STOCKS
Dow (24610.91, -1.35%) is heading lower in line with our expectations and could fall towards 24500-24000 as we have been mentioning for quite a few days. Near term looks bearish while below 25200.
Dax (12217.02, -1.39%) has also fallen and could come off towards 12100-12000 levels in the next few sessions. Immediate support is seen near 12000 and while that holds, the index could continue to trade sideways in the 12000-12500 region for the medium term.
Nikkei (21268.93, -0.99%) has support at current levels on the 3-day candles. If the falling momentum continues to be strong, a break below 21000 is possible which could open up a downside possibility for the near to medium term towards 20500-20000 levels.
Shanghai (3269.44, -0.30%) has been stable when looked at the weekly candles. There is some scope of testing lower levels of 3200 over this week or the next.
Nifty (10094.25, -0.99%) and Sensex (32923.12, -0.76%) have come down sharply yesterday. Decent support seen in the 10080-10020 region on Nifty which if holds could bring a bounce towards 10200-10300 levels again in the near term. But if the index breaks below 10020 in this week, it could open up chances of a sharp fall in the next couple of weeks. Similarly with the Sensex, an immediate bounce is expected if the support at current levels hold.
COMMODITIES
Brent (66.21) is gradually moving up and could continue to do so towards 67. Trade region of 67-64 is likely to sustain for the coming sessions. Nymex WTI (62.30) may test 63 breaking above immediate resistance on the daily candles. WTI looks that it may face some rejection near 63 and come off towards 62-61 again in the coming sessions.
Gold (1316.30) is likely to trade in the 1320-1310 region with a test of 1300 on the downside. Scope of rising above 1320-1325 looks less likely just now with focus on levels near 1300. Weekly chart shows possibility of 1300-1275.
Copper (3.0850) is stable just now and does not show any bounce from current levels. 3.0-3.05 is an important support region which if produces a bounce could again take Copper up; else a fall below 3.05-3.0 if seen, could be vulnerable to a fresh fall in the medium term.
FOREX
Dollar index (89.88) slightly breached immediate resistance on daily candles near 90.25-90.30 yesterday by seeing a high of 90.35, but has now dipped. A break of support on the daily candles (near 89.80) is likely to happen anytime within the next 1-2 days, with next downside target being 89.0-89.1 (seen as crucial support level on the weekly line chart). We repeat yesterday’s comment regarding the Fed meeting on 21st March:
‘A lot could depend on the US Fed meeting this week, where a rate hike is expected. Whether a rate hike and a possible rise in US yields subsequently are positive for Dollar strength or not would have to be seen –the usually positive correlation between bond yields and currency strength has not worked for the Dollar in the past 3-4 months and whether this particular rate hike can reinstate the previous correlation would be something to watch out for in the coming weeks. Our preference is for the negative correlation to continue ie for the Dollar to see a dip.’
Euro (1.235) – As expected, the Euro has bounced from immediate support on daily candles near 1.225 after having seen a low of 1.2258 yesterday. There is immediate resistance now on daily candles near 1.2375 which could be breached in this week itself. The Euro has been seeing sideways movement in the broad 1.215-1.255 zone for the last 8 weeks. A decisive breakout on the upside beyond higher resistance on 3 day candles near 1.255 could be on the cards within the next couple of weeks.
Dollar Yen (106.20) might see a retest of 106.5 which is seen as immediate resistance on daily candles. On 3 day line chart, we see that 106.5 is the resistance provided by earlier medium term support line. The Dollar Yen might be about to turn bearish towards 105 and lower within the next 1-2 weeks. As mentioned yesterday as well, the next possible downside target is support near 105.00-104.75 on daily candles. A break of 105, would be crucial since the Dollar Yen hasn’t been able to move below that level for more than a year.
Euro Yen (131.11) exactly as per our prediction yesterday, has bounced from crucial support near 129.75 on 3 day and weekly candles (also seen on the daily line chart). There is immediate resistance now on daily candles near 131.5 which should produce a dip.
Pound (1.4037) after testing support near 1.38 on 3 day candles last week is now moving up. It could sustain this bullishness in the coming 1-2 weeks and attempt a test of 1.44 (seen as resistance on 3 day candles and 3 day line charts).
Dollar Rupee (65.1725) may see 65.30-40, maybe 65.60, but possibly not more than that.
INTEREST RATES
Global bond yields are expected to react to the Fed meeting this week. We have been expecting US yields to move up in response to a much anticipated rate hike. The 2 Year yield has already moved up to a 9 year high and might well pull up the other longer term yields as well.
US 10 Yr Yield (2.85), 30 Yr (3.086), 5 Yr (2.65), 2 Yr (2.30) : US Yields haven’t seen much movement (as is usual in sessions just before the Fed meeting) Data releases over the past week have put up a contrasting view of the US economy – CPI, Retail Sales, Wage Growth and Housing Starts data indicate a pause in growth while Capacity Utilization, unemployment claims, Industrial Production and Import Prices data indicate a surge in growth. We expect the US Fed to hike rates tomorrow but at the same time strike a balance by not being too hawkish in the press conference. We might be wrong and the Fed could surprise everyone – lets wait and watch. For now, we expect 10 Year yields to move past 3% in the days after the Fed meeting.
Japan 10 Yr Yield (0.043) as per expectation has bounced form support near 0.035% on the short term chart.
