STOCKS
Dow (26186.71, +0.14%) is held well by support near 26000. While above 25700-26000 region, the index may attempt to move higher towards 26500 in the near term.
Dax (13003.90, -1.41%) came off sharply to test 13000 on the downside. This is an important level for the near to medium term. If the support at 13000 holds, the index could move back to levels near 13300 or higher; else a fall below 13000 could easily take it down towards 12800-12700 in the medium term.
Nikkei (23181.34, -1.30%) is almost trapped in the 23000-23600 region and is unable to decide which direction to take. A possible test of support near 22800 is possible before it bounces back towards 23400-23600 levels. Overall range-bound movement is likely to be seen in the near term.
Shanghai (3440.49, -0.19%) has been coming off sharply and could test levels near 3350 which is a medium term support coming from May’17. While 3350 holds, a bounce back towards 3400-3450 is possible in the longer term. Near term looks bearish.
Yesterday the Indian stock indices saw some volatility as the Bugdet statement was laid out, but surprisingly recovered almost the whole of the dip by the end of the session. It is most likely that Nifty (11016.90, -0.10%) and Sensex (35906.66, -0.16%) have already made a near term top and that the corrective dip could begin any time sooner. While below the recent highs, we may expect a dip next week or at least some sessions of sideways consolidation. Near term targets for Nifty and Sensex are 10800 and 35500 respectively, considering a test of these levels were almost seen yesterday.
COMMODITIES
Brent (69.79) and WTI (66.04) have risen. Although we were looking at a rise in Brent and a small dip in WTI, both have risen sharply from levels seen yesterday. While immediate support near 68 holds on Brent, it may target 71-72 in the near term. WTI on the other hand is respecting support near 64 and while that holds, it could move up towards 67 to make fresh highs within the current rally.
Gold (1347.85) has moved up as expected and could be headed towards 1350-1360 while above 1340 support. Watch price action near 1350-1360 to get an indication on further course of direction.
Copper (3.21) has moved up to test immediate resistance near 3.225. While that holds, a dip back towards 3.1750 is possible; else a rise above 3.225, if seen and sustains, could lead to a rise towards 3.25-3.26 in the near term.
FOREX
Dollar Index (88.757) has dropped below 89 and is now testing support on the daily line charts near 88.6-88.7. There is similar support near 88.8-88.9 on the weekly line chart. There are good chances for this support zone of 88.6-88.9 to hold. We still await for the correlation between Dollar strength and high US yields to resurface in the days to come.
Contrary to our expectations, Euro (1.2495) has moved up afresh instead of dipping. It reached a high of 1.2516 today and is currently trading just below 1.25. Resistance is seen between current levels and 1.26 on the Weekly Line chart. This is a crucial resistance level and we will have to wait and watch if a dip from here towards 1.23 (support on weekly candles) happens in the days ahead.
The Euro-Rupee quotes higher at 80.02 and could head further up to 82 also, suggesting Euro strength and Rupee weakness might both sustain for a while.
Dollar-Yen (109.64) is strengthening as the Bank of Japan has reacted aggressively to the recent rise in Japanese yields (see Interest Rates below) by increasing its bond purchases. With the Japanese govt and Central Bank not seeming to favour Yen strength, it will be interesting to see if an increasing yield spread between US and Japanese bonds (in favour of US bonds) will strengthen Dollar Yen in the coming days. For now, Dollar Yen is at resistance near 109.7 on the daily candles and if this resistance holds, there could be a slight dip towards 109 in the current session.
Euro-Yen (137.06) has moved up well past 136 as Dollar-Yen (109.64) has remained stable at relatively elevated levels. However, there is crucial Resistance coming up near 138 on the Euro-Yen, which can hold, especially as Dollar-Yen has some chances of starting to fall afresh. Note that Yen-Rupee (0.5846) also looks potentially bullish.
Pound (1.4270) has moved up beyond immediate resistance near 1.42 on the 3 day candles. It should find resistance at 1.43-1.44 (1.43 is seen as next resistance level on the 3 day line chart and 1.44 is seen as next resistance level on the weekly candles).
Dollar-Rupee (64.02) – Expected roadmap for the next few days… (A) see 64.1075 tomorrow (B) then we might see a dip to 63.90-80 (C) after that we may see a fresh rise to 64.15-17. Where the market will go from 64.17 will have to be seen.
INTEREST RATES
US bonds sell off seem to be continuing globally as confidence in the US economy increases and inflation expectations remain strong. Yesterday’s statement by the FOMC confirming that inflation expectations are indeed on an uptrend, is lending support to the present sell off. Parallely, positive growth and inflation sentiments in the Euro zone countries is leading to a rise in German bond yields as well. Japan on the other hand seems to be panicking with a rise in 10 year yield beyond 0.1% (happened yesterday) and is trying its best to keep the yield below 0.1% and nearer to the targeted 0%.
US 10 Yr (2.7915%), 30 Yr (3.0299%), 5 Yr (2.5745%) & 2 Yr (2.1690%) – On Wednesday, the shorter term yields had risen significantly with the rise in longer term yields being less. Yesterday, the opposite happened with both 10 Yr and 30 Yr yields rising almost 8 basis points, lending some relief to the yield curve flattening which happened yesterday. We repeat that 5 Yr and 2 Yr are very near to long term resistance levels near 2.5-2.6% and 2.2% respectively (these resistances are shown on long term charts in our January Treasury report – available on request). Both these resistances are seen on trend lines which join resistance levels over the last 30 years – thereby making us believe that the short term yields shouldn’t rise much further.
Yield spreads have come back near respective support levels as the recent hovering around support levels continues. US 10 Yr-5Yr (0.217%) is above 0.2% (seen as support on short term charts) and US 30 Yr – 10 Yr (0.2384%) is almost touching 0.24% (seen as support on long term charts).
Japanese 10 Year Yield (0.088%) is back below 0.1% after the Bank of Japan increased its bond purchases in response to the rise in yields. We could see the Bank of Japan now making sure that the yield stays below resistance near 0.088%-0.9% on the short term charts.
German 10 Year yield (0.721%) is rising fast and could target 0.9% on the upside in coming weeks (this high was last seen in June-July 2015).
 has moved up beyond immediate resistance near 1.42 on the 3 day candles. It should find resistance at 1.43-1.44 (1.43 is seen as next resistance level on the 3 day line chart and 1.44 is seen as next resistance level on the weekly candles). ){kind=link}