Market Morning Briefing

GOOD MORNING!

EQUITIES
Dow (15994.77, +1.22%) extended its rally on the back of Yellen’s promise of keeping the low interest rate regime intact. If it manages to break and stay above the resistance zone of 16100-200 now, then the expected resumption of downtrend may get negated. Right now it is not clear if the current rally is a new upmove or just a correction of the last fall.

Nikkei (14837.94, +0.81%) has begun hitting the major supply zone of 14850-15100 and may face selling pressure any time now as it remains in a bear market. It is leaving too many gaps unfilled which may be filled soon before any more rises.

Shanghai (2101.49, -0.10%) rallied closer to our target of 2120-30 above which the longer term downtrend could be reversed. Bears may attempt to push it down from 2120-30.

Dax (9478.77, +2.03%) broke above our resistance of 9300-80 and reached closer to our upper limit of 9500-50. It should be clear in the next couple of sessions if the rally will extend more or the bears will be back.

Nifty (6062.70, +0.15%) may open higher today on the back of positive global cues but the price action near 6100-10 is to be seen to gauge the actual strength. A failure to sustain above 6100-10 would bring the weakness back. We do not see the current rally going above 6150-90 at this moment

COMMODITIES
Commodities are mixed. Gold (1285.68) and Brent (108.75) have come off from crucial resistance while in a near term uptrend while the others remain ranged.

Gold (1285.68, -0.10%) came off sharply from crucial resistance near 1293.90. While above 1274.45, there are chances of sustaining above 1295 levels to target 1300. Overall trend remains up.

Silver (20.115, -0.32%) is ranged while targeting crucial resistance near 20.5. Movements within the 19.85-20.5 levels could continue for some more sessions before testing 20.5. A break above this would stretch the rally to 21-21.5.

Copper (3.2320, 0.54%) has risen a bit but is unable to rise past 3.25. It may be ranged within 3.25-3.20 for some time before resuming its rise upwards.

Brent (108.75, 0.06%) is trading lower after some fluctuation below 109.35 yesterday. Movements within 108.015-109.80 for a few sessions could be seen for now before rising up further towards 110.

Nymex WTI (100.29, 0.35%) is ranged and may target 100.75-101.8 levels while in a near term uptrend. A rise to 102-104 could be seen in the longer run if it manages to sustain a break above 101.8.

CURRENCIES
The Dollar Index (80.65) has bounced from our support of 80.35-40 but remained mostly unchanged even after the Yellen speech. A successful break above 81.50 is required to take it sharply to 81.85-90 and then 82.50-60. Below 80.35-40, it may test 80.15 on the downside, after which testing the major support of 79.60-70 is possible.

The Euro (1.3667) faced rejection from exactly our resistance of 1.3660-90. If Euro fails to break above 1.3690 and 1.3750 soon, we may witness the alternative scenario of another dip towards 1.3550-1.35.

Dollar-Yen (102.58) bounce is stalling near 102.50-103.50 but the resumption of downtrend will confirmed only below 102. In that case, we may see 101.20-100.75.

The Euro-Yen Cross (139.62) has achieved our next target of 140.35-40 and now it has to break and stay above 140.40 to rise further towards 142. Otherwise it may correct to 138 before any more rally. It has bounced from a major monthly trendline support at 136.20 to break above 138 to negate any immediate fall.

Pound (1.6449) tested the immediate resistance of 1.6440-80 but it has to break above that to reach 1.6475-1.6510 now where the price action will determine the next course of action in the short term. A failure to break above 1.6440-80 may invite the bears.

The Aussie (0.9057) is close to 0.91, above which a bigger rally will be signaled. Only a failure to break above 0.91 and a move below 0.90 may bring back the weakness now.

Dollar-Rupee (62.22) may open lower near our support of 62-62.10 today. If it breaks 62, contrary to our expectations of a rise, we may see a further drop towards 61.70-80 before any sign of strength emerges.

INTEREST RATES
The US 10Yr (2.72%) saw a rise after Jannet Yellen’s said that she would maintain Bernanke’s policies and the Fed will continue to taper even after a weak Jobs data, at her first speech as the new Fed Chairman. The 10Yr faces resistance near 2.75% and can target 3.00% if it is able to rise past it.

The German 10Yr (1.68%) remained unchanged. The German 10-5Yr yield differential (1.004%) is up and trading just above the support at 0.99%-1.00%. The EU Industrial production data is due today. Both the yield differential and the Industrial production charts suggest that we may see the 10Yr yield go up and target 1.75% in the near term. The UK 10Yr (2.74%) is up and can target 2.80% if it is able to move past 2.75%.

Japan was closed yesterday. The Japan 10Yr (0.60%) has been trading in the 0.60% - 0.62% range for the last two weeks. We have the GDP and the BOJ Meeting early next week and can expect a major movement after that. The US-Japan 10Yr spread (2.10%) has come up to a resistance at current levels. It can move up to 2.15% if the resistance breaks.

The Indian 10Yr GOI yield (8.74%) saw a rise after the Trade Deficit data came out at $9.92 Billion against $10.14 Billion in December. The CPI and the IIP data coming out today evening will be closely watched. Till then we expect the 10Yr to remain in the 8.705 – 8.80% region.

DATA TODAY
2:00 GMT or 7:30 IST CN Trade Bal
...Expected 24.2 $ Bln ...Previous 25.60 $ Bln ...Actual 31.86 $ Bln

12:00 GMT or 17:30 IST IN CPI (MoM )
...Previous - 9.87 %

12:00 GMT or 17:30 IST IN IIP
... Previous -2.10 %

10:00 GMT or 15:30 IST EU IND Prodn (MoM)
...Expected -0.2 % ...Previous 1.81 %

10:00 GMT or 15:30 IST EU IND Prodn (YoY)
...Expected 1.8 % ...Previous 2.63 %

DATA YESTERDAY

IN Trade bal
... Previous -10.14 $ Bln ...Actual -9.92 $ Bln