Vikram Murarka
Kshitij Consultancy Services
GOOD MORNING!
EQUITIES
The global markets trade in the positive territory as a better than expected US manufacturing data gives renewed hope. Domestically, the RBI meet turned out to be a non-event as the status quo was maintained.
The Dow (16532.61, +0.46%) is just 20 points away from hitting a new life high but may do it by tonight. A break above 16600 would signal the beginning of the rise to 17000 or more..
The Shanghai (2057.19, +0.48%) remains in a consolidation mode. Weakness will be confirmed below 2030-20 and strength will be confirmed above 2080-85 only.
The Dax (9603.71, +0.50%) is facing rejection from our interim resistance zone of 9600-9650 before it can reach 9700-9900. A failure to firmly break above 9650 may generate weakness and it may return 9400-9350 levels.
Nikkei (15011.43, +1.48%) has broken above 15000 in a show of weakening bearish momentum and may extend the rise to 15450-500 now.
Nifty (6721.05, +0.25%) continues its rally with the RBI meet having no discernible effect on the price. We keep watching the supports of 6675-60 but the rally may reach our next targets of 6750-60 and 6810 now.
COMMODITIES
Commodities are overall weak except Copper. Oil market has slipped sharply from major resistance.
Gold (1282.59) rebounded a bit on expectation that physical demand may increase in China. But while the metal trades below 1285, there are chances of a fall to 1260.8-1260 before we could see a sharp bounce. Note that it is testing long term support on the weekly and may show some upward movement for now. But overall near term remains bearish.
Silver (19.796) has chosen to remain ranged above the crucial support of 19.6 in line with our expectation. If this support holds we may see an eventual rise to 20.5 but at the same time we cannot negate a fall to 19.5-19 if it breaks below 19.6.
Copper (3. 0430) is rising eventually and may target 3.10-3.15 in the near term. No major movement expected for now.
Brent (105.67) has slipped sharply from the crucial resistance zone of 108-108.4, losing all gains in the last 7-8 sessions, in line with our expectation. It may now move up towards 107 taking a few more sessions. The bears seem to be more powerful now while below 108.5.
Nymex WTI (99.76) has also come off from the 102 levels as expected. Movements in the 99-100.7 range could be seen in the next few sessions while it tries to move back towards 102.
CURRENCIES
Dollar Index (80.07) keeps trading in the tight range of 79.90-80.35 but remains firmly on course to its way to 80.50-75 after this correction ends. Staying above 79.70-65, the strength remains intact.
The Euro (1.3802) has faced rejection from our resistance zone of 1.3810-50 and the bearish momentum may intensify on a break below 1.37. The next important support comes at 1.3650.
In Dollar-Yen (103.86) is testing the upper end of the 10-week long range of 101-104 and sustaining above 103.75-45 may extend the rise to 105.
The Euro-Yen Cross (143.36) has broken above 142 and looks on its way to 144-145 now keeping in line with our bullish stance.
Pound (1.6635) has achieved our initial target of 1.6650 after resuming the medium term uptrend. Now a further rise to 1.67-1.6750 may be expected with the major support coming at 1.6520-1.6500.
Aussie (0.9238) have broken above 0.92 to signal a medium term rise to 0.9380-0.94. Any correction now should be limited to 0.9150-0.91.
Dollar-Rupee (59.91) falls to 59.70 where a short term bottom may be formed pending confirmation yet. It remains to be seen this week if the weekly low of 59.70 holds or not as a break below 59.70 may open further downside to 59-58.80. Our bias remains negative till Dollar Rupee manages to break above 60.50-55.
INTEREST RATES
The US 10 Yr (2.77%) and 5Yr (1.75%) are trading at the crucial resistance zones at current levels. The 10-5Yr yield differential (1.02%) has bounced from the support coming from the low of 0.54% since June-08. The 30-10yr differential (0.85%) is trending down and may come down to test the support near 0.75%. With the yield differentials testing supports we may see a rise in the US yields.
The German-US 2yr spread (-0.29%) has risen from the low of -0.32% (31-Mar-14) taking the Euro (1.3802) up with it. The 10Yr spread (-1.20%) is still trending down and can target -1.25%. The German 10Yr (1.57%) is consolidating in the range of 1.55% - 1.60% can target 1.50%. The ECB Meeting is due tomorrow and it is expected that they will keep the interest rates unchanged.
The US-Japan 10Yr spread (2.14%) has come up as along with the Dollar -Yen (103.86). The close co-relation may take it higher to 2.25-2.30%. The Japan 10 Yr (0.63%) has started to consolidate in the range of 0.60% - 0.65% just below our resistance zone of 0.65%-0.67%. With the 10-5Yr yield differential (0.43%) rising from the support near 0.40% we may see the 10Yr go up to 0.70%.
The India-US 10Yr spread (6.07%) can move up to test the resistance near 6.25% and we may see a fall from there. With the RBI keeping the interest rates unchanged in yesterdays Monetary Policy meeting we may see the 10 Yr GOI (8.80%) to maintain the range of 8.75%-8.85% for the coming days.
DATA TODAY
9:00 GMT or 14:30 IST EU GDP
...Expected 0.30 % ...Previous 0.30 %
12:15 GMT or 17:45 IST US ADP Emp
...Expected 192 K ...Previous 139 K
DATA YESTERDAY
AU PMI
...Previous 48.60 ...Actual 47.9
JP Tankan Large Manufacturers Index
...Previous 16 ...Actual 17
CN Manufacturing PMI
...Previous 48.50 ...Actual 48.0
RBA Meeting
...Expected 2.50 % ...Previous 2.50 % ...Actual 2.50 %
RBI Repo Rate
...Previous 8.00 % ...Actual 8.00 %
RBI Reverse Repo Rate
...Previous 7.00 % ...Actual 7.00 %
RBI CRR
...Previous 4.00 % ...Actual 4.00 %
RBI MSF
...Previous 9.00 % ...Actual 9.00 %
CH PMI
...Expected 56.70 ...Previous 57.60 ...Actual 54.40
EU PMI
...Expected 53.20 ...Previous 53.00 ...Actual 53.00
UK PMI
...Expected 56.90 ...Previous 56.20 ...Actual 55.20
EU Unemp
...Expected 12.00 % ...Previous 12.00 % ...Actual 11.90 %
US Manufacturing ISM
...Expected 59.2 ...Previous 60.0 ...Actual 59.0
The above views are based on the latest available information. Though the information sources are believed to be reliable, the information is not guaranteed for accuracy. While the views are proffered with the best of intentions, neither the author, nor the firm are liable for any losses that may occur as a result of any action based on the above. World financial markets, and especially the Foreign Exchange markets, are inherently risky and it is assumed that those who trade these markets are fully aware of the risk of real loss involved.
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