Market Morning Briefing

GOOD MORNING!

STOCKS
The global markets remain concerned about the timing of the USD Fed’s interest rate hike and any good US economic data adds to the worries. The Indian market will show today the extent of their dislike to the CPI & IIP data. The Japanese market is closed for the day.

Dow (16987.51, -0.36%) extended the narrow congestion band to 16900-17150 without any significant change to the structure. The bias remains bullish as this correction may not go lower than 16800 even on a downside break.

Dax (9651.13, -0.41%) has been testing the support area of 9630-9600 for the last three days and is expected to rally anytime now. A failure to rise at this point and a break below 9600 now would weaken the setup considerably. Keep watch.

The Shanghai (2327.25, -0.20%) created a Graveyard Doji with bearish connotations after making a new high at 2343. But in a strong bull market like this, this pattern would require a lot of follow up selling to be meaningful. A dip till 2285-70 would only be a natural correction in this bull phase. The Nikkei (15948.29, +0.25%) is rising strongly on the back of a crashing Yen and faces the long term resistance 16100-200 now.

The Nifty (8105.50, -0.24%) couldn’t break above 8125-35 to regain strength and remained structurally weak in the short term. The disappointing CPI/IIP data points to a break below our bear trigger level of 8050, which may show a drop to 8000-7970 this week.

COMMODITIES
Gold (1232.99) may test the crucial 1300-1225 in the coming sessions. While the bears are firmly dominant, no scope of reversal is seen just now. Near term is bearish.

Silver (18.664) has bounced a bit from 18.46 but need to see if this bounce takes it higher towards 19. However, we cannot negate a break below 18.5 towards 18.2-18 levels just now. Gold-Silver ratio (66.009) has fallen from resistance near 66.74 as expected and may remain ranged in the 65.76-66.74 region in the near term.

Brent (96.44) has broken below weekly support near 96.75 and while in a strong downtrend it may target levels of 94-92 in the coming sessions. On the longer term we may even see levels of 90-88 on the downside.

Nymex WTI (91.13) has been pushed down by the 13-day and the 21-day MA and while below 93, we may expect a fall to 90. A bounce from 90 thereafter would save the Crude from falling further towards 88-86. Overall trend remains down.

Copper (3.0705) has fallen and may soon target 3.05-3.00 in the near term resuming the longer term downtrend. Near term is bearish.

FOREX
Dollar Index (84.18) is consolidating in a narrow range since last Monday and the Majors have been trying to take the opportunity. But at least a retest of the recent lows is required before a meaningful bounce can be considered. The Rupee is showing no clarity right now.

Euro (1.2967) keeps consolidating though the contraction has been transformed in a rectangular consolidation. The bearish momentum remains very strong below 1.3025-50 and a resumption of the downtrend may come soon.

Dollar-Yen (107.26) is taking a minor pause near the 12-year old long term trendline resistance of 108-109, where the price action will have severe impact on both this pair and Nikkei. The Euro-Yen Cross (139.06) has tested our first target area in 139.15-30 and may rally for the second target at 140 now.

The Pound (1.6242) is trading quietly in the narrow range of 1.6200-80 after the gap-filling exercise. The weekly candle suggests buyers coming from the long term support of 1.6050-6000 levels but a massacre of this magnitude requires a long base building before any sustainable reversal attempt. So expect some volatility in the short term.

The Aussie (0.9006) almost reached our next target area in 0.8990-70, the low just 9 pips away till now. The bad Chinese data over the weekend keeps the bear dominance fully intact with the next targets unchanged at 0.8920-0.8890.

Dollar-Rupee (60.65) closed below 60.70 to negate the bullishness technically but the disappointing CPI/IIP data may weaken the Rupee considerably in the opening hour, opening up multiple possibilities. A break above 61.05 will bring back the targets of 61.15-25.

INTEREST RATES
Yields hardened further in the USA on Friday with the 5Yr (1.82%), 10Yr (2.61%) and 30Yr (3.34%) up from 1.80%, 2.56% and 3.25% respectively on Thursday. The 2Yr Swap Cost (0.2378%) is trading above 0.23% suggesting that the market is betting on higher interest rates ahead. But, the market may quieten down now ahead of the FMC meeting on Wednesday. The Fed might remain dovish given that the August NFP (released on 5th Sep) was not very nice with the Unemployment rate increasing from 6.2% to 6.3%.

The German 10Yr (1.08%) also saw a sharp rise on Friday, and the German-US 10Yr Spread (-1.52%) has moved up by 1bp from -1.53% earlier. The 2Yr Spread (-0.62%) has also moved up 1bp from -0.63% earlier. European Yields have hardened overall with the KSHITIJ E4 10Yr Composite (1.2783%) now a good 10bp higher than the 1.17% Support we were talking about last week. Further hardening will be needed to pull the Euro (1.2965) even higher.

In India, we have to see how the market reacts to the bad IIP data (+0.53%) released on Friday. The headline CPI (7.80%) had dipped a bit from the previous 7.96% but Food inflation has risen a bit to 9.22% from 9.14% earlier. The 10Yr GOI (8.50%) had closed at the crucial 8.50% Support on Friday before the release of the data. Whether there will be a pullback rally towards 8.55-60% again or not will have to be seen. The RBI will most probably do nothing in its next meeting on 30th Sept.

DATA TODAY

6:30 GMT or 12:00 IST IN WPI
...Previous 5.19 %

9:00 GMT or 14:30 IST EU Trade Bal
...Expected 15.90 EUR Bln ...Previous 13.80 EUR Bln

13:15 GMT or 18:45 IST US Industrial Production
...Expected 0.40 % ...Previous 0.48 %

13:15 GMT or 18:45 IST US Capacity Utilization
...Expected 79.30 % ...Previous 79.20 %


SATURDAY'S DATA:-
CN Ind Prodn (YoY)
...Expected 8.8 % ...Previous 9.0 %

CN Retail Sales (YoY)
...Expected 12.1 % ...Previous 12.2 %