Market Morning Briefing

GOOD MORNING!

STOCKS
Nearly all the major markets, except Nifty, are in a pause mode ahead of the ECB meet and the US non-farm Payroll data today, which may determine the next course.

Dow (16976.24, +0.12%) rallied from end to end of its 300 pts range prevalent for the last 4 weeks. But still needs a break above 17050-70 to break out, though more rallies are expected. Only a break below 16700-600 may signal a deeper correction. The Dax (9911.27, +0.09%) had the expected push up from the major support of 9800-700. The confirmation of strength returning will be a break above 9915-35.

Nikkei (15360.74, -0.06%) has bounced sharply after creating a Harami Doji pattern and holding above 15100, may rally to 15600-700. The Shanghai (2063.97, +0.22%) keeps trading in a contracting range for the last few months where the range has come down from 200 to 75 points now with the breakout levels coming at 2000 & 2075.

Nifty (7725.15, +1.18%) has made a new high above 7700 as expected and now it may rally towards our previously mentioned target levels of 7900-8000+ with the Bank Nifty coming to the party now.

COMMODITIES
Gold (1324.16) has been stable and may remain consolidative for a few sessions. The 1325-1350 region is crucial but while below 1325, we may expect a fall towards 1310-1300. Note that it is unable to sustain a rise above 1325 for now. The weekly resistance near 1330 is still holding for now.

Silver (21.0661) is also stable but seems to move eventually up targeting 21.5-22.5 in the near term. Gold-Silver ratio (62.737) is ranged within the 63.098-62.37 region and until a break on either side of the range, we cannot determine further direction.

Copper (3.2495) has shot up sharply breaking above our expected 3.23 level. This rally that started from 3.00 has initiated a reversal in trend and may target 3.3-3.4 in the near term.

Brent (110.89) fell further as expected and is testing levels of 110.8 which if holds may take it higher to 112 else the fall may extend to 109-108 levels.

Nymex WTI (104.010) has fallen below our expected levels of 104.27 and now may test crucial weekly support near 102.5-103.6 region from where it may bounce back to 105-107.

FOREX
The ECB comments today may unfold a very volatile session for the Euro and Dollar with the direction for the next few days being set.

Euro (1.3650) is correcting softly ahead of the ECB meet today but a lot of volatility is expected now. Weakness will emerge below 1.3615-00 and strength above 1.3700.

Dollar-Yen (101.86) is bouncing up as expected and it may well bounce to 102.50 levels now. The range of 101.20-102.75 may continue for some more time. The Euro-Yen (139.05) is trading around the resistance of 139 after a rally on the back of a stronger Euro and a firm break above 139 may take it to 140.00-50 levels.

Pound (1.7156) is trading with a lot of bullish momentum and the strong factory output has helped it more. Now it may reach 1.72 as expected or even higher in a day or two.

It turned out to be a false breakout above 0.9460 for Aussie (0.9377) as it fell sharply afterwards. If the support zone of 0.9350-20 breaks, the entire uptrend can be threatened.

Dollar-Rupee (59.68) broke below 60.00 and the area of 59.75-65 was tested as expected. Now the fall can extend to 59.45-40 on the back of falling Indian Yields and Indo-US spreads.

INTEREST RATES
Importantly, the Indian 10Yr GOI (8.66%) saw a big dip yesterday from 8.74% and 8.76% earlier, in line with hope yesterday of lower yields. The Indo-US 10Yr Spread (6.11%) has also come off sharply, reinforcing the Resistance at 6.27%.

The 2Yr Swap Cost (0.1238%) is testing and could bounce from an important Support trendline. Paying a Floating-to-Fixed may well be considered.

US Yields (5Yr 1.70%, 10Yr 2.62%, 30Yr 3.45%) have moved up further from levels of 1.63-1.66% on the 5Yr and 2.53-2.57% on the 10Yr earlier in the week. Looking at the 30Yr chart, there cab be chances of faster than expected increase in Yields in coming weeks/ months. Keep an eye on this.

Crucially, the rise in US Yields has pushed the German-US Yield Spreads below the trendline support levels mentioned yesterday. This could be bearish for the Euro. Take a look at
http://www.kshitij.com/graphgallery/eurusddiff.shtml#eurusd

DATA TODAY

9:00 GMT or 14:30 IST EU Retail Sales
...Expected 0.3 % ...Previous 0.4 %

11:45 GMT or 17:15 IST ECB Meeting
...Expected 0.15 % ...Previous 0.15 %

12:30 GMT or 18:00 IST US Trade Balance
...Expected -45.10 $ Bln ...Previous -47.24 $ Bln

12:30 GMT or 18:00 IST US NFP
...Expected 211 K ...Previous 217 K

12:30 GMT or 18:00 IST US Unemployment Rate
...Expected 6.3 % ...Previous 6.3 %



DATA YESTERDAY

Australia Trade Balance
...Expected - 0.21 AUD Bln ...Previous -0.12 AUD Bln ...Actual -1.91 AUD Bln

EU GDP
...Expected 0.2 % ...Previous 0.2 % ...Actual 0.20 %

US ADP Emp
...Expected 206 K ...Previous 180 K ...Actual 280 K