STOCKS
Most of the stock indices are testing immediate resistance as seen on the respective daily candle charts. While they hold, the indices may come off in the near term. Immediate view is bearish to sideways for most indices.
Dow (24801.36, -0.33%) tested a low of 24535 yesterday but moved up to close near 24800. As mentioned yesterday, 24500 is an immediate support which if holds, could produce a bounce back towards 25500 levels in the near term. Failure to bounce back from 24500, would trigger a fall to lower levels of 24000.
Dax (12245.36,+1.09%) made an intra-day high of 12275, attempting to test 12300 on the upside. If 12300 holds as interim resistance, the index may come off towards 1190 again; else a break above 12300 is needed to confirm a near term uptrend targeting 12500-12600 in the coming sessions. Wait to see price action near 12300.
Nikkei (21411.38, +0.75%) is stuck in the 21000-21600 region for the last few sessions and is likely to test 21800 on the upside just now. A break on either side of 21000-21800 zone would indicate further directional movement. Till then some narrow sideways movement may continue.
Shanghai (3283.44, +0.36%) came off a bit from immediate resistance near 3300 as seen on the daily candle chart. If that holds in the near term, the index could come off towards 3250-3200 again in the coming sessions.
Nifty (10154.20, -0.93%) and Sensex (33033.09, -0.85%) are trading lower and look bearish for the week. Nifty could test 10080-10020 on the downside whereas Sensex could come off towards 32500 in the next few sessions.
COMMODITIES
Brent (64.49) has immediate resistance near 66 and while that holds, price may test lower levels of 63-62. WTI (61.30), on the other hand, is likely to trade in the 60-62.50 levels in the coming sessions.
Gold (1328.30) came off sharply contrary to our expectation of moving up towards 1350. The price may be trapped in the 1345-1315 region for the next few sessions.
Copper (3.1370) came off from 3.1750 and could test 3.10-3.07 on the downside in the next few sessions before again moving back towards 3.20.
FOREX
The Dollar Index (89.596), after seeing lows near 89.4 in the last couple of days is currently trading near 89.6. As mentioned yesterday, there is crucial long term support level on the weekly line charts near 89.0-89.5. Whether the index will break this support zone and move down towards lower support on daily candles near 88 would highly depend on the two central bank meetings in the next 2 days – ECB and Bank of Japan. If the ECB makes a slight step forward in the direction of future tightening of its monetary policy, we might see Dollar weaken and the Dollar index come down below 89.0-89.5.
Euro (1.2403) saw a high of 1.2445 yesterday but is currently trading just above 1.24. We might see muted movement in the Euro in the few hours before the ECB meeting. The Euro infact stands at a crucial juncture right now. Looking at the daily candles, we see both a downmove towards support near 1.225-1.23 and an upmove towards resistance near 1.255 possible. The charts suggest slightly greater chances (say 55-60%) of it rising up. However, as mentioned yesterday too, Draghi might 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 (106.09) has again bounced from the crucial 105.45-105.50 levels . This is the lowest level seen by the Dollar Yen in more than a year. The struggle to break this level might suggest that the markets are waiting for both the ECB and BOJ meetings. We repeat that 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 (131.570) had tested resistance near 132 on daily and 3 day candles day before yesterday and might see a slow downmove towards 129-130 in the coming sessions.
As mentioned yesterday, Pound (1.3904) is slowly moving up towards 1.395, which is seen as immediate resistance on daily candles. It is likely to dip after testing 1.395.
Dollar-Rupee (64.885): Test of Support at 64.80-75 still possible. Look for a bounce from there to 65.20-25. Else, break below 64.75 raises chances of 64.60-40.
INTEREST RATES
The German 10 Yr – US 10 Yr yield differential (-2.22%) has again dipped slightly towards long term support level near -2.25% via a dip in the German 10 year yield towards 0.655% and rise in US 10 Yr towards 2.877%. We will have to watch out for the ECB meeting later today 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 (2.877), US 30 year Yield (3.148), US 5 year yield (2.64), US 2 year yield (2.246) : US yields have been seeing sideways movement in a very narrow range for the past few days and are likely to see a significant move soon. The sentiment surrounding global politics indicate that a rise in US yields beyond long term resistance levels is imminent.
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.)
