STOCKS
All Equity indices are in the green, having moved up well in line with expectation. However, Resistances coming up in the near term could lead to some profit-taking, with the exception (perhaps) of the Shanghai.
The Dow (23787, +1.09%) is heading up towards the stated Resistance (21-MA on 3-day chart). As mentioned yesterday, gains beyond that might not be easy in the near term. Instead, the market might dip back towards 23500-250 before gathering steam to rise towards 24500 in the longer term.
Dax (10803.98, +56.17, +0.52%) rose, as expected, to test the mentioned resistance at 10900. Some more upside to 11000 is possible in the near term, but we may see some profit-taking from there.
Nikkei (20455, +252,+1.25%) has risen well and is testing the 21-MA at 20400 on the daily line chart in the next session. If it manages to sustain the rally, then a rise past 20500 could lead to a test of the strong resistance at 21500 in the medium-term.
Shanghai (2568, +42, 1.65%) has risen well since yesterday and is trading in our target region of 2550-75 already. This is a crucial level now. A break above 2575 could be very bullish in the long term.
As suggested, the Sensex (35980.93, +130.77, +0.36%) and Nifty (10802.15, +30.35, +0.28%) are heading towards the immediate resistance 36100 and 10900. The 21-MA on the 3-day charts at 35500 and 10600 might provide strong Support for both and could lend them enough strengthen to eventually break the near-term resistance at 36100 and 10900.
COMMODITIES
Although OPEC-led supply cuts in crude is supporting the oil prices just now, there is news of a possible US crude output above 12mb/day already. This could be a concern for the oil prices. The US-China talks are to continue today also and the markets expect easing of trade relations post the current meet with possibility of reaching a settlement. The API reported a crude inventory draw of 6.127 mb for the week ending 4th Jan’19.
Crude prices have moved higher. Brent (59.43) and Nymex WTI (50.53) are fairly trading near our expected target levels of 60 and 50. While the rise continues, we could possibly see a test of 62.50-64.00 and 55 respectively. Near term looks bullish for the Crude prices just now.
Gold (1285.80) and Silver (15.72) are almost stable below 1300 and 16 respectively. Gold could spend a few sessions within 1280-1300, before attempting a rise towards 1320 in the near term while Silver is likely to come off towards 15.50-15.00 in the medium term. Some ranged sideways movement could be expected just now.
Copper (2.6675) is testing immediate channel resistance at 2.67 and needs to break on the upside to turn bullish towards 2.70/75 levels. Although daily candle chart suggests a possible fall from here back towards 2.55, longer term charts are indicating bullishness towards 2.75/80. Any dip from current levels could be short lived.
FOREX
US Dollar looks strong and could lead to weakness in the Pound, Yen, Yuan, Euro and Rupee in the near term. On the contrary, Aussie and Euro-Yen look bullish.
Dollar Index (95.83) looks bullish while above 95.25/50 and could be soon headed towards 97.25.
Euro (1.1452) has been trapped within the 1.15-1.13 region for almost 3-months now and a break on either side is due soon bringing in sharp and volatile moves. For now, we expect 1.15 to hold, pushing Euro back towards 1.13.
Dollar Yen (108.86) continues to trade above immediate support at 108. While above 108, it could rise towards 110 in the near term. View is bullish above 108.
Euro-Yen (124.70) is trading in a narrow range over the last 2-sessions. It could be in a pause mode below immediate resistance at 125.00/20. While below 125.20, there is scope of falling to levels near 123/122 again in the near term. View is bearish for the near term while below 125.20. On seeing the longer picture, there is long term support at 122 coming from Jul’12 on the 3-day line chart which suggests bullishness towards 128 in the longer run.
Pound (1.2734) has trend resistance at 1.28 as we have been mentioning in the last couple of editions. While 1.28 holds, a fall back to 1.26/25 could be a possibility. On the contrary, if Pound manages to break above 1.28, it could be set for a sharp rise towards 1.31.
Aussie (0.7158) has risen slightly and could be headed towards 0.73 in the near term. Rising Aussie could possibly indicate some bullishness in Copper also in the near term, as Aussie has strong directional correlation with Copper and is likely to continue.
USD-CNY (6.8391) seems to have broken below the immediate support on the 3-day and weekly candles. While below 6.8430, the Yuan could strengthen towards 6.80.
Dollar Rupee (70.21) could trade within 69.80-70.30 today. We may expect a dip from 70.30 back towards 70.10/00. Only on a break above 70.30, we would consider continuation of the current upmove towards 70.50/60 for the coming sessions.
INTEREST RATES
As expected, the US 10Yr has moved up to 2.72%. The 2Yr (2.58%, up from 2.54%), 5Yr (2.57%, up from 2.53%) and 30Yr (3.01%, up from 2.99%) have all moved up yesterday. As mentioned day before, “While the market expectations (about Fed rate hikes) will see flip-flops over time, it might be prudent on our part to budget for one hike after June.”
That said, the 5Yr may have Resistance near current levels and the 10Yr may have Resistance near 2.75%. Both could dip back a little over the coming days.
Importantly, the rise in US yields has pulled down the German-US 2Yr Spread (-3.17%) and German-US 10-yr (-2.5%) over the last couple of days. We had expected the German-US 2Yr to rise towards -3.00%. we are not very sure now whether that will happen. Need to watch that.
In India, the 10Yr GOI (7.45%) dipped back after having risen to 7.51% on Monday. Need to watch whether our expectation of an eventual fall towards 7.10% will materialise or not.
