STOCKS
Dow (25007.03, -0.68%) is trading near important levels just now. Resistance near 25200 on the 3-day candle is holding well and there is scope of a fall to 24400-24000 in the medium term. While below 25500, view is bearish towards 24000.
Dax (12221.03, -1.59%) fell sharply in line with our expectation and while below 12500, there is room on the downside towards 12000-11800 in the coming sessions.
Nikkei (21748.30, -1.00%) is trading along the resistance as mentioned yesterday also. Trade within 22000-21400 is possible in the next couple of sessions. A fall below 21400, if seen could take it further down towards 21200-21000. For now the index is likely to remain stable or see a short corrective dip.
Shanghai (3294.85, -0.48%) seems to be holding below 3350 resistance as mentioned yesterday. While below 3350, the price could fall towards 3250-3200 in the coming sessions.
Nifty (10426.85, +0.05%) and Sensex (33856.78, -0.18%) both tried to move up a bit yesterday but came off to close at slightly higher levels. If the upside momentum continues, the indices could move up towards 10500 and 34500 as our initial target; else a short dip back towards 10380 and 33500 could be seen in the near term.
COMMODITIES
Brent (64.7) is trading below 66 and stuck between the narrow 66-63 region just now. Some more trade within this region is possible in the near term. Near term looks sideways to bearish.
59.50-60.0 is the trade region for WTI (60.80). Stable movement is likely to continue this week.
Gold (1329.0) is likely to move up gradually towards 1340/50. Near term looks bullish.
Copper (3.1485) is slowly truing to rise but may again face a short rejection from 3.1750 before coming off again towards 3.1000-3.0750. Only if a break above 3.1750, if seen could ensure a rise towards 3.20 or higher.
FOREX
As mentioned yesterday, the data releases in USA this week would be important for the course followed by major currency pairs and bond yields. The US CPI data yesterday could not exceed market expectations, thereby decreasing likelihood for quicker rate hikes by the US Fed this year. This has led to Dollar weakening against majors.
The Dollar Index (89.58), against our expectation, has broken immediate support on daily candles near 89.75 and might now move further down towards support near 89.2-89.0 on weekly line chart. This is a crucial support level seen on a trendline coming from Mar’14, a break of which could lead to medium term bearishness. The movement in the next few sessions could depend on US Retail Sales data (due later today), EU CPI data (on Friday), US Housing Starts data (Friday) and US Industrial Prodn data (Friday).
Euro (1.2409): Against our expectation, the Euro has breached resistance that was being provided by the 21 days moving average on daily line chart. There is some resistance that could still be provided near 1.24 by earlier support (now resistance) trendline on the daily line chart. However, in case of a breach of the same, the Euro should test resistance near 1.25-1.255 on 3 day and daily candles. The EU CPI data release on Friday would be vital – a higher than expected figure would be bullish for Euro.
Dollar-Yen (106.44) yesterday saw a high near 107.29 after news of a political scandal involving the Prime Minister broke out, lowering confidence in the Yen. However, it proved to be a temporary blip as there was strong resistance provided by moving average lines on the daily line chart near those levels. Moreover, global Dollar weakness helped in bringing Dollar Yen back below 106.5. We could now see a resumption of the downmove towards crucial support near 105.5-105.0 in the coming sessions -a break of the same would confirm medium term bearishness.
The Euro-Yen (132.05) against expectations has moved back up beyond 132 as the Euro strengthened against the Dollar. If the Euro strength pauses for the next few days while the Yen regains strength against the Dollar, we could see the Euro Yen resume its earlier downmove towards 130-129. A testing of 130 however implies 105 on the Dollar Yen (if Euro stays near 1.24) – if this happens, Dollar Yen might drop further, taking Euro Yen below 130-129.
Pound (1.3986) breached 1.395 yesterday, which was seen as immediate resistance level on daily candles. There is higher resistance now near 1.4 which should lead to a dip in the Pound in the next couple of sessions.
Dollar-Rupee (64.90): Dollar Rupee is likely to come down towards 64.80/75 today before pausing. The RBI in a move late last evening banned LOUs for Imports, thereby creating some uncertainty regarding where the Dollar Rupee might open today. Whether banning of LOUs will lead to less USD borrowings leading to lesser demand or whether it will lead to importers buying more Dollars to clear payments would have to be seen.
INTEREST RATES
The US CPI data couldn’t exceed expectations yesterday thereby decreasing likelihood for quicker rate hikes by the US Fed this year. This has led to a drop in US yields.
US 10 Year Yield (2.83), US 30 year Yield (3.08), US 5 year yield (2.61), US 2 year yield (2.25) : US yields are seeing a significant dip in their respective set ranges around their long term resistance levels. Yesterday we wrote about how US yields might drop to keep the German – US Yield spread about crucial long term support near -2.26%. The same is happening currently. Last week, we had also said that there might just be some drop in US yields in this week, after which the week of the US Fed meeting might then see volatility return.
Lets wait and watch how further US data releases this week impact yields. Currently, the likelihood of a significant rise in yields due to the Fed meeting next week is seen to be decreasing. (Long term resistance levels for the 4 yields have been as follows: 2.85-2.90, 3.20, 2.7 and 2.2 respectively )
