STOCKS
Asians are trading weak ahead of the US Federal Reserve meeting outcome tonight. While most of the indices are well within their current trading range, the big surprise is from Shanghai which has broken below the strong support level of 3400 contrary to our expectation. Inability to bounce back could be bearish for Shanghai going forward. Dow has to break above 35100 to move up further. DAX is oscillating within its 15200-15800 range. Nikkei has dipped towards the lower end of its 27000-29500 range. Sensex and Nifty have also declined sharply yesterday after testing the upper end of their 52000-53200 and 15600-15900 range respectively earlier. Will the Fed meeting outcome provide the possible trigger to break the current range in equities on the upside? We will have to wait and watch.
Dow (35058.52, −85.79, -0.24%) has failed to sustain above 35100 and has come back into the 35000-35100 resistance zone. A sustained rise past 35100 is needed to see the rise to 36000. A fall below 35000 can drag the Dow to 34500-34000 again and will delay the rise to 36000. The broader view is however bullish with strong supports at 34000 and 33000.
DAX (15519.13, −99.85, -0.64%) seems to lack strength to move up towards the upper end of its 15200-15800 range. While below 15600, a test of 15200 is possible in the near-term. We expect the range to remain intact for some more time. The bias remains bullish to break the range on the upside and move up to 16000-16200 eventually.
Nikkei (27660.08, −310.14, -1.11%) has failed to rise past 28000 and is coming down again towards the lower end of its 27000-29500 range. While above 27000, the bias is bullish to see an upside breakout above 29500 and see a rise to 31000 going forward. As mentioned yesterday, a strong break below 27000 will only turn the outlook bearish to see 26000 on the downside.
Shanghai (3378.02, −3.17, -0.094%) has declined below 3400 contrary to our expectation to sustain above it. Our long-term view of seeing 3700-3800 could be getting negated now. Inability to bounce back above 3400 can drag Shanghai to 3200 and even lower in the coming weeks.
Sensex (52578.76, −273.51, -0.52%) has come-off sharply yesterday. The 52000-53200 range remains intact. As such the expected bullish breakout above 53200 and the rise to 54000 might get delayed further.
Nifty (15746.45, −78, -0.49%) has failed to break above 15900 and has come-down sharply. The 15600-15900 range will continue to remain intact for some more time. The broader view is bullish to see a break above 15900 and a rise to 16000-16200 eventually. Strong supports are at 15600 and 15500.
COMMODITIES
Crude prices continue to trade higher and could test immediate resistances while Gold has also recovered on Dollar weakness ahead of the FED policy meet statement due tonight and could head towards 1820. Silver has broken below 25 and could head towards 24-23 in the medium term while Copper can range within 4.65-4.40 before rising towards 4.80 in the longer run.
Brent (74.95) and WTI (72.12) both have risen well today. As mentioned yesterday, Brent can rise towards $75-76 while WTI can rise towards $74 before again coming off from there in the near term. Failure to fall from expected levels would be strongly bullish for a possible extension towards $78-80 (Brent) and $75/78 (WTI) in the longer run. For now watch price action near mentioned resistances.
Gold (1804.30) has recovered the fall seen yesterday on weakness in the Dollar Index. While the index remains below 92.50 and continues to fall, Gold could rise to test 1820.
Silver (24.78) has dipped below 25 and if it does not rise back to 25+, it is bearish for a fall to 24-23 in the medium term.
Copper (4.5790) has dipped from 4.60 instead of heading further up. We may expect a possible trade within 4.65-4.40 before an eventual rise towards 4.80 is seen in the longer run.
FOREX
Volatility is seen in the currency markets today as we wait for the post FED policy meet announcements especially on interest rates, inflation and when the FED is likely to start reducing its purchases of government bonds. Dollar Index has fallen below immediate support at 92.50 and Euro has risen past 1.1820. We need to see if this sustains and continues to break below 92 and above 1.1830/50 respectively, which could then indicate a reversal. Aussie is stable while Pound has bounced well and could be headed towards 1.3950/40 on a break above 1.39. EURJPY looks ranged within 130.5-129. USDCNY has surged above 6.50 validating the possible triangle formation mentioned last week. We need to watch USDINR to see if it rises to test 74.60/70 on the upside or falls sharply to 74.30/20 on the downside.
Euro (1.1821) has moved up again as the Dollar Index fell ahead of the final statement due after the FED policy meet due today. All eyes are on the FED post meeting conference for announcements regarding inflation, economic growth and interest rates and when the FED is likely to start reducing its purchases of government bonds. As expected yesterday, a break on Euro above 1.1830/50 would be an initial signal for a bullish break out and could open up chances of a rise towards 1.19 and beyond in the longer run. Watch price action over the next 1-2 sessions to see if the rise sustains.
Dollar Index (92.44) has broken below immediate support at 92.50 and needs to break below 92 to indicate further fall going forward. Need to keep an eye whether the current fall is only due to expectations from the FED meeting outcomes or is likely to sustain. While below 92.50, the index is bearish.
EURJPY (129.78) is holding below immediate resistance at 130.50 and while that holds, a broad range of 130.50-129.50/129.00 may hold for now.
Dollar-Yen (109.77) has fallen sharply from 110.60 but we may expect a bounce back from 109.00-109.50 soon. Failure to see a bounce from 109 could make the pair vulnerable to a sharper fall in the near term.
Aussie (0.7361) is likely to trade in a stable fashion within 0.7330-0.74 while Pound (1.3821) has been rising well over the past few sessions and any break above 1.39 can be further bullish towards 1.3950-1.40 on the upside. Watch price action at 1.39 over the next couple of sessions.
USDCNY (6.5055) has also finally risen above 6.50, validating the triangle pattern that we had mentioned last week. While there could be some pull back from current levels towards 6.4950-6.50, view is bullish for the medium term towards 6.52/55.
USDINR (74.47) rose back sharply from 74.35 yesterday instead of sustaining lower. We expect 74.60/70 to hold on the upside and push back USDINR down towards 74.40/20 or even lower in the longer run. For now 74.30-74.60/70 may hold unless we see a break on the downside to signal any fresh movement.
INTEREST RATES
The US Treasury yields have dipped at the far-end ahead of the US Federal Reserve meeting outcome tonight. The 30Yr is at a key support and the 10Yr has support slightly below current levels. We expect the supports to hold and produce a corrective bounce before the broader downtrend resumes again. The German yields are coming closer to their key intermediate supports within their downtrend. A corrective bounce is possible from the upcoming supports and then a fresh fall is possible. The 5Yr GoI is stuck in a narrow range and is attempting to break the range on the upside and move up further.
The US 2Yr (0.21%) and 5Yr (0.71%) Treasury yields remain stable while the 10Yr (1.25%) and 30Yr (1.90%) have dipped. The 30Yr has to sustain above 1.9% in order to see a corrective bounce to 2.1%-2.2% in the coming weeks. A break below 1.9% can drag it to 1.7%. The 10Yr on the other hand has support at 1.2% and 1.1% from where we expect it to bounce towards 1.45%-1.5% first and then resume the broader downtrend.
The German 2Yr (-0.75%), 5Yr (-0.73%), 10Yr (-0.44%) and 30Yr (0.03%) have dipped further. Our view of testing -0.45%/-0.50% (10Yr) and 0%/-0.05% (30Yr) on the downside remains intact. Thereafter a corrective bounce to -0.30%/-0.25% (10Yr) and 0.10% (30Yr) can be seen and then the broader downtrend can resume again eventually.
The 5Yr GOI (5.6902%) is attempting to break the narrow 5.66%-5.7% on the upside. Such a break, if seen, can take the yield up to 5.76% in the coming days.
