Market Morning Briefing

GOOD MORNING!

EQUITIES
The global markets are consolidating after rallying hard to recover most if not all of their losses. The Asian markets got a boost from Japan as a committee advising the ministry that oversees the $1.26 Trillion pension fund said it no longer needs to focus on domestic bonds.

Nikkei (14954.48, +0.38%) is consolidating inside yesterday’s range after it reached our target resistance zone of 15000 and with brief intermittent corrections, may rise towards 15200-300 now.

Shanghai (2038.77, -0.70%) has come down sharply after it failed to break above our resistance zone of 2075-77. It is contracting in a Triangle and may remain rangebound inside 2030-2075 for some more time.

Nifty (6328.65, +0.49%) is extending the rally to the old supply zone and the higher end of the broader range at 6340-60 now, where the price action may decide the next course of action.

Dow (16360.18, -0.22%) is consolidating near the old resistance of 16400 and it requires a successful break above 16400-600 to rise towards 17000 soon.

COMMODITIES
Gold (1337.99) is trading lower within an overall uptrend. While above 1324.44 we may expect an eventual rise to 1360. Silver (21.23) has been ranged within the crucial 20.98-21.5 region and may continue for a few sessions now. Only a break above 21.5 could take it higher to 22-22.2. Overall it has been ranged for the last one week.

Copper (3.2020) is finding it difficult to sustain levels above 3.22-23 and is testing channel support near current levels. There are chances of major movements coming up in the near term. Need to wait and watch for further direction.

Brent (107.81) tumbled down breaking below 108 levels as resistance near 111.32 holds strong enough. Immediate support coming up near 106-107 regions from where it may bounce back towards 108-110.

Nymex WTI (101.1) dropped sharply as well testing support near 101. The bears seem to start gaining little momentum and chances of a fall would increase if it falls below 101 levels. However a bounce from 101 and further 103 would negate the bearish signal.

CURRENCIES
Most of the major currencies are in a quiet mode and may remain so till the ECB Meeting today.

Dollar Index (80.1540) has bounced from the old support zone of 79.80-70 as expected and it may attempt to rise to 80.45-50 again. Keep an eye on 79.70 for any major downmove as a break below 79.70 may drag it down to 79.10-78.90.

The Euro (1.3727) has failed to break above our major resistance of 1.3850 to weaken and this failure keeps it rangebound between 1.3850-1.3650. Major support comes at 1.3550-75.

Dollar-Yen (102.52) has reached our target of 102.50 and may rise further to 103 but remains stuck in the broader range of 101-103.

The Euro-Yen Cross (140.72) reached our target of 141 before retreating to consolidate in 138.80-141.30 once again which may continue for some more time.

Pound (1.6719) has bounced back from 1.6640 as expected and the rise may extend to 1.68. It is in a correction of its major uptrend now which may extend to 1.6540-1.65 only if breaks the support of 1.66. It may reach 1.69-1.7050 after the current correction finishes. All the dips till 1.6470-80 may be bought into.

Aussie (0.9023) has reached our target of 0.90 before weakening again as it remains in a broad range of 0.89-0.91 and only a breakout from this range may give a trending move with a clear direction.

Dollar-Rupee (61.7550) failed to confirm strength by failing to break above our resistance zone of 62.17-22. The support area of 61.70-80 is threatened now and may give way to the next support zone of 61.50-30.

INTEREST RATES
Although the German 10Yr (1.61%) has risen a bit, the US 10Yr (2.70%) has also risen and the 10Yr Bund-Bond Spread (-1.09%) remains under pressure overall while below -1.0%. A break below -1.11%, when seen, can accelerate the downmove, targeting -1.25%.

With the US 10Yr (2.70%) moving up, we may now look for a sideways range of 2.60-2.80% for an extended period of time. That said, the Yield Curve may well steepen going ahead. The 10-5 Yr Spread (1.16%) is likely to find good Support near 1.12% and move up towards 1.25-1.30% in the coming months. In contrast, the German 10-5 Yr Spread (0.98%) looks ranged at best and bearish at worst. As such, the long-term outlook for the Euro may be bearish and Draghi may not want to change that in the ECB Meeting today. The BOE Meeting is also scheduled today. The Gilt Yields have a similar structure to US Bonds and the Pound continues to look strong.

In this part of the world, the Indo-US 10Yr Spread (6.15%) has come off from the high of 6.29% a couple of days ago. We will continue to watch this for a while. A credible rise past 6.25% is needed to put the Rupee on a structurally stronger wicket. On the other hand, a fall back to 6.0% and below may force foreign investors to remain a little cautious about Indian debt.

DATA TODAY

0:30 GMT or 6:00 IST Australia Trade Balance
...Expected 0.11 Bln ...Previous 0.59 Bln ...Actual 1.43 Bln

12:00 GMT or 17:30 IST BOE Mtg
...Expected 0.50 % ...Previous 0.50 %

12:45 GMT or 18:15 IST ECB Meeting
...Expected 0.25 % ...Previous 0.25 %

15:00 GMT or 20:30 IST CA PMI
...Expected 56.70 ...Previous 56.80



DATA YESTERDAY

AU GDP
...Expected 0.70 % ...Previous 0.60 % ...Actual 0.80 %

EU GDP
...Expected 0.30 % ...Previous 0.10 % ...Actual 0.30 %

EU Retail Sales
...Expected 0.90 % ...Previous -1.33 % ...Actual 1.60 %

US ADP Emp
...Expected 159 K ...Previous 127 K ...Actual 139 K

BOC Meeting
...Expected 1.00 % ...Previous 1.00 % ...Actual 1.00 %