Market Morning Briefing

GOOD MORNING!

STOCKS
The Holiday week begins in China & Hong Kong markets along with a very long weekend in India. Still, closing the positions may produce some volatility in the Indian markets.

Dow (17042.90, -0.17%) spent the session in the already established weekly range of 16900-17150. The highly overlapping nature of the fall suggests it to be a weak correction that may get over soon. Dax (9474.30, +0.55%) took a pause in the downtrend exactly as expected and it may continue for some more time, at least till the ECB meet. 9600 may act as a stiff resistance or any bounce.

Shanghai (2363.87, +0.26%) has been testing the recent high of 2365 for the third time in the last 4 sessions. As long as it stays above 2325-15 now, expect it rising towards 2430-50. The Nikkei (16214.78, +0.26%) bounced back from the lower end of the range 16000-400 and may continue trading in the same range for another session.

Nifty (7964.80, +0.07%) rallied sharply after the RBI meet but faced rejection from our old resistance area of 8040-50, establishing that area further as the main trigger level for the bulls. So the index is limited to 7840-8050 now and a break of this range will give us a clear trend.

COMMODITIES
Commodities have all fallen and are trading low. Near term looks bearish.

Gold (1206.12) was again pushed by the 13-day MA as expected and is now trading lower. 1200 may be tested in the next few sessions. Expect a break below 1200 next week. Near term is bearish.

Silver (16.951) dropped sharply yesterday nearing our expected targets of 16.5-16levels. Bears are strong for now and if the fall continues to break below 16 we may see a danger of testing 14 in the near term. Overall long term trend is down.

Nymex WTI (91.43) fell sharply as expected coming back to test levels of 91-90. Strong dominance of the bears continues for now. It may whipsaw in the 90-95 range and unless a break on either side is seen.
Brent (95.020) has fallen to test support near 95 and may consolidate a bit above 95. The crucial 95-97 zone is likely to hold for some time now. Overall trend remains down.

Copper (3.0045) is whipsawing in the 3.00-3.05 region and may continue to do so for a few more sessions unless a break in either side is seen. Overall near term remains bearish.

FOREX
Nothing changed as Dollar (86.04) keeps rising and rising, hitting new highs for 5 consecutive sessions. Rupee may hurt more now after the RBI meet.

Euro (1.2610) failed to break above 1.2715 and just as expected, crashed vertically from 1.2702 to 1.2568 levels, just a few pips away from our support of 1.2550. Repeat - unless it manages to break above 1.2715 immediately and 1.2820 later, the same story of vicious bear attacks can run again with the possibility of seeing much lower levels very fast.

Dollar-Yen (109.94) is close to reach our first target of 110.30 and 113 also looks likely as long as the pair remains above 109. The Euro-Yen Cross (138.65) has achieved our second target of 138.50 too and may try to bounce again if 138.25-137.65 provides support.

The Pound (1.6189) has been forming weekly candles with large shadows for the last 3 weeks, implying high volatility and confusion. The currency may keep trading in 1.6050-1.6525 for the next few days.

Aussie (0.8675) pause didn’t survive for more than a single day as the bounce was rejected sharply by exactly our resistance at 0.8770. Trading below the 4-year support of 0.8660 keeps it ready for more fall targeting 0.84 levels.

Dollar-Rupee (61.74) has confirmed its uptrend and with the long weekend coming, Dollar demand can push it up more towards 62.00 and 62.40 levels.

INTEREST RATES
The RBI kept rates unchanged yesterday, warning that its inflation forecast is of 7% rather than the needed target of 6%. The 10Yr GOI has risen to 8.51%, in line with our expectation of a rise towards 8.50-55%. Need to see if this Resistance holds or breaks. May be crucial for the Rupee going forward. Unable to decide on direction after 5.55% risght now.

Importantly, the US-Japan 10Yr Yield Spread (1.97%) has come off from the 2.01% Resistance mentioned a couple of days ago and is close to the initial target of 1.95%. Further dip towards 1.92% is also possible. Need to see whether this can be a drag on the still bullish Dollar-Yen (109.93).

The German-US 2Yr Spread (-0.65%) continues to hug the downtrend channel Support line, falling along the line for now. Failure to bounce will keep pressure on the Euro (1.2613). Watch closely. The KSHITIJ E-4 10Yr Composite (1.1688%) is falling again, but could find Support near its previous low of 1.1343%.

Looking at all three above, if the Dollar does not lose its yield advantage soon, it will continue to strengthen.

DATA TODAY

22:30 GMT or 4:00 IST AU PMI
...Previous 47.30 ...Actual 46.5

23:50 GMT or 5:20 IST JP Tankan Large Manufacturers Index
...Expected 10 ...Previous 12 ...Actual 13

0:30 GMT or 6:00 IST CN PMI
...Expected 51.1 ...Previous 51.1 ...Actual 51.1

1:35 GMT or 7:05 IST JP PMI
...Expected 51.7 ...Previous 51.7 ...Actual 51.7

6:30 GMT or 12:00 IST IN PMI
...Previous 52.4

7:30 GMT or 13:00 IST CH PMI
...Expected 52.1 ...Previous 52.9

7:30 GMT or 13:00 IST EU PMI
...Expected n 50.5 ...Previous 50.7

8:30 GMT or 14:00 IST UK PMI
...Expected 52.6 ...Previous 52.5

9:00 GMT or 14:30 IST EU GDP
...Previous 0.70 %

14:00 GMT or 19:30 IST US Manufacturing ISM
...Expected 58.6 ...Previous 59.0

12:15 GMT or 17:45 IST US ADP Emp
...Expected 206 K ...Previous 205 K


DATA YESTERDAY

UK Cons Conf
...Expected 0 ...Previous 1 ...Actual -1

JP Unemp
...Expected 3.8 % ...Previous 3.8 % ...Actual 3.5 %

RBI Repo Rate
...Previous 8.00 % ...Actual 8.00 %

RBI Reverse Repo Rate
...Previous 7.00 % ...Actual 7.00 %

RBI CRR
...Previous 4.00 % ...Actual 4.00 %

RBI MSF
...Previous 9.00 % ...Actual 9.00 %

EU Unemp
...Expected 11.50 % ...Previous 11.50 % ...Actual 11.50 %

CA GDP
...Previous 0.30 % ...Actual 0.00 % ...Expected 0.2%

US Case Schiller
...Expected 7.50 % ...Previous 8.1 % ...Actual 6.7 %

US Cons Conf
...Expected 92.20 ...Previous 93.40 ...Actual 86.0