STOCKS
Growth in US GDP at an annualized rate of more than 3% in the past 2-quarters has boosted a rise in the stock market too.
Dow (23940.68, +0.44%) has surged to levels above our expected 23800-23900 and has moved beyond the immediate resistance levels. Now the index looks strongly bullish and could target levels near 24000-24500 in the medium term.
Dax (13061.87, +0.02%) came off from 13200 yesterday and is likely to continue in the 12900-13200 region for some more time. A break on either side would be needed to have some clarity on further direction.
Nikkei (22574.45, -0.10%) has been stable despite a sharp up move in Dollar Yen (111.96). Movements have been narrow over the last few sessions and a sharp move is on the cards within the next few sessions. A break above 22750 could be surprising and could take the index back to levels near 23000-23250 but while below 22750, chances of a fall towards 22250-22000 looks possible.
Shanghai (3330.03, -0.23%) is fluctuating in the 3300-3350 region and is likely to move sideways in the coming sessions. A move above 3350 would be required to bring in some reversal just now; else a move towards 3300 and lower is possible in the near term.
Nifty (10361.30, -0.09%) is stable near current levels and is likely to spend the week sideways before trying to move up towards 10500 and higher again in the near term.
Sensex (33602.76, -0.05%) is likely to test 34000 in the near term but has been quiet since the past 2-3 sessions. Momentum could be low and movements narrow for the rest of the week.
COMMODITIES
Gold (1284.80) is in a short term up channel and is likely to trade in the 1280-1300 region. A bounce from 1280 looks likely just now.
Brent (63.37) is trading sideways but while above 62, it could test 65 in the near term.
WTI (57.37) could find some support in the 57.0-56.8 region which may again take the price back towards 59 and higher.
Copper (3.0735) is unable to sustain above levels of 3.08 and could probably move to test 3.00-2.95 on the downside in the coming sessions. Near term looks bearish.
FOREX
Dollar-Index (93.108) is trading marginally lower today and as predicted yesterday, might move beyond resistance on daily charts around 93.40 if there is sustainability in dollar strength; however, the possibility of downside towards 92.50-92.75 in case of a weak dollar remains open and will be ascertained in the coming few sessions.
Euro (1.1867) dropped to levels around 1.1820 yesterday after the US GDP data was released but is now trading a bit higher around 1.1860-1.1870. With a sharp increase in US Yields yesterday (see Interest Rates below), the Euro is likely to move down gradually towards 1.1825 and then 1.1775 levels (acting as support on the weekly candle charts). However, with a corresponding rise in German Yields, the possibility of a breach of resistance at 1.19 – 1.195 (on the weekly line charts) can’t be ruled out, in which case, the upmove beyond resistance could be steep and sharp.
Dollar-Yen (111.99) has sharply moved up from yesterday’s levels around 111.40 on the back of strengthening US Yields. This rise could lend support to Dollar strength in the coming days and an upside of 113-113.50 could be reached quickly if this strength persists.
Pound (1.3471) continues its move past resistance level of 1.335 and is now on course to test 1.36 on the weekly charts, which could then act as resistance for some time.
Dollar Rupee (64.32) is likely to bounce back from support at 64.30 and could move higher to test 64.50/60 in the coming sessions.
INTEREST RATES
Decent pickup in US yields as Supports mentioned over the last couple of days have held well. The 5Yr is up at 2.10% from 2.07%, 10Yr has moved up strongly from 2.33% to 2.38% and the 30Yr is also up strongly from 2.76% to 2.82%.
This bounce can pave the way for further rise, especially since Yellen has reiterated the Fed’s committment to gradual increases in interest rates. Significantly, she said, ""We don’t want to cause a boom-bust condition in the economy."
The US Yield Curve has also steepened with the 30-5 Spread (0.72%) rising to 0.72% from 0.69% earlier. This is in line with our expectation of a rise to 0.75% and higher.
German yields have also risen a bit, with the 2Yr at -0.69% from -0.71% earlier and the 5Yr at -0.30% compared to -0.34% earlier. However, there is Resistance near -0.27% on the German 5yr whereas there is no near term Resistance on the US 5Yr now. Reflecting this, the German-US 10Yr Spread (-2.00%) has dipped from -1.99% yesterday, in line with our expectation of a further dip to -2.03%. A break below -2.03% could open up much lower levels.
Similarly, although the Japanese 10yr (0.04%) has moved up a bit from 0.03%, the US-Japan 10Yr Spread (2.34%) has moved up again. Need to see if this Spread can break above immediate and important Resistance near 2.355%.
In India, SBI has increased deposit rates by 100bp on bulk deposits above Rs 1 Cr. This seems to go against their view of lower GOI yields going forward. That said, we stick to our view of near term range trade between 6.90-7.10%.
