium term. Watch Nikkei, as the resistance near 20900-21000 if holds (Refer to Stocks section above and see weekly candles) could bring down Nikkei just now indicating some Yen strength in the very near term.
Pound (1.3074) has surprised by rising above 1.30 but could soon face rejection from 1.31 resistances as seen on the 3-day line chart. A fall from 1.31 could pull it back towards 1.29-1.28 levels. Only on a sustained break above 1.31 would we look at bullish possibilities of rising towards 1.33/34.
Aussie (0.7127) daily line chart shows a slight bounce from the 21-Day MA and could see some bounce just now to 0.7150/60. While above 0.7050-0.7100, there is scope for rising to 0.73 in the medium term.
USD-CNY (6.7850) has been trading lower for the last couple of sessions and could test support at 6.75 before bouncing back from there towards 6.80. Immediate view is bearish towards 6.75, followed by a bounce thereafter.
Dollar Rupee (71.3450) rose from 71.14 to 71.36 yesterday and closed near the day’s high yesterday. Immediate trade is seen in the 71.10-71.40 region while we may expect an upside extension to 71.60. We could possibly see a re-test of 71.15 today. Break below 71.10 or above 71.40/60 would be crucial.
INTEREST RATES
The US 30yr (3.06%, down from 3.07%) has good Resistance in the 3.08-3.10% region and has chances of dipping towards 3.00%. The 30-5 Spread (0.48%) and 30-10 Spread (0.31%) could dip down towards 0.43% and 0.28% respectively. In effect, the 5Yr (2.58%) and 10Yr (2.75%) might not dip as much as the 30Yr and the Curve may flatten a bit.
Contrary to our expectation of a dip, Japanese Yields have actually moved up by an average of 1bp across the Curve yesterday. The 10-5 Spread (0.16%) has Support near current levels and has room to move up towards 0.22% in the longer term. So, maybe we have to look at Japanese Yields a little more carefully, whether they can actually rise a bit.
The 10Yr GOI (7.5774%) rose back a little yesterday, but has remained below 7.59%. It is looking ranged between 7.55-65% in the near term.
