Market Morning Briefing

GOOD MORNING!

STOCKS
BOJ has kept all of the rates unchanged and the US market is going under a correction, which is spreading to the other global markets too. It is time to keep an eye on the commodities too, especially Crude Oil.

Dow (16734.19, -0.65%) has already lost nearly all of the previous week’s gains but after January we haven’t got two consecutive down weeks so far. So bulls would not be concerned till 16600-300 gets broken and the next week turns out to be another down week. The Dax (9938.70, -0.11%) has corrected too but the immediate trendline support at 9850 may come in aid for the bulls. Another push up to 10300-400 remains on cards as long as it stays above 9800-700.

The Nikkei (14878.00, -0.64%) correction has extended to 14850 already and the correction may go on for some more time with major support coming in 14700-650. The Shanghai (2058.31, +0.32%) has been trying to rise in a weak manner for the last 3 sessions but that is getting resisted at the prior highs in 2055-61. This 2055-61 area must be firmly broken to signal a good rally.

Nifty (7649.90, +0.30%), while in major uptrend, has already partially discounted the improved CPI data released yesterday after the market hours. Now a major move will emerge only on a break beyond the range of 7580-7700. Keep an eye on 7580 as now only a break below 7580 may signal deeper correction.

COMMODITIES
Gold (1272.96) has been rising since the last 6 sessions nearing immediate resistance near 1278-1280 while Silver (19.55) is also heading towards the crucial 19.66. Need to watch if the metals are able to break these levels or gets pushed back to previous levels. Overall the long term trend is down.


Nymex WTI (107.29) has shot up breaking above 102.25 giving a bullish signal in the coming sessions as violence in Iraq threatens oil supply. It may now target 110 levels in the near term.
Brent (112.81) has also risen exactly in line with our expectations. As said earlier the contraction of prices seems to have ended finally and this rise may initiate fresh bulls targeting 115-117 in the near term. Overall the oil market is bullish.

Copper (3.0255) has fallen targeting 3-2.90 in the coming sessions. It may continue to range in the 2.90-3.05 region for sometime before deciding its further move. Overall long term trend remains down.

FOREX
Dollar is facing some attack from the majors, especially the Pound. A risk-off mode is perhaps on now and that is strengthening the major currencies.
Euro (1.3558) is trying to find strength from the support area of 1.3500-3475 once again but that bullish reversal will be confirmed only on a break above 1.3630 and then 1.3680. The bias is neutral now.
Dollar-Yen (101.78) is trading below the support area of 101.95-85 and now may test the support area of 101.40-20 before it finds any sustained buying. The 9 week long range of 101-103 may continue for a few more days. The Euro-Yen (137.99) is trying to bounce on the back of somewhat firmer Euro but the downside risk of testing 137 levels is clearly there.
Pound (1.6945) broke out above 1.6850 very sharply after Markit reported faster expansion in UK’s manufacturing in April and the BOE Governor commented that a rate hike may come sooner than expected. This rise may reach 1.70-71 levels very soon.

The Aussie (0.9412) has broken above 0.9410, the last swing high, to confirm the intermediate uptrend and is close to testing the 7 month high of 0.9461 now. A weekly close above 0.9409 would add to the bullish sentiment.

No cue is coming from anywhere for any decisive move in Dollar-Rupee (59.25) which spent another sideways session with the uptrend fully intact. We still wait for a break above 59.45 to confirm the next phase of rally and the major support remains unchanged at 59.00

INTEREST RATES
The US 5Yr (1.70%), 10Yr (2.60%) and the 30Yr (3.41) have fallen. The US 10-5Yr yield spread (0.90%) extended its fall further and may either remain ranged in the 1.0-0.9 region or come off further towards 0.87 in the coming week.

The German – US 2Yr differential (-0.43%) has dropped further, and may target -0.50% on the weekly from where it may bounce back. The Euro (1.35570) is rising as support near 1.3520 holds well. The Euro may strengthen towards 1.36 that may raise the yield differentials. The German 10Yr (1.39%) has dropped strangely but may move up again towards 1.40% while support at 1.3% holds.

The US-Japan 10Yr yield differential (2.00%) came off to 2.0% as the Dollar-Yen (101.77) came off sharply. The Japan 10-5Yr yield spread (0.43%) has fallen from resistance as expected while the Japan 10Yr (0.60%) remains stable.
The 10Yr GOI (8.53%) fell slightly and may test 8.5% before bouncing from there. A break below 8.50% may push it to 8.30-8.28% in the mid-term.

DATA TODAY

3:00 GMT or 8:30 IST BOJ Meeting
...Previous - <0.10 %

9:00 GMT or 14:30 IST EU Trade Bal
...Expected 12.00 EUR Bln ...Previous 17.10 EUR Bln

12:30 GMT or 18:00 IST US PPI ex Food & Energy (MoM)
...Expected 0.20 % ... Previous 0.21 %


DATA YESTERDAY
Australia Labour Force
...Expected 10.30 K ...Previous 10.30 K ...Actual -4.8 K

EU IND Prodn (MoM)
...Expected 0.40 % ...Previous -0.40 % ...Actual 0.80 %

EU IND Prodn (YoY)
...Expected 0.90 % ...Previous 0.50 % ...Actual 1.30 %

IN IIP (Mar'14)
...Previous -0.50 % ...Expected 1.60 % ...Actual 3.40 %

IN CPI (Apr'14)
...Previous 8.59 % ...Expected 8.36 % ...Actual 8.28 %

US Retail Sales
...Expected 1.59 % ...Previous 0.40 % ...Actual 0.70 %