Market Morning Briefing

GOOD MORNING!

EQUITIES
The global markets are undergoing a bout of profit taking on the persistent concern about the health of the Chinese economy. The last day of week is crucial from the perspective of short to medium term trend.

Nikkei (14411.86, -2.73%) has achieved our initial target of 14400 and may fall further to our next target support of 14000. A break below 14000 may accelerate the decline to 13750 and then 13200.

Shanghai (2006.12, -0.64%) broke below the support of 2020-15 to test the January low. The bears dominate firmly as long as it stays below 2040-50 and reversal will come only on a break above 2080. A break below 1980-75 may take it to 1950-45.

Nifty (6493.10, +0.37%) had a steep intraday fall after retesting the recent high of 6560. The correction signals a possible consolidation period but the short term bullish possibilities survive until the last high of 6415 is breached. The medium term bullish view remains intact above 6340-60 and we may expect further rally to 6650-6700 in the coming days with some consolidation in between.

Dow (16108.89, -1.14%) failed to break above our supply zone of 16400-600 and broke down below our short term support at 16200-250 to signal the loss of upward momentum. It may consolidate between 15900 and 16600 for some time before launching the next move. The major uptrend will be threatened only on a break below 15500.

COMMODITIES
Gold (1372.74) continues to rise targeting resistance near 1375-1380. A break above 1380 would take it higher towards 1400-1425.

Silver (21.25) is stable for now and while below 21.5 it may move sideways for some more time. No major movement expected for now.

Copper (2.9220) has crashed considerably since last week on China concern and is testing crucial long term support on the weekly near 2.90 from where it may bounce back. A failure to bounce (if seen) would indicate a danger of a major downtrend.

Nymex WTI (98.14) bounced from 97.55 as better US data rose expectation of a stronger demand. Gold-WTI ratio (14.0120) is rising steadily towards resistance near 14.5 suggesting that the fall in WTI might just not be over and we may see the Crude falling further to support near 97.

Brent (107.04) is trading just above crucial support near 106.8-107 and if this holds may bounce back towards 110 in the near term. The Brent-Nymex spread (9.18) continues to rise sharply targeting resistance near 10 from where it may come off to 8. This also indicates a fall in WTI before rising back again while Brent may remain ranged.

CURRENCIES
Dollar Index (79.6280) found excellent support near our major demand zone of 79.10 and bounced back sharply. A break above 80-80.15 now would signal an extension of the bounce towards the upper end of the broader range of 79-81.25. The long term trend may get severely bearish below 79.10.

The Euro (1.3869) was sharply rejected just after it entered our target resistance zone in 1.3950-1.4050. A break below 1.3830 may weaken it further to the short term major support of 1.3750, below which the short term uptrend may be over.

Dollar-Yen (101.79) failed to break above 103.75-90 as was required for the bulls and returned towards the lower end of the previous range. A break below 101-100.75 now may take it to 99-98.75.

The Euro-Yen Cross (141.16) weakened sharply contrary to our expectation of further rise and raised questions about its strength. The bullish view survive as long as it holds above the major support area of 139-138 but a break below this support may turn the view bearish and may pull it down to 136-135.50 and even 131.

Pound (1.6619) is in a correction of its major uptrend now in the form of a bullish flag pattern. It may reach 1.69-1.7050 after the current correction finishes. All the dips till 1.6440-30 may be bought into.

Aussie (0.9033) came off the highs from our target resistance of 0.91. It has reached a very important time-price confluence zone and the bulls must break above 0.9150-0.92 by the next week to confirm an intermediate term reversal or else a sharp fall may take it back towards 0.87.

Dollar-Rupee (61.22) finished the correction at our support zone of 60.90-80 and bounced back. A break above 61.26 and then 61.35 may trigger further rally to 61.55-60 initially and then to 61.90-95.

INTEREST RATES
The US 10Yr (2.65%) saw a sharp fall yesterday, as increased concerns over Ukraine and Chinese economy overshadowed the better than expected US Retail Sales data which came in yesterday. With The 10Yr yield and the 10-5Yr yield differential (1.12%) falling below the supports we may see the 10Yr drop further towards 2.60-2.55%.

The German 10Yr (1.54%) fell below 1.55% and can target 1.50-1.45%. The 10Yr Bund-Bond Spread (-1.05%) has risen and we can expect it to go up to -1.00%.

The Japan 10Yr (0.64%) is stable and is testing the channel resistance near 0.65-0.66%. The US-Japan 10Yr spread (2.01%) has dipped further and come down to our target of 2.00%. We may see lower levels if the US 10Yr continues to drop.

India's 10Yr GOI (8.74%) saw a slight rise yesterday after the better than expected IIP and CPI data. While below 8.75% we may see 8.70-8.65% before a rise back up to 8.80%.

DATA TODAY

6:30 GMT or 12:00 IST IN WPI
...Previous - 5.05 %

9:30 GMT or 15:00 IST UK Trade Balance
...Expected -8.70 £ Bln ...Previous -7.72 £ Bln

12:30 GMT or 18:00 IST US PPI ex Food & Energy (MoM)
...Expected 0.20 % ...Previous 0.54 %

DATA YESTERDAY

Australia Labour Force
...Expected 15.30 K ...Previous 17.98 K ...Actual 47.27 K

CN IIP (YoY)
...Expected 9.50 % ...Previous 9.70 % ... Actual 8.60 %

CN Retail Sales (YoY)
...Expected 13.5 % ...Previous 13.6 % ...Actual 11.8 %

US Retail Sales
...Expected 1.26 % ...Previous 1.63 % ... Actual 1.33 %