STOCKS
Dow (24962.48, +0.66%) moved up sharply about 166 points yesterday, contrary to our expectation of testing lower levels of 24500-24000. Overall trade within 25500-24500 region looks possible in the coming sessions.
Dax (12461.91, -0.07%) has dipped lower in line with our expectation. A test of 12300 is possible on the downside before the index again starts to inch upwards targeting 12600 in the medium term. Overall the index is likely to remain range bound.
Nikkei (21814.31, +0.36%) is trading higher contrary to our expectation of a test of support near 21200-21000. As mentioned earlier, the index now has some scope on the upside towards 22500 while above 21000. Near term looks bullish.
Shanghai (3279.52, +0.34%) breaks above 3260/70 levels mentioned yesterday and could now be headed towards 3300-3350 in the early sessions next week. Near term is likely to be bullish.
Stability around the support levels on both Nifty (10382.70, -0.14%) and Sensex (33819.50, -0.07%) is retained just now but the immediate supports re unable to produce a sharp bounce from current levels. Could this indicate an eventual break below current levels in the near to medium term? Maybe. An end in the current stable and range bound trade would lead to some sharp movement on either direction. While immediate supports lacks strength, our preference would be on the downside.
COMMODITIES
WTI (62.81) and Brent (66.34) have risen sharply and are trading higher today. A report from the EIA states that the crude oil inventories at 420.5mln barrels are in the lower half of the seasonal average and is likely to stimulate optimism. The prices could see a rise today followed by some dip in the next week.
As mentioned yesterday, 1320 is an important near term support for Gold (1329) and while that holds, Gold is likely to move back towards 1350-1360 levels in the near term. A break below 1320 if seen and sustains, could be vulnerable for the metal increasing chances of testing 1315-1310 by end of next week.
Copper (3.22) is likely to trade in the 3.15-3.30 region for the near term.
FOREX
The Dollar Index (89.836) after testing resistance on daily candles near 90.1-90.2 yesterday didn’t rise to test higher resistance on weekly candles near 90.3-90.4.The Dollar Index has ranged between the broad 88.,5-90.5 zone for the last 3 weeks and if the same ranging continues next week, downside target could be support on daily and weekly candles near 88.25-88.50. The EU CPI data release later today and the US Consumer Confidence and US GDP data release next week could be further market movers for the major currencies next week.
Euro (1.2318) saw a low near 1.226 yesterday and tested lower support near 1.2275-1.2265 on the daily candles (which was also seen as crucial support on weekly candles). We had written about chances of a false break of support on weekly candles towards 1.221-1.223, but that didn’t take place, and the Euro is now seeing a bounce. It has been ranging in the broad 1.22-1.255 zone for the last 3 weeks and if the ranging continues, we could again see a test of 1.25 sometime late next week.
The Dollar-Yen (106.89) has dipped from resistance near 107.9-108.0 on the daily candles and could again move down towards 105.5 – seen as support on weekly candles. Yesterday we wrote about the Dollar Yen having seen 4 continuous weeks of upmove on the last 2 occasions when it tested support on weekly candles. It is now looking less likely that the same will get repeated, as the Dollar Yen could continue to stay bearish over the next 1-2 weeks.
The Euro-Yen (131.68) saw a low near 131.30 yesterday and is now trading at levels near 131.6-131.8 indicating that a bounce might be underway. Strength in Euro towards 1.24 and in Yen towards 106 would mean that the Euro yen stays above support on daily candles near 131.30.
Pound (1.3953) saw a low of 1.3857 yesterday but now seems to be bouncing from support on daily candles near 1.39. There is still some possibility of it moving down again next week towards lower support near 1.38 – seen both on daily and 3 day candles.
Dollar-Rupee (65.045): The near-term outlook (one-three days) is unclear. Equal chances of rise towards 65.20 and of fall towards 64.90-80-70.
INTEREST RATES
US 10 Year Yield (2.9335), US 30 year Yield (3.2179), US 5 year yield (2.6687), US 2 year yield (2.254) : As the US bond auctions continue, all 4 yields continue to hover around their long term resistances. There has been a slight dip in the 10 Year yield from yesterday’s highs near 2.95%, which might indicate that there could be a further dip below 2.9% next week.
As mentioned yesterday as well, after this week’s volatility in yields, we might well see another few sessions of consolidation next week. A decisive breach of long term resistances towards 3% for the 10 Year yield still looks to be few weeks away.
(Long term resistance levels for the 4 yields earlier mentioned are as follows: 2.85-2.90, 3.20, 2.7 and 2.2 respectively – we have been expecting these levels to hold in this month.)
Japan 10 year yield (0.05%) has come down towards 0.05% after seeing highs near 0.095% in late Jan, reflecting the fact that investors might be moving towards Japanese bonds in these times of volatility.
 saw a low near 131.30 yesterday and is now trading at levels near 131.6-131.8 indicating that a bounce might be underway. Strength in Euro towards 1.24 and in Yen towards 106 would mean that the Euro yen stays above support on daily candles near 131.30. ){kind=link}