STOCKS
Dow (24884.2, +0.04%) is holding above immediate support near 24500 and while that holds, a rise towards 25500 or higher is possible in the coming sessions. But note that the Dow is reported to be quoting 360 points lower near 24,494 on news of impending resignation of Gary Cohn, National Economic Council Director, from the White House. We would have to see price action near 24500, a break on the downside could negate immediate scope for the upside.
Dax (12113.87, +0.19%) moved up towards 12300 yesterday but came off to close at slightly lower levels. Note immediate resistance at 12300 might hold for a few sessions bringing in another dip towards 11900 or lower. Only on a break above 12300, would we focus on higher levels of 12600.
Nikkei (21377.07%) moved up slightly as the support near 21000 is holding well. Looking at the 3-day candles, there seems to be enough room on the upside towards 22500-22600 levels for the coming sessions. While above 21000, near term looks bullish.
Shanghai (3300.60, +0.33%) has moved up above 3300 breaking the immediate resistance. Now while the upward momentum remains intact, the index could head towards 3350 or higher in the near term.
Nifty (10249.25, -1.06%) and Sensex (33317.20, -1.27%) have broken on the downside negating chances of an immediate bounce back to higher levels. This has been a crucial break of immediate supports and indicates further downside for the medium term. Nifty could head towards 10000 and Sensex may test 32500 in the next few sessions. Near to medium term looks bearish.
COMMODITIES
Brent (65.28) and WTI (62.08) are trading a bit lower than levels seen yesterday. As mentioned yesterday, 66.0-66.50 on Brent and 63.40-63.0 on WTI are important near term resistances and if they hold, the crude prices are likely to fall in the coming sessions towards 64.30 and 61 respectively.
Gold (1.336.80) has moved up a bit and may attempt to re-test higher levels of 1345-1350 in the next 1-2 sessions. Near term looks bullish.
Copper (3.1555) is almost stable. While below 3.18, there is scope of moving to lower support evels near 3.07; else an eventual rise back towards 3.20 is possible.
FOREX
The Dollar Index (89.517), as per expectation, did break the 13 days and 21 days moving average lines on the daily line chart and saw a low near 89.43 yesterday. It is currently trading near 89.5 and the next crucial long term support level is seen on the weekly line charts near 89.0-89.5. However, there is some possibility for support on daily candles near 88 to be tested in the next few sessions if the ECB (meeting on 8th March) doesn’t weaken the Euro. A test of 88 would be extremely bearish for the Dollar since long term support on weekly line chart would have been broken.
Euro (1.2418)- There has been a sharp rise in the Euro as per our expectation yesterday. It will be interesting to see if the Dollar puts up a bit of a fight at current levels or it chooses to allow the Euro more room up to 1.2600-15 before digging in its heels. Importantly, the ECB is due tomorrow and the markets would like to see what Draghi says about the Euro. The charts suggest slightly greater chances (say 55-60%) that the Euro may rise towards 1.26. Draghi will have to be as emphatic as his famous “whatever it takes” statement if he wants to talk the Euro down. In that case the Euro dips back to 1.23 and 1.22. Chances are 40-45%.
Dollar-Yen (105.74) as per expectation tested levels near 106.5 yesterday and is now seeing a dip. It has seen a low of 105.46 today which is very near to the low of 105.55 last seen on 16th Feb. This is the lowest that the Dollar Yen has dipped to in more than a year. A downmove towards 105 could imply medium term bearishness and could lead to a quick test of support close to 104.0-104.5, on daily and 3 day candles.
The Euro-Yen (131.30) as expected, tested resistance near 132 on daily and 3 day candles yesterday and may now dip again towards 129-130 in the coming sessions.
Pound (1.3894) is slowly moving up towards 1.395, which is seen as immediate resistance on daily candles.
Dollar-Rupee (64.96): While the Rupee is currently reacting more to the Dollar weakness in the global currency markets, our hunch is that it will start reacting to Equity weakness also soon. If so, the 64.80-75 region would be a decent Support.
INTEREST RATES
The German 10 Yr – US 10 Yr yield differential (-2.18%) as expected, has bounced from near crucial long term support level of -2.25% via a rise in the German 10 year yield towards 0.675%. We will have to watch out for the ECB meeting on 8th March and 21st March US Fed meeting as they now become extremely vital to the course of yields and forex rates. Any indication of tightening by the ECB might lead to a rise in the German yields and correspondingly the German – US yield spread.
US 10 Year Yield (2.86), US 30 year Yield (3.1275), US 5 year yield (2.63), US 2 year yield (2.237) : US Yields continue their oscillation near respective long term resistances.
The first half of March should see muted movement in US yields – however, some volatility due to the ECB meeting on 8th March is possible. As the 21st March Fed meeting comes closer, there could be a rise in yields in anticipation of a rate hike.
(Long term resistance levels for the 4 yields have been as follows: 2.85-2.90, 3.20, 2.7 and 2.2 respectively – a decisive breach of these levels could happen in March 2nd half.)
