STOCKS
Almost all indices have fallen and could continue to trade lower or remain sideways for the week.
Both Dow (20668.01, -1.14%) and Dax (11962.13, -0.75%) are off from yesterday’s levels.
Dow has fallen from resistance levels as indicated in the 3-day candles and the weekly line charts and while this holds, Dow could be bearish in the near term. A break below immediate daily support on 20600 could lead to a fall towards 20500-20300 levels. Note price action near 20600.
Dax has also negated the immediate support near 12000 and has resolved on the downside, opening up chances of a fall towards 11700 levels in the near term.
Nikkei (19065.37, -2.01%) has fallen in line with the fall in Dollar-Yen. The broad 19600-18600 region has again come into focus and the sideways consolidation since Dec’16 is continuing to remain for now. Note the 21-week MA near 18950 could possible act as an immediate support which if breaks could open up levels of 18800.
Shanghai (3236.52, -0.77%) could test lower levels of 3200. A break below is not preferred just now. Some sideways consolidation in the 3200-3250 region is possible for now.
Nifty (9121.50, -0.06%) has possibly begun its first sharp correction after the recent rally in the past 2-months. An initial fall towards 9000-8990 levels could be expected as mentioned yesterday.
COMMODITIES
Overnight weakness in Dollar index (99.65) has helped Gold (1245) to trade above its pivot at 1241. It may have resistance at 1250. A close above that could open up 1272-78 levels.
Silver (17.53) is also trading above its pivot of 17.45 .Immediate resistance poised at 18.00 level.
Copper (2.58) was unable to close above its pivot at 2.70-72 of its recent trading range of 2.55-83 and fell in line with our expectation. It may find support at 2.57 levels in near term but a close below that could open up 2.55 and 2.49 as well.
Brent (50.54) and WTI (47.34) both have fallen but still trading within their respective ranges of 50-52 and 47-49 with a bearish bias. We have US crude oil inventory data at 8.00 pm IST. An increase of 1.9M barrel (as expected) or higher in weekly inventory could open up the lower band of their trading channels.
FOREX
Uncertainty over the passing of Republican pro-growth policies through US congress has unsettled the Dollar and the focus now is on the Republican attempt to pass a health-care bill tomorrow, 23rd March.
Dollar Index (99.85) has broken below 100.00 in line with our expectation as it gets gradually closer to our target of 99.00. The narrow band of 99.00-98.50 is a very significant support zone which may be tested in the coming days
Euro (1.0794) has tested the upper end of the near term range of 1.07-1.08 on relief from French election debate in which the centrist candidate seems to have got a lead over the far rightist Le Pen. The German-US 10Yr rate differential (-1.96%) is just breaking above a major resistance around -2.00% (check Interest Rates) but Euro is yet to rally above the resistance of 1.0830-50. Though the upside possibilities must be considered more now, we prefer t wait and watch till a clean break above 1.0850 is seen.
Dollar-Yen (111.59) is trading below 112.00-111.70, which is a call for 110.00 and even 108.50-00 as targets in the coming days. Near term upside may be limited to 113.00.
Contrary to expectations, Pound (1.2465) jumped above the resistance of 1.2440 on the back of a stronger than expected inflation at 2.3% for Feb’17, breaking through the BOE target of 2% for the first time in 3 years. Now if Pound manages to sustain above 1.25 levels for a session or two, the rise may extend all the way to 1.2650-1.2700.
Aussie (0.7660) has been pushed lower hard by the long term resistance 0.7750-0.7850, which has been aided by the weakness in the base metals like Copper too (Check Commodities section). While the downside is open now, the chances of sideways trading in the band of 0.7600-0.7750 for a few sessions can’t be rule out yet.
Dollar Rupee (65.29) is trading at 65.51 in the NDF now, slightly above the immediate intraday resistance of 65.45 which may take it higher to the near term resistance of 65.60-70. The support of 65.20 is expected to hold for the week.
INTEREST RATES
The US yields continue to fall. The 5yr (1.94%), 10YR (2.41%) and the 30Yr (3.03%) have fallen in line with our expectation and this could possibly continue for 1-2 sessions before we may expect a bounce back to higher levels.
The US 10-5yr (0.47%) could test 0.45% before rising from there.
The 5Yr (-0.15%) and the 10Yr (0.06%) Japan yields have moved down and could test support just below current levels while the 30YR (0.84%) is almost stable near current levels.
The German yields have moved up followed by some weakness in the US Dollar while the Euro gained. There is some more room on the upside which could be tested in the next couple of sessions before a dip is seen.
The German-US 2YR (-2.01%) and the 10Yr (-1.96%) have shot up breaking the immediate resistances confirming a sharp rise in Euro in the near term. Refer to FOREX section above for specific view on Euro. The yield spreads could rise for another 1-2 sessions before pausing.
The US-Japan 10YR (2.35%) has come down as expected and could test immediate support just below current levels. If that produces an immediate bounce, further yen strength could be limited. In case, the yield spread breaks below the immediate support, it could indicate a sharp fall in dollar-Yen to continue in the near term. We need to keep a close watch on this.
The US-UK 10YR (-1.16%) has also risen sharply and is heading towards resistance near -1.03%. Till then the pound has enough scope of rising on the upside.
