Technical Analysis

Market Morning Briefing

Typography

STOCKS

Most equity indices are possibly in a sideways consolidation mode and may continue for some time. Broad range-bound movement is possible in the next couple of weeks.

Dow (20905.86, -0.04%) and Dax (12052.90, -0.35%) are almost stable without any major movement just now. As mentioned earlier, both could trade sideways for another couple of sessions before starting to move up. Dow has resistances coming up near 21200 and 21300 which if holds could possibly keep the index in sideways range for a longer time than expected. Dax may remain below 12156 for the next 2-sessions at least.

Nikkei (19469.62, -0.27%) is stuck within the support and resistance levels of 19200 and 19600 respectively and while that holds, we could expect the sideways consolidation to continue in the near term.

Shanghai (3255.80, +0.15%) is trading above 3200 and while that holds, medium term looks bullish towards 3300. Movement could be slow in the near term but eventually prices may move higher.

Nifty (9126.85, -0.36%) has been coming off in the last 2-sessions and could test support near 8990-9100 before again bouncing back towards 9200 and higher. Medium term looks bullish.

COMMODITIES

Gold (1228) is trading within the range of 1215-1245. Unless it will manage to close above 1240-45, it will be difficult for gold to move higher.

Silver (16.34) is trading slightly lower from its immediate resistance at 17.45 levels. The bias will remain bearish while it is trading below 17.45-50 levels.

Copper (2.64) was unable to close above its pivot at 2.66-70 of its recent trading range of 2.55-83. The chances of seeing 2.55 are much greater now.

Brent (51.87) and WTI (48.40) both are trading within their narrow ranges of 50-52 and 46-50. Considering the short term oversold sate, we may see some profit taking rally towards their respective resistances. The trend is still bearish in the near to medium term time frame thus any corrective bounce may face selling pressure at the higher levels. Brent-WTI ratio (2.23) may trade below 2.00 as it found resistance at 2.5 levels.

FOREX

Little movement is seen in the markets as expected. A more dovish than expected stance of the US Fed translates into a less wider than expected policy divergence between the Fed and the ECB, keeping the German-US interest rate differential higher and Dollar weaker.

Dollar Index (100.18) remains almost unchanged with the near term target remaining the same at 99.00 and resistance coming at 100.70-101.00.

Euro (1.0761) has been stuck in the narrow range of 1.07-1.08 for the last 4 sessions but it still remains to be seen if the resistance of 1.08 manages to push it down or not. Repeat - the current net short position of the speculators is the smallest since May’16, which may well turn out to be a contra-indicator for a top formation.

Dollar-Yen (112.70) is stable near our target/support of 112.00-111.70, little changed from the levels overnight. As discussed previously, only a break below 111.70 may open up much lower levels of 110.00 and even 108.50-00.

Pound (1.2362) is struggling in our resistance zone of 1.2430-40 just as expected and a failure to rise above 1.2440 soon may drag it down to 1.2300-1.2270 levels or lower.

Aussie (0.7710) has hit the resistance of 0.7750 last night but no buyers were found at the higher levels to continue the rise. We reiterate - this long term resistance area of 0.7750-0.7850 is a very significant make or break zone which, if overcome, may determine the path for the next few months but it remains to be seen if Aussie manages a break above 0.7750-0.7850 immediately or not.

Dollar Rupee (65.36) gained another 10 paisa in the last session but the range of 66.20-70 is expected to hold for the next few sessions.

INTEREST RATES

The US yields have fallen sharply contrary to our expectation of a pause. The 5yr (2%), 10YR (2.48%) and the 30Yr (3.09%) are 1-2bps lower and could come down towards 1.9%, 2.405 and 3.0% respectively in the near term before bouncing back from there.

The German-US 2yr (-2.08%) has broken above the immediate channel resistance and if it continues to move higher in the coming sessions, indicating a rise in Euro in the near term. But the German-US 10YR (-2.04%) is heading towards resistance above current levels and if some rejection is seen there, it could possibly limit the upside for Euro.

The US-Japan 10Yr yield spread (2.41%) may come down towards 2.35% giving some more scope for yen strength before a sharp bounce is seen.

Author: Kshitij Consultancy ServiceWebsite: http://www.kshitij.com
Kshitij Consultancy Service
These views/ forecasts/ suggestions, though proferred with the best of intentions, are based on our reading of the market at the time of writing. They are subject to change without notice.Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. Those acting in the market on the basis of these are themselves responsibly for any profits or losses that might occur, without recourse to us. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
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