STOCKS
Stocks look bullish to sideways for the near term. Need to be cautious on Nifty, Shanghai and Dax as there could be some important resistances coming up in the near term.
Dow (22412.59, +0.19%) is strongly bullish and is rising fast towards our 22500-22600 target mentioned yesterday. Initial rejection could be seen after a few sessions from near 22600.
Dax (12569.17, +0.06%) is almost stable near 12600 levels. An attempt to rise towards 12680 cannot be negated just now.
Nikkei (20479.88, +0.83%) is trading higher and has almost achieved our target of 20500. A break above 20500 can take it higher towards 20800-20900 in the medium term. Near term looks bullish.
Shanghai (3369.56, +0.11%) is trapped within the broad 3390-3350 region and could trade within this region for some more time. Sideways consolidation for another week may not be surprising.
Nifty (10141.15, -0.06%) is paused below 10200 as expected and could spend the next few sessions in the 10200-10100 region. Although there could be some chances of a rise towards 10300 in the longer term, the index could remain stable or dip in the coming sessions.
COMMODITIES
Overall precious metals are trading low after the FED policy meet yesterday as Dollar surged to 93.50 from levels near 91.70. Copper could turn bearish for the coming sessions. Crude may move up just now but could face some rejection in the next few sessions.
Gold (1299.30) came down to test 1296 as mentioned on Tuesday on a spike in US Dollar after the FED policy meet yesterday. In case the price sustains below 1300, there could be some chances of a fall towards 1280-1260 too. But we would like to wait for some confirmation.
Silver (17.09) is also down and could come down to 17.00-16.75 in the coming sessions before rising back again.
56.55-57.20 is an important resistance zone for Brent (56.18) from where the price could come off in the near term. Similarly, WTI (50.71) has some scope of testing resistance near 52 before coming off again towards 50.
Copper (2.9365) is trading below our mentioned support near 2.95 and if that sustains, the fall could extend towards 2.90 or even lower in the medium term.
FOREX
BONDS AND FOREX – Together today…
The FOMC has kept rates on hold for now. But market is pricing in a 66% chance of hike on 13th Dec and 3 more hikes in 2018. Balance Sheet "normalisation" is to start from October. How? Bonds maturing in Oct will not be replaced/ bought back.
As a result…
A) US Yields have risen. The US 10yr is 2.28%, up from 2.24%, and just above resistance at 2.26% mentioned yesterday and seems like it can rise more. The 5Yr (1.88%) also looks like to can try to move up towards 1.95-2.0% in the coming days/ weeks.
In the meanwhile, the German 10Yr (0.44%) has dipped by 1 bp. This brings the German-US 10Yr Spread down to -1.88%, compared to -1.77% earlier. The earlier uptrend since -2.16% since April 2017 is clearly broken now. It would be prudent to plan for -1.90% at least now.
B) This has pulled Euro lower to 1.1883, Dollar-Yen higher to 112.43 and Dollar Index up to 92.56.
Although there is immediate Support at 1.1850 on the Euro, the upside might be limited and downside might be open to 1.1750. The Dollar Index too could rise towards 94-95-96 if breaks above 93.00.
As mentioned earlier, Dollar-Yen is likely to rise further to 113.00-50. The Pound (1.3491) has come down sharply again after having risen past 1.36 yesterday. As such, the long-term Resistance at 1.38 looks respectable now. The Aussie (0.7998) might have also exhausted its upmove after the rally to 0.8100 yesterday. A break below 0.7950 will lead to further profit-taking.
Dollar-Yuan trades higher near 6.5889. Although Dollar-Rupee shows 64.29/34 on the NDF, we should be careful about how the market opens. The big question is, will FIIs take money out of Indian Bonds? If they do, it may weaken the Rupee.
Another BIG Question also is, how much of the Fed balance sheet normalisation is priced into the market? The US Yield Curve has flattened sharply with the 2Yr (1.43%) and 5Yr (1.88%) moving up sharply. This belied our expectation of a dovish Fed and suggests that the market has yet to price in the Fed normalisation.
