STOCKS
Dow (25385.80, +0.41%) is headed towards 25400-25600 as mentioned earlier and looks bullish for the coming sessions.
Dax (13385.59, +0.13%) is trading just at important resistance at 13400. In case this holds, the index could come off towards 13200 or lower; else it could move up towards 13600. We await confirmation of either a break or a rejection from current levels to get more clarity on further course of direction.
Nikkei (23796.45, -0.22%) seems to be holding below 24000 just now. But we need to see a further fall towards 23500 or lower to negate a rise past 24000 in the coming sessions. Near term likely to be bearish.
Shanghai (3428.68, +0.43%) is up strongly and is headed towards the Nov’17 high of 3450. A break above 3450 on the upside would be strongly bullish for the medium term. Watch price action near 3450.
Nifty (10637.00, +0.13%) and Sensex (34443.19, +0.26%) looks bullish just now and could be headed towards 10750-10800 and 34500-34650 levels respectively.
COMMODITIES
The US Crude stockpiles showed a decrease by 11.2mln barrels in a week against expectations of decrease by 3.9mln barrels. This has lead to a sharp rise in the Crude prices. Brent (69.21) and WTI (63.51) have moved up from levels near 68.22 and 62.25 seen yesterday morning. We now have to see if Brent stops near 70, the crucial weekly resistance or tries to move beyond that in the near term. Nymex WTI has broken above 63, faster than expected and could move up towards resistance near 65 on the weekly line charts.
Brent-WTI spread could come off to test support near 5.3-5.0 in the coming sessions before bouncing back towards 6 or higher in the longer run. Near term looks bearish.
Gold-WTI (20.66) has broken below the support near 22 and could be headed towards 19 soon. Near term looks bearish.
Gold (1311.48) has come off from 1325-1330 levels and may possibly delay the test of 1350. The current dip could extend to 1300 on the downside before rising back above 1330.
Copper (3.2300) is stable and could test 3.20 or lower in the coming sessions. Near term looks bearish to sideways.
FOREX
Dollar-Yen (112.25) has been the big mover yesterday, falling on news of BOJ reducing it’s purchase of long-tenor (10-25 year) bonds. This increases the chances of a fall to 110 over the next couple of weeks.
An even bigger mover has been the Euro-Yen (134.07), which has fallen sharply from levels near 136.65 a few days ago, arresting a rise that could have otherwise targeted 138+. Now the Cross can dip towards 133.60 in the near term, which is a medium term channel Support on the weekly candles. Note that a break below 133 (not happening immediately, but if it happens at all) could be a big game changer for all markets.
This brings us to the Euro (1.1942) which is holding above the 21-day MA Support at 1.1902. It has potential to start moving up again, either from current levels or from deeper down near 1.1865. If so, the upside targets would be 1.2150-2250.
The Pound (1.3533) is marking time just above immediate Support at 1.3500 and may continue to trade sideways for a few more days within the overall uptrend that has Support in the 1.34-33 region.
We had hinted at a pause in the Aussie (0.7819) between 0.7800-60, and it has dipped within that. Further dip towards 0.7750 is possible, especially due to the new strength in the Yen.
It will be interesting to see whether the Chinese Yuan (USDCNY = 6.5288) weakens further due to Yen strength or recoups some of its losses if the Dollar weakens again.
Dollar-Rupee (63.70) looks a little Overbought in the near term and may have intra-week Resistance in the 63.80-64.00 region.
INTEREST RATES
Japanese 10 Yr Yield (0.084%) has shot up and broken resistance on the long term charts near 0.07% post the announcement of a reduction in bond purchases by the Bank of Japan. Yields had been rising for the last few days, which indicates that possibility of this policy shift was already being factored in by the markets. Consequently, the US-Japan 10 Yr yield spread has risen to 2.4654% and could rise further towards resistance near 2.52%-2.53% on the short term charts.
The US 10Yr (2.5494%), US 5 Yr (2.3274%) and US 30 Yr (2.8920%) have all risen, with the 10 Yr and 5 Yr moving past resistances on medium term and short term charts respectively. We might now see some consolidation around current levels. However, a rise in US 10 Yr towards 2.62% (last seen in Dec-16 and March-17) is possible, given that inflation expectations have risen and bearishness in global bond markets is beginning to set in. It would be interesting to keep an eye on the yields post the CPI data release on 12th Jan.
The German-US 10 Yr Yield Spread (-2.0834%) has broken support on medium term charts and might now move towards -2.10%-2.15% (last seen in Mar-Apr 2017) before moving up again. German Bund Yields (5 Yr: -0.196%, 10 Yr: 0.469%, 30 Yr: 1.316%) have all risen beyond long term resistances and we could expect some consolidation ahead.
