Market Morning Briefing

GOOD MORNING!

STOCKS
Nearly all the major markets are trading in a sideways fashion though the Indian equities are showing technical signs of strength. The slew of CPI data today from Germany, France and Spain may determine the European direction.

Dow (16560.54, -0.06%) is consolidating at the higher levels in a very narrow range after the sharp rally on Friday. Further extension of the rally may face resistance from 16700-800 levels. Dax (9069.47, -1.21%) dropped sharply just as expected and now may trade in the range of 8900-9200 for 1-2 sessions with the long term downtrend remaining in force below 9300-400.

Nikkei (15187.39, +0.17%) is struggling near 15250-400 area as expected and that keeps the bearish risk active for this index. Shanghai (2216.04, -0.25%) consolidation in the range of 2180-2230 continues with the bullish bias fully intact. It may attempt a rally to the final long term resistance of 2260-70 after this consolidation.

Nifty (7727.05, +1.33%) has closed above 7700-10 to signal further rally towards 7900-8000. But this signal will remain valid only as long as 7655 is protected by the bulls. Keep an eye if the gap down open invites the bulls to buy near 7680-70.

COMMODITIES
Gold (1308.47) is ranged for now above 1305 and may target 1300-1290 in the coming sessions from where we may see an upward correction. Silver (19.964) continues to remain ranged in the 19.7-20.108 region. As said earlier, no clarity is seen unless a break on either side of this range occurs. Gold-Silver ratio (65.529) is trading within 65.7-65.083 and if it breaks lower may target 64.4 in the near term. Long term is trend is down.

Nymex WTI (97.22) has fallen again from levels of 98.5 in line with our expectation of a limited rise. Momentum is low and the bears still seem to dominate prices for now. A sharp rise is needed towards 100-101.81in the coming weeks; else a danger of breaking below 96 could be seen in the near term leading to a fall towards 94.

Brent (102.83) crashed to 103-102 levels yesterday and this signals strong bears influencing prices for now. No scope for a rise seen just now. If this fall continues it may soon target 100-99 levels. This signals a strong bear market coming in for Brent. This may be negative for the Indian Rupee.

Copper (3.1415) is heading towards support near 3.10 from where we may see a little bounce upwards to 3.15. However, a break below 3.10 may take it lower to 3.07-3.05 levels.

FOREX
Euro suggests building a base and a similar thing may be argued for the Sterling. Some Dollar weakness against the majors in the short term perhaps?

Euro (1.3364) bears failed to break 1.3330 despite the poor German data yesterday and maybe that suggests inherent strength in the short term. A breakout from this range of 1.3300-1.3475 may create huge moves with the bullish option gradually gaining credence.

Dollar-Yen (102.29) is trading in the range of 101-and the range bound price action doesn’t look like ending anytime soon. Euro-Yen (136.70) has been trading in a downward channel for the last few days and the range now may be modified to 135.75-138.00, which may not break without any major event.

Pound (1.6804) has given the initial bounce to 1.68 as expected and a break above 1.6840 would signal a further extension to 1.69 too though the downside risk of testing 1.6740 remains still open.

Aussie (0.9278) is wandering about the long term support zone of 0.9250-9200 again, which defines the nearly 5 month long range of 0.92-0.95. Only a break below 0.92 would reverse the medium and long term trend to bearish.

Dollar-Rupee (61.08) may open higher on the back of poor IIP & CPI data but may face selling pressure from the supply zone of 61.40-50.

INTEREST RATES
The US 10-5 Yr Spread (0.83%) after shortly coming off from resistance at 0.85% may again re-test the levels in a couple of sessions and may thereafter continue falling to 0.80%. But if it breaks 0.85%, it may signal a fresh rise coming up in the longer run. The 30-10 Yr Spread (1.65%) is rising towards resistance near 1.70% and if that holds it may be pushed to earlier levels of 1.5%.

The German 2Yr (-0.0055%) has dipped further and if this continues we may see a fall towards -0.1% in the longer term. Keep an eye on the EU CPI to be released tomorrow. If the yield bounces back to positive zone again over the coming weeks the upper target would remain at 0.12%.

The US-Japan 10Yr spread (1.95%) is also rising again towards resistance near 1.97% and if this continues it may be negative for the Yen (102.28).

In India, the CPI data came out at 7.96%, higher than previous 7.46% taking the 10Yr GOI yields (8.62%) to higher levels. The Indo-US 10Yr Spread (6.16%) however remained stable due to rise in the US 10yr yields too. Possible chances of a fall to 6.15-6.10% in the coming sessions.

DATA TODAY

23:50 GMT or 5:20 IST JP GDP
...Expected -1.7% ...Previous 1.6% ...Actual -1.7 %

5:30 GMT or 11:00 IST CN Ind Prodn (YoY)
...Expected 9.1 % ...Previous 9.2 %

5:30 GMT or 11:00 IST CN Retail Sales (YoY)
...Expected 12.5 % ...Previous 12.4 %

8:30 GMT or 14:00 IST UK Unemp
...Expected 6.40 % ...Previous 6.50 %

9:00 GMT or 14:30 IST EU IND Prodn (MoM)
...Expected 0.10 % ...Previous 0.40 %

12:30 GMT or 18:00 IST US Retail Sales (MoM)
...Expected 0.40 % ...Previous 0.31 %


DATA YESTERDAY

IN IIP
...Previous 4.70 % ...Actual 3.40 %

IN CPI
...Previous 7.46 ...Actual 7.96