STOCKS
As the FED kept rates unchanged not much of movement was expected but it seems the stock markets are reacting rather negatively. News states that the introduction of the word “symmetric” in the statement to define the inflation goals could be taken in a way to understand that the FED would let inflation overshoot its target. Surprisingly the Dow (23924.98, -0.72%) is down about 174 points, but closed above 23750. While that holds, the index is likely to remain ranged. The falling momentum if continues could take it lower towards 23500-23250 in the near term.
Dax (12802.25, +1.51%) broke out sharply above 12600-12700 region while the Euro (1.1978) declined from levels above 1.21. The Euro looks weak for the coming sessions and while the Euro weakens, Dax could continue to hit fresh highs in the current rally targeting 13000-13200 on the upside.
Nikkei (22472.78, -0.16%) is down slightly. Note immediate resistance near 22600 and while that holds, a short dip towards 22200 or lower is possible in the near term. Outlook is bearish for the coming sessions.
Shanghai (3064.44, -0.54%) is stuck in the 3150-3050 region and may remain so this week. A break on either side is necessary to see any major movement in the coming sessions.
Nifty (10718.05, -0.20%) is likely to remain stable for the coming sessions with the upside capped at 10800. Trade within 10600-10800 region is likely to be seen in the coming sessions.
Sensex (35176.42, +0.046%) has some scope of rising towards 36000.
COMMODITIES
Some stability could be expected in the crude prices for some sessions. Brent (73.18) and Nymex WTI (67.81) are almost stable for now. Brent could be trading in the broad 76-72 region for sometime while WTI tests resistance near 70 and could come off towards 66-65 levels in the near term.
Gold (1309.40, +0.29%) almost tested 1300 on the downside and may now start to move up in the coming sessions towards 1320 again. Near term likely to be bullish while above 1300.
Copper (3.0615) is held by the support on the 3-day candle chart and while that holds, copper could move up to test 3.15 again in the coming sessions.
FOREX
Dollar index (92.58) saw a high near 92.8 yesterday as the US Fed predictably maintained status quo, while at the same time acknowledging that inflation is moving higher. This hawkish component of the Fed’s stance might have pushed Dollar Index towards 92.8 but it is again trading near 92.5-92.6 currently. In the near term, there could be a dip back towards 92.0-91.5 after which it should again resume its uptrend. The next target on the upside in the medium term could be 94-95 (which corresponds to the 5th wave starting point of the downmove since Dec ’16). It is also seen on daily line chart as resistance on trendline coming down from Jan ’17 and could be tested in the next 2-3 weeks.
Euro (1.1973) saw a low of 1.1938 yesterday as the Dollar Index simultaneously strengthened, possibly due to the Fed’s positivity about future inflation. It could move up towards 1.20 in the coming 1-2 sessions. If it moves further up above 1.20, then levels near 1.21 could again be tested in the near term. However, after that, it is likely to again start moving down towards its medium term target, which would be levels near 1.16-1.17 (which is the 5th wave starting point of the Euro’s upmove since Dec ’16). This downside target is also seen as support on trendline in the daily line chart.
Dollar Yen (109.68) : Dollar Yen continued moving up further in the upward channel on 3 day candles and saw a high near 110. Our predicted dip towards 109 hasn’t taken place yet, but it could well happen in the coming sessions. The current uptrend looks capped till 110.0-110.5 in the medium term, after which Dollar Yen could dip.
Euro Yen (131.35) : As mentioned yesterday, support near 131 on weekly candles for Euro Yen might well give it support in this week. Lower support is present near 130 which would be tested when Dollar Yen moves down towards 109 and Euro simultaneously moves below 1.195. For this week, our targets of 1.200-1.205 on Euro and 109.5-109.0 on the Dollar Yen give a range of 131.95-130.80 for the Euro Yen.
Pound (1.359), after having broken below crucial long term support level near 1.385 on weekly line chart, is slated to turn very bearish in the medium term. As mentioned yesterday, it is moving down towards its next downside target of 1.35 (seen on daily candles), which could possibly be tested by early next week.
Dollar Rupee (66.66): Dollar Rupee to trade sideways in the 66.60-66.80 region today. A break above 66.80 could take it higher towards 67.00-67.20.
INTEREST RATES
The Fed maintained status quo yesterday but expressed positivity regarding rising inflation. This hawkish component did take the US 10 year yield towards 2.99% but the yield has again dipped a bit. Medium term targets in our Apr ’18 US Treasury report (available on demand) are as follows:
3.2%-3.3% (10 Year), 3.4%-3.5% (30 Year), 3.15% (5 Year) and 2.75% (2 Year). A breach of the 3% level by the 10 year yield would be vital for these targets to be achieved by June. A rate hike is expected in the June Fed meeting, which might start getting factored later this month and could henceforth lead to a rally in yields towards these medium term targets. We also expect some more yield curve flattening in the next month followed by steepening after that, as yields bounce from long term supports.
US 10 Yr Yield (2.97%), 30 Yr (3.15%), 5 Yr (2.80%), 2 Yr (2.49%):
Repeating yesterday’s comment:The US 2 year yield (2.5) has tested the psychologically important 2.5% level and could now see a short term correction towards 2.45%.
The 10 Year yield (2.97%) couldn’t rise above 3% inspite of the FOMC’s hawkish stance. A rise back above 3% could happen later this month as the June Fed rate hike starts getting factored by traders.
