STOCKS
Major global indices continues to remain bullish and has room for further rise in the short term. On the domestic front, though the Sensex and the Nifty 50 opened on a nervous note yesterday after the air-strike on terrorist camp, it has bounced sharply from the day’s low thereby keeping the bias positive for further upmove in the coming days.
Dow Jones (26,057.98, -33.97, -0.13%) though sustaining above the psychological level of 26,000 seems to be lacking strong follow-through buyers. A break below 26,000 can take the index lower to 25,800 and 25,750. On the upside resistance is around 26,300 which has to be broken for a further rally.
DAX (11,540.79, +35.40, +0.31%) continues to inch higher and keeps the bullish outlook intact for a test of 11,700 and 11,750.
Nikkei (21,553.22, +103.83, +0.48%) fell breaking below 21,500 yesterday but has bounced back sharply again. This keeps the bias bullish for a rise to 22,000 in the coming days. A strong close above the 100-day moving averag at 21,558 will pave way for this rally.
Shanghai (2,963.21, +21.70, +0.74%) tested the psychological 3000 mark yesterday and has come-off from there. As mentioned yesterday 3014 (50% Fibonacci retracement level) and 3053 (100-week moving average) are the crucial resistances which can halt the current rally and can trigger a corrective fall to 2900-2850 or even lower levels going forward. A strong break and a close below 2940 can trigger this corrective fall.
Sensex (35,973.71, -239.67, -0.66%) and the Nifty 50 (10,835.30, -44.80, -0.41%) has bounced sharply from the day’s low recovering most of the loss on Tuesday. Though the daily candle on the sensex is indecisive, the Nifty 50 looks positive. The Nifty has reversed higher from a key trendline support level of 10,730 and keeps the outlook bullish for a test of 10,950 in the coming days. Sensex has an intermediate support at 35,900 and while it sustains above it an upmove to 36,450 and 36,500 is possible in the short term.
COMMODITIES
Gold remains stable and Silver looks vulnerable for an intermediate dip within its broad sideways range. Copper remains bullish but can see a corrective dip before moving further higher.
Key supports on the WTI and Brent Crude oil are holding well now and the prices have bounced after testing them. A near-term upmove looks possible in oil.The American Petroleum Institute (API) reported a surprise draw in crude oil inventory of 4.2 million barrels for the week ending February 22, against the analyst expectations of crude oil inventories to build by 2.842 million barrels. This has added on to a rise in the crude prices apart from the technical supports seen on the charts.
Gold (1328) continues to trade within the narrow 1320-1335 sideways range. The view remains the same. Gold can trade broadly in the 1320 and 1340 range and a breakout on either side of 1320 or 1340 will decide the next move.
Silver (15.75) has come-off in the Asian session today from around 15.9. Support is at 15.7 a break below which can drag silver to 15.6 and 15.55
Copper (2.95) oscillates around and remains bullish for a rise to 3 and 3.02. However, a dip to 2.92-2.90 cannot be ruled out before we see a further rise.
WTI (55.9) is holding above 55 and has bounced slightly. An upmove to 57 and 58 looks possible again. The 21-day moving average at 54.81 is a key support to watch and the WTI will come under pressure only if it breaks below this support.
The 65-64 support cluster seems to be holding well for Brent (65.5) which has bounced from around 64.35 yesterday. While above 65, a rise to 67 and 67.5 can be seen again in the near term.
FOREX
The FED would be patient about further changes to policy just now and wait for things to clarify. Markets were majorly unmoved after his testimony yesterday. Powell is due to appear before the House of Representatives Financial Services Committee today.
Dollar-Index (96.12) has been stable without any major movement yet. Sideways consolidation within 96.25-96.75 is possible with possible extension to 96 and 97 on either side. We could soon see a sharp break on either side to bring some clarity to further direction.
Euro (1.1381) has been fairly stable too, inching up slightly towards 1.14. Note that 1.1450-1.1400 is an important near term resistance and could keep Euro lower. There is room on the downside towards 1.12-1.11 that could be tested while 1.1450 holds. Keep an eye on the German-US 10YR (-2.51%) which if breaks above the immediate resistance could be indicative of bullishness in Euro.
Euro-Yen (125.83) is stable. We continue to look at resistance at 126 from where a dip is expected. Break above 126 would open up 126.80-127.00.
Dollar Yen (110.56) has come off from immediate resistance at 111.00/50 on the daily chart and while that holds, we could see the fall continue in the next few sessions towards 110 or lower. Also the US-JGB 10YR (2.66%) has scope of falling towards 2.6% which could indicate a fall in Dollar-Yen given to positive directional correlation between the two. At the same time possible rise in Nikkei towards 22000 is to be kept an eye on.
Pound (1.3247) has risen sharply but has immediate resistance at 1.33. Similar resistance is seen on the UK-US 10YR (refer interest rates section below) which if falls could pull down Pound towards 1.30.
Aussie (0.7182) is trading below resistance zone of 0.72-0.7250 and could come off soon from here towards 0.7100. While Copper looks bullish towards a rise to 3 (refer Commodities section above), Aussie could move up too in the near term.
USDCNY (6.6919) has risen above 6.69 and while that holds, a test of 6.70/72 levels on the upside looks possible.
Dollar Rupee (71.07) is trading within the narrow 70.80-71.50 region. While we prefer a fall below 71 in the near term, there is some scope of re-testing immediate resistance levels of 71.35/50 again.
INTEREST RATES
The FED is in no rush to make any judgment about further changes to the interest rates. In his testimony, he elaborated on the conflicting signals that the FED has tried to put forth in the recent weeks in contrast to the strong signals of low unemployment and higher wage growth. The recent retail sales figures have been disappointing but overall slower growth overseas could drag on the US economy, said Powell. The FED would remain patient with the policy and wait for things to clarify.
Powell is due to address the House of Representatives Financial Services Committee today.
The US yields dipped slightly. The 2Yr (2.48%), 5Yr (2.45%), 10Yr (2.63%) and 30Yr (3.01%) are down from yesterday’s levels of 2.50%, 2.46%, 2.66% and 3.02% respectively. As mentioned yesterday, we continue to look for a fall in the yields in the next few sessions towards supports near 2.44% (5YR) and 2.95% (30YR). The 10Yr has fallen to our expected 2.63% and could now move down further to test 2.60% before bouncing from there.
The US-JGB 10Yr (2.66%) has fallen from 2.68% and could move down a bit towards 2.60%. The yield spread has not been moving up in line with the rise in Dollar-Yen in the recent weeks. If the yield spread does not move up from current levels and fails to rise from 2.60%, we could see a sharp fall that could pull down Dollar-Yen with itself in the near term.
The UK-US 10YR (-1.55%) has risen sharply and could test -1.50% in the near term but note that there is resistance at current levels on the medium term chart coming from Sep’17 and Dec’18. While that holds, upside could be restricted just now.
The German-US 10YR (-2.51%) seems to be breaking above the important resistance and if the rise sustains, it could be a crucial indicator of a rise in Euro in the near term. On the flipside, a fall from here immediately would favor Euro to come off from 1.14-1.1450 levels.
