Market Morning Briefing

GOOD MORNING!

STOCKS
The big event today is the RBI Credit Policy and that would determine the short term direction for the Indian markets. Globally the markets are trading in a divergent way, even in Europe where the German market falls while the French market rises. Each on its own?

Dow (16569.28, +0.46%) is taking the expected pause after the fall to 16450. After this pause, the fall may resume again testing the support area in 16300-200. The Dax (9154.14, -0.61%) has firmly broken down the 2 year long channel support at 9400-350 to signal long term weakness. For now, a corrective bounce can be expected from this short term support area of 9150-9000 and then more fall.

Nikkei (15437.49, -0.24%) is trading near the June-July highs around 15450 and unless it gets back above 15600 soon, a trip to 15200 can’t be ruled out. Today Shanghai (2218.10, -0.24%) has hit a new high at 2227 after ending the month above 2140 and targeting the final long term resistance in 2260-70. Some profit booking may be expected in the area of 2230-70.

Nifty (7683.65, +1.07%) bounced higher in sync with Dow just as expected and now the next directional move would be decided by the RBI Credit Policy this morning. Keep an eye on the resistance in 7710-25 and the support in 7635-20

COMMODITIES
Oil market seems to be in the end of a sharp one month correction and we may now expect some bullish moves. Metals are ranged for now with lower momentum.

Gold (1288.98) is struggling in the 1280-1300 region. Momentum remains low and the metal may continue to remain range bound this week. 1280 has been a crucial support and we need to see if it is able to toss the metal to higher levels.

Silver (20.207) is heading lower towards 20-19.7 in the near term while the 21.50 levels hold strong. Gold-Silver ratio (63.768) is rallying higher and may target 64-64.5 in the near term. But if the metals remain stable the ratio may consolidate for some time before rising further.

Copper (3.2390) is in a sideways consolidation while in a near term up trend. It may remain ranged above 3.20 for a few sessions before deciding further direction.

Nymex WTI (98.41) has bounced from 97.00 but while below 99, there might be some chances of testing lower levels of 96. A bounce may take the Crude higher to 102-104 levels in the coming sessions.

Brent (105.58) recovered Monday’s fall bouncing from support near 104.39 as expected. While this holds, we may see a rise towards 107-108.7 levels in the near term. Note that while below 106, we cannot completely negate the possibility of a fall to 104.39.

FOREX
All the global currencies are in a comatose mode with very narrow ranges with the ECM meet coming up and this unchanged scenario may be reflected on the Rupee too, awaiting the RBI meet this morning.

Euro (1.3418) is trading in a range of 20-30 pips but to extend the bounce, it must break above 1.3450. The ECB meet later this week may bring some short covering but the major trend remains firmly down and set for lower targets.

Dollar-Yen (102.56) is trading in the range of 101-103 as expected but now it may still attempt the difficult rise to 103.50-104 if it manages to sustain above 102.35-25. Euro-Yen (137.63) is consolidating in the higher levels and may rise to test the resistance area of 1.3830-50, above which the door to 1.39 will open.

Pound (1.6863) bounced as expected but may find it difficult to handle the resistance at 1.6890-6900 now. It has signaled the end of its 9-month long uptrend and now every corrective rise may face selling pressure at the higher levels.

Aussie (0.9323) is stuck in the range of 0.9350-0.9250 and unless it manages to break this range, no trending move will emerge and sideways price action may prevail.

Dollar-Rupee (60.93) corrected as expected as the traders wait for the RBI meet this morning. Technically, the correction may end in the support zone of 60.70-50. Keep an eye on the resistance at 61.25-30 too.

INTEREST RATES
RBI Monetary Policy announcement today. General consensus is for no rate cut this time. The Repo, Reverse Repo and MSF rates are currently at 8%, 7% and 9% respectively. People will look for the RBI's views on inflation, even though the CPI data is to be released next week.

The 10Yr GOI (8.73%) remains below 8.75% and has prospects of moving lower in the longer term if inflation keeps coming down.

The ECB and BOE monetary policy meetings are also due this Thursday. Europe fights deflation. There is a slight uptick in the yields of the "peripheral" countries (Spain, Italy, Greece) recently even though the German 10Yr (1.136%) remains well below 1.15%.

In the USA, the yield curve continues to flatten with the 30Yr (3.29%) and 10Yr (2.48%) now coming down while the 5Yr (1.65%) remains flat. This is a big change from the earlier scenario where we were looking for a rise in the 10Yr and 30Yr. The 10-5Yr Spread (0.83%) faces an important Resistance at 0.85% in its downtrend since 1.42% (Nov-13).

DATA TODAY

0:30 GMT or 6:00 IST Australia Trade Balance
...Expected -2.00 A$ Bln ...Previous -2.04 A$ Bln ...Actual -1.68 A$ Bln

4:30 GMT or 10:00 IST RBA Meeting
...Expected 2.50 % ...Previous 2.50 %

5:30 GMT or 11:00 IST RBI Repo Rate
...Previous - 8.00 %

5:30 GMT or 11:00 IST RBI Reverse Repo Rate
...Previous - 7.00 %

5:30 GMT or 11:00 IST RBI CRR
...Previous - 4.00 %

5:30 GMT or 11:00 IST RBI MSF
...Previous - 9.00 %


DATA YESTERDAY

CH PMI
...Expected 56.20 ...Previous 54.00 ...Actual 54.30