STOCKS
FED hiked interest rates by 25bps as expected. But that has not impacted the Dow much. Dow (24585.43, +0.33%) inched up to test 24666 before closing at slightly lower levels yesterday. We continue to look at important resistance near 24800 and while that holds, Dow could come off sharply from there or trade sideways in the 24800-24000 region in the coming sessions.
13200 seems to be a decent resistance on the Dax (13125.64, -0.44%) for the near term and while that holds, Dax is likely to trade sideways in the 13200-12900 region. Dax is likely to come down below 13100 in the next few sessions. For any further upside, the Dax will have to break above 13200 and sustain in the near term.
Nikkei (22726.76, -0.14%) is trading below resistance near 23000. Note that the index is range-bound within 22200-23000 region and is likely to continue in the same region for a few more sessions. Near term preference would tilt on the downside if the fall in Dollar Yen (112.64) continues in the near term towards 112 or lower.
Shanghai (3292.71, -0.31%) looks bearish for the near term. While immediate support near 3260-3280 holds, we could see some trade within 3260-3320 region in the next few sessions.
Nifty (10192.95, -0.46%) and Sensex (33053.04, -0.53%) are headed downwards and are in the correction phase just now. While Nifty could target 10100, Sensex could move down towards 32750-32500 in the coming sessions.
COMMODITIES
Gold (1256.67) has risen sharply from support levels of 1240 and could be stalled near 1260 for sometime before again rising back towards 1280/90 levels. A pause and probably a corrective dip is possible from levels near 1260.
Silver (16.08) has risen in line with our expectations and could move up towards 16.40-16.60 soon.
Brent (62.81) has come down surprisingly contrary to our view of a rise towards 68. As mentioned earlier, it could find some support in the 61.00-62.00 region from where a bounce back towards 65-66 or higher is possible.
WTI (56.77) has come off sharply too and could test support near 55.50-56.00 before attempting a rise from there. A break below 55, if seen could turn the bulls down and initiate some corrective dips going forward. But before giving any priority to that view, we would wait for any confirmed move below 55.
Copper (3.0575) could face immediate resistance just below 3.10 and while that holds, Copper could come off towards 3 again in the medium term.
FOREX
Dollar-Index (93.387) has retreated from resistance near 94 on the 3 day candles after the expected 25 bp rate hike by the Fed. As mentioned yesterday, the rate hike seems to have been factored in by the market already, which was reflected in the recent uptrend of the Dollar Index towards 94. With the next rate hike expected to happen only in the March FOMC meeting, we might be looking at a period of bearishness in the Dollar. US Retail Sales data (to be out later today) would need to exceed Market expectations of 4.81 % y-o-y growth to provide some strength to the dollar.
Euro (1.1835) bounced from support near 1.1717, with corresponding dip of the Dollar Index (from 94) and can now be expected to embark on a rally in the medium term. In the near term, immediate resistance can be seen near 1.19 which had been tested earlier this month. Euro’s rally could however see it rise past this resistance and move towards higher resistance near 1.25 on the weekly line chart. The ECB meeting today could provide further strength to Euro.
Dollar-Yen (112.62) has fallen in line with the Dollar Index and can now be expected to move towards 112 in the near term with a gradual move towards support at 110 on the weekly candles by next month.
Pound (1.3435) along with the Euro & Yen has seen a rise after the rate hike yesterday. However, we would need to watch the pound in the next couple of sessions to get more directional clarity (whether it will move back down on its downtrend towards support at 1.32-1.3225 on the daily, 3 day and weekly charts, or whether it will test resistance near 1.355-1.3575 on the weekly candles before dipping again.
Rupee (64.30) has opened lower compared to its close at 64.4375 yesterday and with a rally in the Euro & dip in Dollar strength, might well test previously mentioned support near 64.20.
INTEREST RATES
Fed has hiked by 25bp as expected. Now the expected number of increases in 2018 is 3.There were 2 votes against a rate hike and apparently Yellen said that relatively low/ steady inflation is here for some more time. No action is expected in the Jan FOMC meeting. The next one after that is in March, which will be chaired by Powell.
Keep an eye on the ECB meet today. In case Draghi states anything on the EUR-USD view, we could see an impact on the currency pair in the near term.
The US yields are trading low after the FOMC statement. The 5Yr (2.12%), 10Yr (2.36%) and the 30Yr (2.74%) are down from previous levels of 2.17%, 2.40% and 2.78% respectively. The yields could move down for another sessions before bouncing back from supports visible below current levels.
The US-Japan 10Yr (2.31%) came off from resistance but we will have to see if the yield spread is able to come off below 2.28% or continue to trade along the channel resistance for some more time. Only on a sustained break below 2.28%, we would get some fall in Nikkei and Dollar Yen in the near to medium term.
The German-US 10YR (-2.04%) bounced back sharply from -2.09% as expected and could test resistance above current levels soon. Thereafter, another leg of fall could be expected towards -2.10% or lower. All eyes on the ECB meeting today.
