STOCKS
The US Federal Reserve signaling to keep the rates unchanged all through 2020 seems to have left the equity markets with less cheer. Certainly, because the market wants the Fed to cut rate. We will have to wait and watch the global indices for a few more sessions. Dow and DAX have to surpass their near-term resistance to strengthen the bullishness and avoid any fall. Nikkei retains its sideways range and can continue to consolidate for some more time. Shanghai looks bullish while above 2900. Sensex and Nifty might consolidate sideways with a negative bias.
Dow (27911.30, +29.58, +0.11%) has inched slightly higher but has to rise past 28000 decisively in order to gain momentum. While below 28000, we expect the Dow to remain under pressure to test 27650 on the downside. We will have to wait and see.
DAX (13146.74, +76.02, +0.58%) has moved up and has to be seen if it can rise past 13200 which can take it further higher to 13300 in the near term. Only a strong break above 13300 will negate the chances of seeing a fall to 12800-12700 that we have been mentioning for some time.
Nikkei (23438.41, +46.55, +0.20%) trades well within the preferred range of 23000-23600. We expect the index to remain in this range for some time. Eventually we expect the Nikkei to break this range above 23600 and move up to 24000
Shanghai (2919.43, -4.99, -0.17%) has dipped slightly. But while above 2900, the outlook is bullish for the index to test 2970-2980 in the coming weeks.
Nifty (11910.15, +53.35, +0.45%) is getting support below 11850. However, it has to surpass 12000 decisively in order to turn the sentiment positive and move higher to 12200 levels again. While a sideways consolidation between 11800 and 12000 cannot be ruled out in the near-term, the index is likely to remain vulnerable to test 11700 and lower levels while it remains below 12000.
Sensex (40412.57, +172.69, +0.43%) on the other hand has resistances at 40578 and 40750 which can cap the upside for now. On the downside 40000 is a crucial support a break below which can trigger further fall. Broadly, 40000-40750/41000 is the range that the Sensex is likely to trade in the coming days.
COMMODITIES
Crude oil prices have dipped slightly and could be ranged or trade lower today ahead of the planned imposition of tariffs by US on 15th Dec (Sunday). Markets would wait to see if the tariffs would come into force before we see some volatility next week. Precious metals trade higher after the FOMC statement yesterday as Dollar weakened against major currencies. Copper is bullish for the medium term while above earlier resistance turned support near 2.75/76.
Brent (63.97) is stable and could trade in the 65-63 region for the near term while Nymex WTI (58.89) has been fluctuating in the 58-60 region and could continue to trade so for the rest of the week.
Gold (1479.10) moved up after the Dollar Index fell further to test lower support at 97. A bounce from here in the index could again pull down Gold in the near term. While below 1480/85, Gold still has some scope of testing 1440 on the downside.
Silver (16.95) rose back towards 17 as metals rose on weaker Dollar after the FOMC. We may expect trade between 16.50 and 17.00 for the very near term.
Copper (2.7915) has moved up too and could head towards 2.80/85 in the near term.
FOREX
FED kept rates unchanged yesterday and have indicated to keep them on hold through 2020. The Fed stated that it will continue to watch the data to see if global developments and “muted” inflationary pressures affect the U.S. economy. But removed language from the October meeting noting that “uncertainties about this outlook remain,” possibly hinting on some positive news coming from U.S.-China trade war maybe.
Currencies trade stronger breaking immediate resistances/supports against the US Dollar but that could be short lived if the Dollar index bounces back sharply from support at 97. A break below 97 if seen could turn views for the near term for Euro, Aussie and Dollar Yen especially.
Dollar Index (97.04) opened with a gap down and traded lower after the FOMC. It is now trading at crucial levels and if we do not see an immediate rise from current levels, the overall view could turn bearish for the medium term. Watch support at 97 which is expected to hold just now and produce a bounce back towards 97.50-98.00.
Euro (1.1142) has clearly broken above immediate resistance. But could we get bullish for the near term? Maybe not before the Dollar Index moves further down from current levels. We wait to watch if 1.1150 breaks on the upside to target higher levels of 1.12. But that could be reversed if the dollar Index manages to rise back from here. We would wait to watch price action tonight.
Dollar-Yen (108.56) is likely to trade in the 108-109 region for the near term.
EUR-JPY (120.97) is trading at resistance of 121 and would come off if 121 holds for the day. However, a sharp rise would turn our view towards a test of 123 on the upside (would wait for confirmation).
Pound (1.3225) has risen above 1.32 and while that sustains, we may expect a further rise towards 1.34.
Aussie (0.6886) has also broken above immediate resistance at 0.6875 and could be bullish towards 0.69-0.6925 before coming off again.
USDCNY (7.0310) dropped sharply after FOMC statement hinted at a possible optimism on the US-China trade deal. Overall trade in the 7.04-7.02 region could hold for the near term.
Dollar-Rupee (70.8450) could re-test 70.70/75 on the downside but seeing a break of immediate resistances/supports on other currency pairs, could Dollar Rupee attempt to fall below 70.70 today is to be seen. A fall below 70.70 could take the pair down towards 70.50 in the near term (contrary to our view of a bounce from 70.70).
INTEREST RATES
The US Federal Reserve left the rates unchanged as expected and has hinted to keep the rates on hold through next year. This has dragged the US Treasury yields lower yesterday and could continue to keep them subdued going forward. The German yields may consolidate/dip in the near-term before moving higher again. The 10Yr GoI is moving higher in line with our expectation but is coming closer to a crucial resistance which can reverse the yields lower again.
The US 2Yr (1.61%), 5Yr (1.61%), 10Yr (1.80%) and 30Yr (2.23%) have dipped across tenors after the US Fed meeting yesterday. The 10Yr can fall to 1.75%-1.72% on a break below 1.80%. The 30Yr on the other hand has room to test 2.20%-1.17% which is a crucial support zone to watch. The chances of seeing any strong rise in the US yields stand reduced now after the Fed’s decision yesterday.
The German 2Yr (-0.65%), 5Yr (-0.58%), 10Yr (-0.33%) and 30Yr (0.20%) have dipped yesterday. The 30Yr is struggling to rise past 0.22% and needs to be seen if it can fall to 0.10% or lower before resuming the upmove. The 10Yr has room to test its support at -0.40% in the near-term before moving higher again.
As expected the Indian 10Yr GoI (6.7652%) has surged further and is keeping our bullish view intact to test 6.80%. Though the upside can extend upto 6.85%, the yield is likely to reverse lower again towards 6.70%. We see strong resistance in the 6.80%-6.85% region which can cap the upside and drag the 10Yr GoI lower again.
