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STOCKS

Equities continue to remain bullish. The global indices can move further higher in the next few days. However, key resistances are coming up which increases the possibility of a corrective fall in equities going forward.

Dow Jones (26,091.95, +60.14, +0.23%) can move higher to 26,250-26,300 while it remains above 26,000

DAX (11,505.39, +47.69, +0.42%) has risen above the crucial 200-week moving average level of 11,467 and a trend resistance level of 11,500. The outlook is bullish, and DAX can rise to 11,700 and 11,750 in the coming days. Supports are at 11,490 and 11,467.

Nikkei (21,485.29, +42.94, +0.20%) has come-off after testing the 100-day moving average resistance (21,602). A break below 21,500 can see a dip to 21,350 and 21,300 in the near term. However, an eventual break above 21,602 will then open doors for a test of 22,000.

Shanghai (2,972.58, +11.3, +0.38%) retains its momentum and has room for further rise in the near term. Key resistances at 3014 (50% Fibonacci retracement level) and 3053 (100-week moving average) can be tested in the coming sessions. A corrective fall thereafter to 2900-2850 or even lower levels cannot be ruled out.

The Indian benchmark indices, the Sensex (36,213.38, +341.90, +0.95%) and Nifty 50 (10,880.10, 88.45, 0.82%) have surged in line with expectation yesterday. The outlook is bullish. Nifty 50 has support in between 10,815 and 10,800. It can move further higher to 10,980-11,000 in the coming days. Sensex has series of supports between 36,100 and 36,000 and can test 36,450-36,500 in the near term. A strong break above 36,500 will pave way for the next target of 36,850.

COMMODITIES

Gold and Silver remains stable and can remain range bound. Copper can dip in the near term before resuming its uptrend. Oil has come under pressure after Trump raised concerns through his tweet about high oil price and also asking the OPEC to relax. However, Oil has key supports near current levels which will need a watch to get cues on the next direction of move.

Gold (1327) is stable between 1320 and 1335 and can remain range bound between 1320 and 1340 for some time. A break below 1320 can take gold lower to 1310 and 1300.

Silver (15.88) is stuck in between 15.8 and 16 and looks mixed. A breakout on either side of 15.8 or 16 will decide the next move. A break below 15.8 can test 15.6 while a breach of 16 can take the price higher to 16.2.

The rally in copper (2.94) has paused. The prices can dip to 2.92 or 2.90 before we see a fresh rally to 3 and higher levels.

WTI (55.5) and Brent (65) fell as expected but at a much faster pace than expected. However, crucial supports are near current levels which will need a watch. Brent has cluster of supports between 65 and 64. A bounce in the coming sessions can take it back higher to 67. But a break below 64 can test 63 initially and even 61 and 60 thereafter. WTI has little room left to dip and test its key support between 54.5-54.35. A bounce from there can see a revisit of 56 and 57 levels.

FOREX

Major currencies test immediate resistances just above current levels from where a fall in the near term looks possible.

Dollar-Index (96.37) while above 96, could have some scope of rising back towards 97-98 in the near term. A test of 96 could be seen initially within the next few sessions.

Euro (1.1359) has not been able to move above 1.1370 since the past 5-sessions. A break above 1.1370 could see a test of 1.14 just now before the currency comes off from there back towards 1.13 and lower.

Euro-Yen (125.85) has immediate resistance at 126 and while that holds, a fall back to 124.50 is possible in the coming sessions. Break above 126, if seen could be bullish towards 126.80-127.00; this if happens would pull up Euro too above 1.14.

Dollar Yen (110.77) has immediate resistance at 111 on the daily chart and higher at 112 on the weekly candles. While 111 holds, a dip to 109.50 is possible before a further rise towards 112 is seen.

Pound (1.3141) too has immediate resistance at 1.31 and higher at 1.32 from where a fall back towards 1.28 is likely.

Aussie (0.7164) is trading within 0.70-0.7250 region, both being medium term support and resistance levels. Some sideways movement is possible in the near term before we a see a rise towards 0.74-0.76 in the longer run For now interim support and resistance at 0.71 and 0.72 respectively could hold.

USDCNY (6.6894) has risen slightly rising back to 6.69. Failure to rise above 6.9 could take it down towards 6.65/63 in the near term. Else a rise above 6.69 could bring it back towards 6.70/72 levels just now.

Dollar Rupee (70.9850) came down to trade around 71. While there is scope of testing support at 70.85/80 on the downside, we could see an immediate bounce back from there towards 71.10/20 in the near term. There is news of destroying terror camps at LOC by IAF jets and this could probably add on to pull up Dollar Rupee on the onshore markets today possibly with a gap up opening.

INTEREST RATES

The US yields are trading low and could fall some more in the near term. The 2Yr (2.49%), 5Yr (2.46%), 10Yr (2.65%) and 30Yr (3.01%) are down from yesterday’s levels of 2.51%, 2.49%, 2.67% and 3.03% respectively. Support is visible on the near term charts at 2.44% (5YR), 2.63% (10Yr) and 2.95% (30YR). Some more fall in the next few sessions is possible.

The US-JGB 10Yr (2.68%) could trade sideways for some time before rising towards 2.74-2.78%. Longer term looks bullish.

The 10Yr GOI (7.5839%) could rise towards 7.60/65% while above 7.50%. In the near term, the yield could remain in the 7.50-7.65% region before rising higher in the longer run.

BoJ Governor Haruhiko Kuroda told the parliament that China's economy "slowed quite significantly in the latter half of last year". And he predicts that it may "remain in the doldrums in the first half of this year." Nevertheless, Kuroda expects Chinese even economy to "pick up thereafter, as authorities have taken fiscal and monetary stimulative action."

Domestically, Kuroda expected that the net burden on households from this year's scheduled sales tax hike to be smaller than previous hike in 2014. And he added that BOJ will be watching the impact of the sales tax hike on the economy. The impact could change depending on consumer sentiment, job and income conditions at that time.

Sterling jumps broadly as UK opposition Labour said they're ready to back second referendum. Also, Prime Minister Theresa May is said to be considering delaying Brexit. Labour leader Jeremy Corbyn has been against another public vote on Brexit but finally bowed down to pressure inside his party. He formally said on Monday evening that "one way or another, we will do everything in our power to prevent no-deal and oppose a damaging Tory Brexit based on Theresa May's overwhelmingly rejected deal,". And, "that's why, in line with our conference policy, we are committed to also putting forward or supporting an amendment in favor of a public vote to prevent a damaging Tory Brexit being forced on the country."

Separately, Bloomberg reported that May will finally allow Cabinet discussion on extending Article 50 beyond March 29 on Tuesday. The Sun went further and said May would propose formally ruling out a "no-deal" Brexit scenario. May will chair a Cabinet discussion today in London morning, and that update the Parliament on discussions after noon. The government will propose motions on Brexit state-of-play by Tuesday night. The motion will be debated and voted on Wednesday.

Key Highlights

• The British Pound started a solid upward move above the 1.2920 resistance against the US Dollar.
• There was a break above a significant bearish trend line with resistance at 1.2930 on the 4-hours chart of GBP/USD.
• The Chicago Fed National Activity Index (CFNAI) declined from 0.05 to -0.43 in Jan 2019.
• The US Housing Starts for Dec 2018 will be released today, which could change -0.5%.

GBPUSD Technical Analysis

The British Pound formed a solid support above 1.2800 and later climbed higher against the US Dollar. The GBP/USD pair gained pace above 1.2920 and moved into a positive zone above 1.3000.

Looking at the 4-hours chart, the pair traded above the 1.2990 pivot area and the 61.8% Fib retracement level of the last decline from the 1.3217 high to 1.2772 low. More importantly, the pair settled above the 1.3000 resistance and the 100 (red) simple moving average (4-hours).

On the upside, an initial resistance is near the 1.3120 level and the 76.4% Fib retracement level of the last decline from the 1.3217 high to 1.2772 low. Above 1.3120, the pair could test the 1.3140-1.3150 resistance area.

On the other hand, if there is a downside correction, the pair may find bids above the 1.3020 level. The main support is near the 1.3000 zone and the 100 (red) simple moving average (4-hours).

Fundamentally, the Chicago Fed National Activity Index (CFNAI) for Jan 2019 was released recently. The market was looking for a minor decline from the last reading of 0.27 to 0.21.

However, the result was disappointing as the index fell sharply to -0.43. Moreover, the last reading was revised down from 0.27 to 0.05.

Overall, GBP/USD pair could continue to move higher in the near term towards 1.3150 and 1.3200. If it corrects lower, buyers will most likely defend the 1.3000 support area.

Economic Releases to Watch Today

• Germany’s GfK Consumer Confidence for March 2019 – Forecast 10.8, versus 10.8 previous.
• US Housing Starts Dec 2018 (MoM) – Forecast 1.253M, versus 1.256M previous.
• US Building Permits Dec 2018 (MoM) – Forecast 1.290M, versus 1.322M previous.
• S&P/Case-Shiller Home Price Indices for Dec 2018 (YoY) – Forecast +4.5%, versus +4.7% previous.

Wall Street extends gains on tariff postponement

The early news that Trump was to defer the March 1 tariff deadline stayed with equities for most of the day yesterday, prompting further gains though momentum waned into the close. Oil prices tumbled after Trump tweeted they were too high.

US30 USD Daily Chart

The US30 index tested the November high yesterday but pared gains to close only marginally in the black. The index has opened flat this morning

Resistance at the November high of 26,249 remains intact for now. Support may be found at the 200-day moving average at 25,086

Fed Chairman Powell faces day one of his two-day testimony on the economy and monetary policy before Congress. The Q&A session after the testimony is usually more interesting.

DE30EUR Daily Chart

The Germany30 index lost momentum into the close after touching the highest since December 3, buoyed by the shift in the tariff deadline

The index has started today’s session in negative territory, prompting a decline in the slow stochastics

We have another confidence indicator published today. This time it’s the GfK survey for March, which is seen steady at 10.8. Other surveys have disappointed recently.

WTICOUSD Daily Chart

WTI posted the biggest one-day drop so far this year yesterday after US President Trump tweeted that oil prices were too high and the global economy could not take more price hikes. He called on OPEC to “relax”

Prices are pivoting around the 100-day moving average at 55.91. The 55-day moving average is at 51.54, and has supported prices on a closing basis since January 17

The American Petroleum Institute releases weekly crude stocks data as at February 22 later today. Last week saw an addition to stockpiles of 1.26 million barrels.

Markets consolidate as Trump tweets oil

The collective sigh of relief as president Trump extended the China tariff deadline was palpable in markets overnight, nowhere more so than China itself, where the Shanghai rose 5.6% and the CSI 300 jumped a whopping 6%. The rest of the world seemed to take a more sanguine view of proceedings, with the Asian and European indices climbing steadily but not spectacularly into the green.

Wall Street also continued its positive run with the S&P limping 0.1% higher and the Dow Jones rose 0.4%. The close could have been even more tepid had General Electric not soared a mighty 15% following the announcement of the sale of its bio-pharma division.

Elsewhere the dollar was slightly lower against most currencies as haven flows reversed course. The New Zealand Dollar (NZD) increased 0.80% after posting much higher retail sales, while the British pound (GBP) rose above 1.3100 to 1.3135 this morning as the UK Labour Party announced its support of a second Brexit referendum. Perhaps highlighting the lamentable state of affairs in British politics, it’s taken the main opposition party two years – until just one month before Brexit – to come out with an official position on this.

Overall though, the somewhat subdued market moves of yesterday suggest the street was already positioned for the Trump tariff tweet over the weekend and the nouveau bullish flows of yesterday quickly ran into profit-taking.

One highlight was energy where President Trump’s Twitter account struck again. Trump told OPEC to “relax” and that oil prices were too high. Subtle. Oil took its “chill pill” and immediately ran aground, with Brent plunging 3.5% to USD64.80 and WTI falling 3.2% to USD55.50. The timing was impeccable catching many traders very long after a two-week rally.

Federal Reserve Governor Jerome Powell heads to the Hill for two days of testimony today, and US Consumer Confidence will also be closely watched. Locally, Singapore Industrial Production will be released at 1300 local time with markets hoping for a 1% bounce back after December’s dire 5.6% fall.

FX

Haven flows out of the US dollar should continue into regional currencies today but we can expect a trickle, not a torrent. As the low volatility implies, the FX markets seem trapped in a no-man’s land of late, awaiting clarification of macro drivers. Despite all the noise, we don’t have many.

The GBP continues to rally, more on hope than reality, and being long at these levels in recent times is not a trade that has ended well for many.

Equities

Equities should open positively in Asia but without any fireworks. The street (except China) appeared to be nicely long heading into the weekend, which has taken the edge off the surprise factor. China will be the main driver for the Asian session with a follow-on rally from yesterday’s spectacular jump, likely dragging regional bourses higher.

Oil

The oil markets have been the most optimistic on a US-China trade deal over the last two weeks. As a result, they were probably the longest and therefore the most vulnerable to a headline-driven sell-off. The technical picture agreed, with the Relative Strength Index (RSI) on both Brent and WTI at extreme overbought levels.

President Trump has duly obliged and popped the balloon, at least temporarily. The technical picture suggests both contracts have room to fall more from here, with significant support being USD60.00 a barrel for Brent and USD52.00 a barrel for WTI. Volumes in Asia will be light with traders nervous of further headline-driven moves.

Gold

Gold closed unchanged at USD1,327.50 per ounce overnight in a moribund session. Overall gold is sitting in the middle of its monthly USD1,301.00/1,348.00 range and continues to consolidate from a long-term perspective. In the shorter term, traders are clearly focusing their attention elsewhere.

The Canadian dollar fell 0.41 percent pulled down by oil prices that depreciated after President Trump’s tweet.

The OPEC+ production limit agreement has brought stability to oil prices, but it has also made the group and its de facto leader Saudi Arabia targets for the President’s tweets.

The US has ramped up production and with the US-China trade war tension hitting global growth estimates oil prices would be lower if not for the OPEC+ deal.

Canadian stocks rose alongside other global indices as the US-China trade talks appear to be close to bearing fruit.

The loonie was trading higher on the news that the trade war between the US and China is on the verge of an agreement, but it was Trump’s tweets later in the day that had the currency lower.

Canada is a large oil producer and its currency depreciated despite the market’s appetite for riskier assets as Brexit and the US- China trade war had positive news on Monday.

Stocks were boosted by trade deal hopes, while commodities were hit by Trump’s second tweetstorm as it once again targeted OPEC for keeping prices higher. Oil dropped more than 3 percent with investors looking ahead at Fed Chair Powell’s testimony on Tuesday.

OIL – Frankie Says Relax

Oil dropped more than 3 percent after Trump’s tweet urging the OPEC to relax as oil prices were too high. Take profits were triggered even as the OPEC+ remains committed to a production limit agreement that has brought stability to global energy markets.

The balance between rising US oil production and the OPEC and other major producers cutting output was broken by a tweet. Investors sold crude following the President’s tweet even though the US via its sanctions to Iran and Venezuela were driving prices higher despite record levels of domestic production.

GOLD – Gold Falls As Risk Appetite Returns

Gold fell 0.26 percent on Monday as the market digested the news that the Trump administration was extending the deadline for the US-China trade talks. The yellow metal has risen when used as a safe haven, but progress in the trade talks and a possible extension of the Brexit deadline put downward pressure on the price of gold.

Gold will remain bid as the US- China extension is only for 10 days and despite talk of progress there has been little evidence of how close the two largest economies are to sorting their trade dispute. Brexit remains an enigma as various factions push for their preferred outcome but without apparent knowledge that some of their best-case scenarios are mutually exclusive even within UK groups.

STOCKS – Trade Hopes Keep Indices Gaining

Global indices were higher after the news that an extension to the March 1 deadline was reached between the US-China. A meeting with Chinese President Xi could be announced soon as further proof that there has been substantial progress between the two nations with something worthy of an announcement before the new March 11 deadline.

US economic data disappointed last week, with the spotlight on the first estimate of the Q4 GDP data the highlight in the indicator release calendar. Fed Chair Powell will testify in Washington with plenty of opportunities to boost optimism for economic growth taking stocks higher.

The Fed has paused its monetary policy tightening but is still sticking to a hawkish view on growth, even though it acknowledges present headwinds as it waits for more solid data.

Fed Vice Chair Richard Clarida attended a Dallas Fed event on Global Perspectives, with Dallas Fed President Robert Kaplan. There Clarida said that "the U.S. economy is in a good place right now....It's a good situation to be in, and we really want to do whatever we can to help support and maintain the economy."

Clarida also noted that slowdown in Asia and Europe are "definitely a relevant factor" to Fed policy. Since other central banks are still having interest rates stuck in crisis-fighting mode, "that obviously, on balance, makes the global economy more fragile." He also tried to talk down the implication of yield curve inversion. He said "you can't be handcuffed" to financial market signals . There are factors like global demand for US treasuries that pushes yields down at the long end.

Kaplan indicated that "you want to run maybe a little hotter, but you don't want to go too far." And, since "inflation is not running away from us", Fed "might have the luxury of trying to do more to get more people into this workforce on a sustainable basis ..."

https://www.youtube.com/watch?v=hOjWTjLXiqA

Trump indicated overnight that the US is "very, very close" to completing a trade agreement with China. And there will be a "signing summit" with Chinese President Xi Jinping soon. Trump said that "we're going to have another summit, we're going to have a signing summit" and "so hopefully, we can get that completed. But we're getting very, very close."

He later also tweeted that "China Trade Deal (and more) in advanced stages. Relationship between our two Countries is very strong. I have therefore agreed to delay U.S. tariff hikes. Let's see what happens?" "If a deal is made with China, our great American Farmers will be treated better than they have ever been treated before!"

https://twitter.com/realDonaldTrump/status/1100126391729774592

https://twitter.com/realDonaldTrump/status/1100184874466664448

Trump decided to delay new tariffs on USD 200B of Chinese imports beyond March 1. For not, there is no information on how long that would that be postponed. A spokeswoman for the U.S. Trade Representative's Office said the agency had no announcements at this time beyond the president's remarks.

Separately, Trump has left for a summit with North Korean leader Kim Jong-un in Vietnam. An initial one-on-one meeting is scheduled for Wednesday, followed by dinner with advisers.

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