STOCKS
A key development in the US-China trade talks over the weekend has given a boost to the Asian Indices to begin the week on a strong note. The US President’s tweet on Sunday for extending the March 1 deadline of new import tariffs on the Chinese goods has triggered a strong surge in the Asians today and is likely to drive the global equities higher through this week. Though some indices like the DAX and Nikkei have resistances near current levels, the bias is positive for them to breach and move higher along with the other major indices.
Dow Jones (26,031.81, +181.18, +0.70%) has risen above the psychological level of 26,000. The outlook is bullish for a test of 26,250. Only a decisive close below 25,900 will turn the view negative for a fall to 25,650 and 25,600.
DAX (11,457.70, +34.42, +0.30%) tested the key resistance level of 11,500 and has come-off slightly from there. While below 11,500 a dip to 11,300 and 11,200 is possible in the near term. But the bias is bullish for an eventual break above 11,500 targeting 11,750 or even higher levels over the medium term.
Nikkei (21,572.11, +146.60, +0.68%) has a resistance near current levels at 21,600 (the 100-day moving average). A strong break above it can take the index further higher to 21,940 and 22,075 in the coming days.
Shanghai (2,878.66, +74.43, +2.65%) has surged breaking above the 200-day moving average resistance (2,756) on Friday and is retaining the momentum. Currently trading near 2,880, a break on the upside could take it higher towards 3,000. Support is seen at 2,730.
Sensex (35,871.48, -26.87, -0.07%) and Nifty 50 (10,791.65, 1.80, 0.02%) traded in a narrow range and closed on a flat note on Friday. While the sensex looks mixed on the charts, the bias on the Nifty 50 is positive for a rise to 10,860 and 10,890 in the near term. As such Sensex is also likely to move up along with the Nifty 50 and test 36,100 and 36,150.
COMMODITIES
Rally in copper gains momentum and the outlook remains bullish for further rise. Gold and may remain range bound for a few days and can rise within the range in the near term. Oil seems to lack fresh buyers and can see a corrective dip in the near-term with the overall uptrend.
Gold (1330) is holding above its support at 1,320. A sideways move between 1320 and 1340 can be seen for sometime. Within this range, a rise to test 1340 is possible in the near term. A breakout on either side of 1320 or 1340 will then decide the next move. Silver (15.95) is bouncing from its support at 15.80 and can revisit 16.2 levels again. A range bound move between 15.8 and 16.2 is possible for some time.
Copper (2.95) has surged breaking above 2.92 and has closed on a strong note last week. As mentioned on Friday, with a double-bottom reversal pattern, the medium-term outlook remains bullish for a test of 3.2 and 3.25.
WTI (57.2) seems to be getting rejected from near 58. A dip to 56 and 55 is possible in the near term. Even a test of 54 cannot be ruled out in the coming days while WTI remains below 58.
Brent (67) has come-off from its high of 67.7. A near-term dip to 66 and 65.5 is possible. Strong support is between 65 and 64.5. While above this support region, the short-term outlook will continue to remain positive for a test of 68 and 70.
FOREX
Big movement in Dollar-Yuan. Euro indecisive. Dollar-Yen tilts towards bearishness. Aussie might see temporary uptick within overall downtrend. Rupee might be stable/ strong.
Three days of indecisive sideways movement in the Euro (1.1339). Dollar Index (96.48) also stuck between 96.25-00 on the downside and 97.00-25 on the upside. Longer term charts favour strength for Dollar Index towards, but that is yet to show up in the price in the near term.
The German-US 2Yr Spread (-3.06%) and 10Yr Spread (-2.57%) both look potentially bearish, suggesting downward pressure for the Euro.
That both Dollar-Yen (110.61) and Euro-Yen (125.41) have found decent Resistances at 111.00 and 126.00 respectively over the last three days and could dip towards 110.00 and 125.00 in the near term also suggest downward pressure for the Euro.
Although the Aussie (0.7135) bounced a bit on Friday, the medium term might be bearish towards 0.7025 while below 0.7200-7250 and while Gold (1333.50) remains below 1350-60.
Dollar-Yuan (6.6883) has fallen sharply today on optimism about the US-China trade talks, which has also pulled the Shanghai sharply higher. USDCNY has broken below significant support at 6.69 and may well test 6.65-63 on the downside in the near term. The 6.69-70 region will now become a significant Resistance.
Dollar-Rupee (71.1450) is quoting lower near 71.01/06 on the NDF market after closing at 71.1450 on Friday.
INTEREST RATES
Jeremy Powell’s Congressional testimony over Tuesday-Wednesday, which might be anticipated to be dovish only, unless he happens to get swayed by the recent sharp increase in the Dow and Crude.
The market itself seems to be a bit confused. After recording a good rise on Thursday, possibly breaking downtrends that were in place since Nov-18, US yields dipped a back a bit on Friday. Our own longer term chart studies suggest room on the upside for US yields.
NOTE that US Libors have been falling steadily over the last several weeks, alongwith the overall dip in US yields. Now we need to see if they will move up as US Yields move up a bit.
Indian 10Yr GOI yield (7.6046%) saw a sharp rise on Friday, contrary to our expectation of a dip, and the Indo-US 10Yr Spread (4.9256%) also rose as a result. We will be keen to see if Yields fall back today or not. The highest we have seen so far is 7.6817% on 5th Feb.
