Market Morning Briefing

GOOD MORNING!

STOCKS
The Portugal bank problems abated and generated some quietness in the markets. The lack of any immediate major trigger may keep the markets silent now.

Dow (16943.81, +0.17%) tested the lower end of the month old 300 points range in 16800-17150 and may bounce towards the higher end towards 17100 now. The Dax (9666.34, +0.07%) weakness mentioned earlier is evident now and may test the long term bull market defining support band in 9500-350 before any sustainable bounce.

Nikkei (15219.53, +0.37%) is settled in the range of 15000-500 and even any extension of the range now could be small and slow with the range dominating for a few sessions more. The Shanghai (2046.08, -0.04%) has further contracted in a range of 2005-2070. Keep an eye for an impending breakout soon.

Nifty (7459.60, -1.43%) has firmly closed below 7500 and in a show of extreme weakness but right now the bulls may attempt a bounce or even a reversal from the current levels or from slightly lower 7400 levels, as both Nifty & BankNifty are hitting the earlier swing lows and supports.

COMMODITIES
Metals are in an upward rally while oils are trading lower in a near term down trend.

Gold (1334.92) is stable for now and while trading above 1330, it may target resistance near 1350-1360 on the upside. Near term rally is in force.

Silver (21.36) is trading a bit lower after testing 21.5 on Thursday. It needs to break above 21.5 to continue the current rally else we may see some correction towards 21.25-21 before targeting 22.5.

Copper (3.2685) is stable near 3.25-3.27 region and seems to have paused a bit for now. Will it continue its rise further towards 3.32-3.33? Or has it entered into a sideways consolidation? Possibility of the rally to continue is more likely.

Brent (106.87) dropped sharply to 106 levels as expected. The bears are strong for now but if the support near 106 holds it may rise towards 109 else there is a possibility of a fall towards 104.

Nymex WTI (100.89) fell sharply on Friday as Libya boosted its Crude output, and tested the daily channel support near 100.5. If this holds, we may see a bounce to 103-104 levels; else it may further fall to longer term support near 98-96 levels.

FOREX
The speech by the ECB president Mario Draghi tonight may determine the short term direction for the Euro and hence the Dollar too. Keep watching.

Euro (1.3603) has been consolidating in the broader range of 1.35-1.37 for the last 6 weeks and may continue doing so. Now it may reach the 1.3650-1.37 once more before reversing towards the lower end.

Dollar-Yen (101.36) continues to trade sideways in the old range of 101.20-102.75 just as expected after the false break down t 101.07 and there is still no sign of a break coming. Euro-Yen (137.87) is trading below the 2 month old range of 138-140 and any inability to quickly return inside that range may drag the price down to the long term channel support of 137 or even 136.30.

Pound (1.7114) is unaffected by all those happenings in ECB or US and keeps consolidating at the higher levels for nearly two weeks. Now it may reach 1.72 as expected or even higher after the current correction ends.

Aussie (0.9400) is stuck in the band of 0.9320-0.9500 for the last 5 weeks. A break above 0.9525 may result in a rally towards 0.98 but a break below 0.9320 would result in a drop to the long term support of 0.92. Expect sideways move to continue till a breakout takes place in either direction.

Dollar-Rupee (59.93) failed to break above our 60.26 to confirm strength and ended below 60.00, signaling further sideways movement in the band of 59.50-60.25, with the possibility of an extension to 59.15 or 60.40.

INTEREST RATES
The Portugual-Germany 10Yr Spread (2.67%) rose last week on the Banco Esperito Santo issue and can rise some more towards 3.5%, putting downward pressure on the Euro in the near term. But the German-US Yield Spreads are rising a bit and that could ease some of the pressure on the Euro.

The US-Japan 10Yr spread (1.99%) is dipping a bit over the last few days and can test 1.95% on the downside only to bounce again. That could help Dollar-Yen (101.35) move up in the longer term.

The UK-US 10Yr Spread (0.08%) is down from levels near 0.15% but has Support near 0.05-0.02%, limiting any immediate downside for the Pound.

In India, the WPI and CPI data on inflation is awaited to lend direction to the Yields and Dollar-Rupee. The Indo-US 10Yr Spread (6.25%) has crucial Resistance near current levels and can come down if inflation is benign.

DATA TODAY

6:30 GMT or 12:00 IST IN WPI (Jun'14)
...Previous 6.01 %

9:00 GMT or 14:30 IST EU IND Prodctn (MOM)
...Expected -1.2 % ...Previous 0.80 %

9:00 GMT or 14:30 IST EU IND Prodctn (YOY)
...Expected 0.5 % ...Previous 1.30%


DATA ON FRIDAY
12:00 GMT or 17:30 IST IN IIP (Apr'14)
...Expected 1.25 % ...Previous 3.40 % ...Actual 4.70 %

12:30 GMT or 18:00 IST CA Labour Force
...Expected 26.2 K ...Previous 25.80 K ... Actual -9.4 %