STOCKS
Concerns of the global growth slowing down has taken back the center stage again after the European Central Bank cut its growth forecast yesterday. As a result the Asian equities are trading deeply in red following the sharp fall in the US equities overnight. This could weigh on the Indian indices today which have been moving higher over the last few days.
Dow Jones (25,473.23, -200.23, -0.78%) has declined decisively below the 21-day moving average support level of 25,695. This keeps the bearish outlook intact for a fall to 25,100 and 25,000 which we have been reiterating over the last few days.
After consolidating in a narrow range for a few days, DAX (11,517.80, -69.83, -0.60%) below the key resistance level of 11,550. While below 11,550, a fall to 11,350 is possible in the coming days.
Nikkei (21,142.75, -313.26, -1.46%) has tumbled below the crucial support level of 21,400. Next key support is at 21,000 will be tested in the coming sessions. A break below it can drag the index to 20,850.
Shanghai (3,034.15, -72.27, -2.33%) has come-off sharply from Thursday’s high of 3130. A test of 3,000 is possible. Whether it breaks further below 3000 or not will decide the next move.
Sensex (36,725.42, +89.32, +0.24%) and Nifty 50 (11,058.20, 5.20, +0.05%) moved further higher as expected. However, the daily candle for yesterday on the Sensex reflects indecisiveness. This chart pattern coupled with the sharp fall in the global indices could pull the Indian equities lower today. As such Sensex and Nifty 50 can test their key support levels of 36,500-36,480 and 10,980 respectively.
COMMODITIES
In spite of a sharp rise in the dollar index, commodities are trading stable and continue to consolidate within their broad sideways range. This is something interesting that indicates that further downside, though cannot be ruled out in the near term, could be limited. It also leaves the possibility high of the commodity prices reversing higher going forward. We will have to wait and see to get further confirmation on this.
Gold (1286) is continuing to hold above 1280. A strong break above 1290 can trigger a corrective rally to 1300-1303. However, the weekly chart is bearish and a fall to test 1275 and 1270 is still cannot be ruled out while gold remains below 1300.
Silver (15.02) has been inching lower slowly over the last couple of days. It looks vulnerable to break below the psychological level of 15 and fall to 14.85 in the coming days.
Copper (2.91) continues to consolidate between 2.89 and 2.98 as expected.
Brent (65.9) spiked to test 67 as expected yesterday and has come-off from there. A dip to 65.3 and 64.8 looks likely in the near term. The broader 64-68 sideways range remains intact. WTI (56.35) is stable within its overall 55-58 sideways range.
FOREX
Dollar-Index (97.56) rose sharply above 97 as Euro (1.1199) declined after the dovish ECB comments yesterday. The ECB announced fresh TLTROs starting in September while rates are expected to remain at current levels. Growth and inflation projections have been revised lower as expected.
US NFP data is due today. Consensus expectation is around 180,000 jobs added in Feb’19 after Jan’s figure of 304,000. The data released around expected figures could possibly have less impact on Dollar Index whereas a figure higher than expected could boost the rising momentum in the index. Overall technically, 97.70 is an important resistance level on the chart and while that holds, a corrective dip could be expected back towards 97.50-97.00 just now. A sustained break above 97.70, if seen would intimate fresh bullishness.
Euro (1.1199) broke below our expected support at 1.1250 falling towards lower support at 1.11. On the weekly candles, 1.11 is an important support which could produce a small bounce towards 1.1250-1.1300 again in the medium term.
Euro-Yen (124.89) broke below 125.70 on sharp decline in Euro. 124.40 is an immediate support on the daily candles which could hold; else the fall could extend towards lower support at 123. While Euro heads towards 1.11, Euro-Yen could test 123 on the downside before bouncing back from there.
Dollar Yen (111.51) is almost stable but is gradually tilted to fall towards 111 in the near term from where a fresh bounce back towards 112.5 is possible.
Pound (1.3094) has fallen below 1.31 opening chances of falling towards 1.30-1.2950 in the near term as mentioned yesterday. Interim support is visible at 1.3025 from where a small bounce is possible.
Aussie (0.7020) has dipped a bit too but is unable to decide further direction from here. A rise from here would enable a test of 0.7150 again; else we will have to consider a fall to 0.6950/30 before Aussie bounces back in the medium term.
USDCNY (6.7185) has risen back to re-test immediate resistance near 6.72/73. Unless a break above the resistance is seen, Yuan could strengthen towards 6.70/68 again in the near term.
Dollar Rupee (70.00) majorly trading near 70 yesterday, could possibly see a small bounce towards 70.15/20 today before again coming back to re-test 70.0-69.75 levels in the medium term. Scope of testing lower support at 69.80/75 remains intact for next week. For today the pair could trade above 70 with possible extension to 69.90 on the downside.
INTEREST RATES
The US yields fell sharply after the ECB said that it would delay its plan to hike interest rates and launch a program to stimulate banking lending in the Eurozone. The 2Yr (2.48%), 5Yr (2.44%), 10Yr (2.65%) and 30Yr (3.03%) have fallen to our expected levels mentioned yesterday. There is scope of some more fall in the yields over the next 1-2 sessions followed by a bounce from support levels. The 30Yr, 10Yr and 5Yr could test 3%, 2.60% and 2.40% respectively before a bounce is seen.
Markets await the US NFP and unemployment data today.
The German bund yields have also fallen. The 2Yr, 5Yr, 10Yr and 30Yr yields are trading at -0.57%, -0.36%, 0.07% and 0.73% respectively. The fall is likely to continue for a couple of sessions more before a corrective bounce comes in.
