Market Morning Briefing

GOOD MORNING!

STOCKS
The geopolitical risk has subsided a lot as it has been largely clear that the MH17 incident was a supreme mistake instead of any sign of further escalation in the Ukraine-Russia conflict. Most of the markets recovered their loss as expected and today may be quiet day for the equities. Japanese market is closed today.

Dow (17100.18, +0.73%) reversed the knee-jerk reaction and recovered nearly all of its Thursday loss. The range, slightly modified to 16850-17200, prevails for now and a break is required for a trending move. The Dax (9720.02, -0.35%) managed to hold above its recent lows in 9615-20 levels but must break above 9875 soon to regain strength or it may fall prey to the bears for 9500-400.

Nikkei (15215.71, -1.01%) has opened with a sharp gap down but the 5 week long range of 15000-500 may still remain unbroken. The Shanghai (2052.69, -0.31%) failed to break above the upper end of the contracting range at 2080-90 which would signal a considerable bullish reversal towards 2140-80. This signals a continuation of the broader range of 2000-2090.

Nifty (7663.90, +0.31%) corrected by exactly 60 points just as expected and bounced back. Now it may reach 7700-7730 area where the sellers may re-emerge. Get cautious there.

COMMODITIES
Gold (1310.28) extends its downfall after a sharp rise on Thursday. A fall towards 129-1280 could be seen in the coming sessions while below 1325 from where a little bounce could take place but the overall longterm downtrend is still in force.

Silver (21.886) has been fluctuating in the 20.5-21.75 region in the last few sessions but has been overall ranged. Need to see if it is going to continue sideways or move down to 20.5-20 levels in the near term?

Copper (3.1815) has dropped sharply as expected, to test channel support near 3.16-3.17 levels. If this holds we may see a bounce to 3.20-3.25 this week else a break below 3.15 could lead to a danger of a fall towards 3.10-3.05 in the near term.

Nymex WTI (102.96) has come off from 104 levels and may now fluctuate in the 102-104.3 region. It needs to break 104.3 to ensure a rise towards 106 else may remain ranged for sometime.

Brent (107.14) dropped sharply last week but seems to whip-saw in the 108.62-106.5 region unable to decide further moves. But while the long term support near 106 holds, it may soon target 109.45-111.84 levels. Near term uptrend persists.

FOREX
The risk-off mode didn’t prevail for long as the correction in Gold also shows. Keep an eye on Euro as it is possible, though still with no more than 40-45% probability, that a major bottom may be formed at 1.3489 with confirmation in the form of a break above 1.3600 pending. If that comes true, that would affect the entire Dollarscape.

Euro (1.3530) bears may do well if they get a bit cautious here unless 1.3475 is broken convincingly. A break above 1.3540 may extend this small current bounce to 1.3570-1.3600 but above 1.3600, it would signal another rally towards 1.37 now and probably a major reversal on the back of panic short covering.

Dollar-Yen (101.28) tested the earlier spike low level around 101.10 on a safe haven entry and bounced back later when the fear subsided, to continue trading sideways in the range of 101-102, which still shows no sign of breaking. Euro-Yen (137.04) broke below 137 to make a low at 136.70 and got a bit closer to the final long term support area of 136.20-135.50. Just like Euro, the bulls must appear right now or run the risk of getting annihilated.

Pound (1.7096) is yet to break above the latest swing high of 1.7191 to continue the rally, resulting in an extension of the corrective mode in the range of 1.7050-1.7200. Expect more price action inside this range.

Aussie (0.9389) may retest 0.9520 levels on a break above 0.9420 as it tries to bounce from the lower end of the 5-week long band of 0.9320-0.9500. On the other hand, a break below 0.9320 would result in a drop to the long term support of 0.9240-0.9200. Bias is neutral in 0.9320-0.9420.

Dollar-Rupee (60.28) opened with a gap up and reached our initial target area of 60.40-50 just as expected but the last swing high of 60.54 was not broken above. The lower closing has made the picture unclear for the moment and we wait for further price action for clarification.

INTEREST RATES
German 10Yr Bund Yield (1.15%) is stable for now but may trend lower as said earlier which may not be so good for the Euro (1.3530).

The US 30Yr (3.29%) is trading at crucial levels and may soon see a bounce upwards. The 10Yr (2.48%) and 5Yr (1.67%) have bounced well from support trendlines as expected and may continue to rise for a few sessions. Market awaits US CPI data tomorrow.

The 10Yr GOI-US Spread (6.29%) has broken above 6.25% and entered into the earlier said resistance zone of 6.25-6.50%. The GOI 10 yr yield (8.77%) has risen and may continue to rise in the coming sessions. Will the resistances on the Indo-Us spread hold given that the Us 10 yr yields are rising? Need to wait and watch.

DATA TODAY

No major data release today.

FRIDAY'S DATA
Euro Area Monthly Balance of Payments
...Expected 16.2 EUR Bln ...Previous 18.80 EUR Bln ...Actual 8.9 EUR Bln

CA Inflation Y/Y
...Expected 1.70 % ...Previous 1.70 % ...Actual 1.80 %