Market Morning Briefing

GOOD MORNING!

STOCKS
The European markets remain under pressure as all the Manufacturing PMI came lower than expected, including Germany (51.4) and the EU (50.7). Expect actual movement in the markets only from tomorrow with the US market open and the ECB meet close. The Indian market has its own rhythm though.

Dow (17098.45, +0.11%) is stalling in a narrow range of 150 points in 17000-150 after testing the life high last week. The trend remains firmly up but to extend the rise, the bulls must break above 17300-400 soon. Dax (9479.03, +0.09%) has faced selling pressure exactly from our resistance zone of 9600-800 and remains under pressure below this supply zone. Only a break above 9800 would reverse the downtrend and signal a rally towards 10600-700.

Nikkei (15657.16, +1.17%), contrary to expectations, has recovered all the previous week’s loss and hit a new swing high. This forces us to change the bias to bullish and a farther rise to 15850-950 can be expected now. The Shanghai (2242.22, +0.30%) has bounced sharply after retesting our support at 2190 but still needs to break above 2260-70 to confirm the next phase of the major rise. Till a breakout takes place, expect fluctuations in the range of 2170-2270.

Nifty (8027.70, +0.92%) has closed above 8000 and looks set to check the upper end of the 4-month congestion zone at 8075-90. The bullish momentum remains intact above 7975-65. A break above 8100 would open the door for larger targets of 8190-8300-8550.

COMMODITIES
Gold (1282.443) is trading low and testing support levels of 1280.5 for now. If this continues we may soon see lower levels of 1271-1270 in the coming sessions. Gold-WTI ratio (13.39) has fallen further indicating the upcoming fall in Gold in the near term. May expect a possibility of a rebound from 13 to target 14 again.

Silver (19.435) is held well for now by support at 19.26. The metal now seems trapped in the 19.26-19.76 levels and may remain ranged in the near term. Gold-Silver ratio (65.929) is trading above support at 65.768 for now and may remain sideways within 66.73-65.768 for a few sessions before falling towards 65.06-64.4.

Nymex WTI (95.83) has paused after rising for a couple of sessions as the 95.84 levels hold for now. If a break above 95.84 is seen it may target level of 98-98.32 else a fall from current levels could be seen towards 92.5.

Brent (102.79) came off from 103.30 as the 21-day MA holds well. There are chances of a fall towards 102-101 levels either from current levels or from levels near 104. Near term is bearish.

Copper (3.157) remains stable for now. Trapped between support and resistance at 3.10 and 3.23 respectively, it needs to break on either side to give more clarity on further direction. Near term to remain ranged within the said region.

FOREX
The all important ECB meet is getting closer and the big traders are back in the markets after the Summer. The stage is set for some big movements this week. Expect explosion in volatility.

Euro (1.3121) is not finding even the smallest buyers yet though it is very close to the long term support zone of 1.3050-3000 now. Let’s see if any short covering emerges from these support levels after the ECB meet.

Dollar-Yen (104.75) has broken above 104.50 to get closer to the six year high at 105.40. A firm closing above 105.40-50 could signal a rally to the long term resistance at 108-109. Euro-Yen (137.48) keeps trading in the range of 136-138 for more than a month. The pair remains weak below 138 and the range of 136-138 may sustain for a few sessions more.

Pound (1.6581) created a Pinocchio Bar above 1.6620 before reversing to the downside. The pause may be over and it may have resumed the major downtrend once again towards 1.6460-1.6360.

Aussie (0.9306) is back at 0.93 levels from 0.9375 just as expected. A retest of 0.9250-0.92 can’t be ruled out now, especially with the RBA & Current Account Balance data today.

Dollar-Rupee (60.53) is adamantly stuck in our range of 60.35-70 and only a break beyond this range can produce the next directional move. Till then, expect sideways action.

INTEREST RATES
Reserve Bank of Australia (RBA) meeting today. Interest rates are expected to remain stable at 2.5%.

The USA was closed for Labour Day yesterday. The German 2Yr (-0.046%) is now 54.4bp lower than the US 2Yr. There is an important Support at -0.55%. If this holds, we might see a near term bounce towards -0.45%. But, a break below -0.55%, if seen, could push the Euro (1.3120) even lower.

The Spain-Germany 10Yr Spread (1.3690%) is trading a little higher, but has a crucial Resistance at current level. However, there is some chance it could break higher and test 1.50%. We are watching this one closely as we are taking a contrarion view that European Yields could rise a bit after the ECB Meeting on Thursday. The KSHITIJ E-4 10Yr Composite Yield (1.1690) trades near crucial long-term Support at 1.17 and could surprise by moving higher.

In India, the 10Yr GOI (5.5497%) has seen a tiny dip and the Indo-US 10Yr Spread (6.21%) has also come off by 1.61bp. We see Resistance overhead for both, near 8.60-65% and 6.25% respectively. FIIs continue to buy Indian debt. FIIs Debt purchase is now 2-3 times their purchase of Equity. A double-edged sword.

DATA TODAY

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

5:45 GMT or 11:15 IST CH GDP
...Expected 0.50 % ...Previous 0.46 %

14:00 GMT or 19:30 IST US Manufacturing ISM
...Expected 57.00 ...Previous 57.10


DATA YESTERDAY
AU PMI
...Previous 50.70 ...Actual 47.30

CN PMI
...Expected 51.20 ...Previous 51.70 ...Actual 51.10


CH PMI
...Expected 53.30 ...Previous 54.30 ...Actual 52.90

EU PMI
...Expected 50.80 ...Previous 50.80 ...Actual 50.70

UK PMI
...Expected 55.00 ...Previous 55.40 ...Actual 52.50