Market Morning Briefing

GOOD MORNING!

STOCKS
Both the FOMC decision and the advance estimate of the US Q2 GDP are pending today and both are important enough to produce good moves in the markets. On the other hand, US & the Eurozone expanding sanctions on Russia may introduce more uncertainties.

Dow (16912.11, -0.42%) is showing a bit of weakness now but with the lower end of the 2 month long range at 16850 providing support, the probability of a bounce towards 17200-30 once again can’t be ruled out. The Dax (9653.63, -0.58%) wiped off its previous 3 days gains in a single session but the important thing remains to be seen is exactly when the buyers emerge from the long term support area of 9500-350, which is not expected to be broken right now.

Nikkei (15660.40, +0.27%) is trading at a 6 month high and holding above 15600-550, it may target 16000 now. Shanghai (2182.48, -0.03%) has achieved our second target of 2180 too and a normal consolidation/correction is taking place now. The expected bull market may have begun and now, a closing above 2135-40 this month may take it to the final long term challenge at 2260-70.

Nifty (7748.70, -0.54%) closed below 7750 in a firm short term downtrend now. The targets remain unchanged at 7710 and 7660 with the trend reversal point coming at 7810.

COMMODITIES
Gold (1299.63) is trading lower. The correction that started from 1345 is still not over and has some room on the downside towards 1280.5. Long term bearishness is still in force while below 1350-1400. Falling to1280-1260 seems a possibility in the longer run.

Silver (20.56) is trading just above support near 20.45 but may remain ranged for a few sessions and move downwards towards 20.25-20.108. Overall long term trend is down.

Copper (3.2165) is trading lower and may range in the 3.20-3.26 region for a few sessions. Near term bullishness remains intact while above 3.18.

Nymex WTI (100.90) has been heading downwards as expected and if this continues it may soon see levels of 99-98 in the near term. Near term is bearish within a longer term uptrend.

Brent (107.39) is in a sideways mode after the recent sharp fall and may continue for some more time before gearing up for a rise towards 110-111. Overall it is in a long term uptrend.

FOREX
The advance estimate of US Q2 GDP may affect the Euro in a big way today as can the FOMC decision. With Dollar Index reaching close to the 8-10 months old supply zone in 81.40-50, anything is possible now including a short term top for the Dollar. Keep cautious tonight.

Euro (1.3411) is testing the 200 week MA and the FOMC decision today may decide if it will hold or not right now though Euro looks ready for a journey to 1.33 or 1.31 in the next few days. Any attempt to bounce will face supply from 1.3475-1.3500.

Dollar-Yen (102.12) is trading close to the resistance of 102.25-30 with no strong bias and the price action here may decide if it will rise towards 102.80 or return to 101.50-10 levels. Euro-Yen (136.97) is trading sideways in 1.3630-1.3730 on the back of equally weakening Euro and a weak Yen but it may still drop further if fails to overcome 1.3770 levels in the coming days.

Pound (1.6949) has created a Marubozu weekly candle with strong bearish implication in the short term. If the prior pattern is maintained, then this ongoing correction may end near 1.6890-75 levels before reversing for another new high.

Aussie (0.9381) has been rejected from the higher levels just as expected and the 5-week long band of 0.9320-0.9500 may continue for a few more days.

Dollar-Rupee (60.1250) remains unchanged with no directional clue and it may keep trading in the range of 59.75-60.50 today.

INTEREST RATES
The German-US 10Yr Spread (-1.34%) is headed towards our target of -1.40% as the German 10Yr (1.12%) continues to fall. The German-US 2Yr Spread (-0.51%) too is headed lower towards -0.55%. Take a look at
http://www.kshitij.com/graphgallery/eurusddiff.shtml#eurusd

Money seems to be moving from Europe to USA on relative yield-spread and relative growth differential play, as Europe is seen as growing much slower than the USA. If today's US GDP data comes in lesser than the market expectation of 3.10%, people may square up some of their Short-Europe trades.

The FOMC is also due today. The market is said to be looking at a 62% chance of increase in rates by July 2015. QE is supposed to end either in October or December.

The US Yield Curve continues to flatten with the 5Yr (1.69%) holding up while the 10Yr (2.46%) and 30Yr (3.23%) fall. The 10-5 Yr Spread (0.75%) is headed lower towards 0.70%, a level last seen in 2008. Like many in the market, we have been flummoxed by the sharp decline in the 10Yr and 30Yr yields.

India has a new 10Yr Government Bond coming up which is likely to yield much lesser than the current bond with yield of 8.71%.

DATA TODAY

9:00 GMT or 14:30 IST EU Biz Climate
...Previous - 102

12:15 GMT or 17:45 IST US ADP Emp
...Expected 234 K ...Previous 281 K

12:30 GMT or 18:00 IST US GDP
...Expected 3.1 % ...Previous -2.90 %

18:00 GMT or 23:30 IST US FOMC Meeting
...Expected <0.25 % ...Previous <0.25 %


DATA YESTERDAY

JP Unemp
...Expected 3.5 % ...Previous 3.5 % ...Actual 3.7%

US Case Schiller
...Expected 9.80 % ...Previous 10.82 % ...Actual 9.30 %

US Cons Conf
...Expected 85.5 ...Previous 86.4 ...Actual 90.9