Saturday, April 21, 2018
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Market Morning Briefing: Brent Is Almost Stable Above 70
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STOCKS

Almost all major indices are in a recovery mode just now, trying to bounce back after a sharp fall last week.

Dow (24202.60, 2.84%) moved up a bit yesterday and could test 25000 on the upside in the next few sessions if the rise sustains. A fall back to levels below 23500 if seen would make it vulnerable to a sharper fall in the medium term. 25000-24000 could be the trade region for the coming sessions.

Dax (11787.26, -0.83%) dipped more and is testing support near 11700. This if holds, could produce an immediate bounce to levels near 12100-12300 in the near term (more preferred); else a fall towards 11600 could be seen.

Nikkei (21110.68, +1.66%) has moved up well from 20400 levels and could test daily channel resistance near 21400. Only on a break above 21400 would initiate further chances of an upmove; else a fall back towards 20600-20400 or even lower could be considered for the medium term.

Shanghai (3159.64, +0.83%) opened with a gap up as support near 3100 seems to be holding for now. While the support holds, te index could gradually move up towards 3200-3250 in the coming sessions.

Nifty (10130.65, +1.33%) and Sensex (33066.41, +1.44%) rose yesterday as expected. Nifty could test 10260 again on the upside while Sensex has scope of rise towards 33500.

COMMODITIES

Brent (70.23) is almost stable above 70. While the long term chart may look bullish just now, there could be some dip towards 68 in the coming sessions. A straight rise from here could trigger some more of upside momentum taking it to 72.50. Nymex WTI (65.70) could also see a pause just now. A test of 64 on the downside looks possible before another attempt to rise past 66.50.

Gold (1353) has moved up and is trading just at the resistance level. A break above 1354 if seen and sustained could lead to a sharp rise towards 1360-1380 in the near term before another corrective dip takes place.

Copper (3.0149) has bounced back a little but needs to move up beyond 3.04 to get back the upward momentum and start rising back to higher levels. While below 3.04, there could be chances of seeing a further fall in the coming sessions. Bearishness to be negated only above 3.04.

FOREX

Dollar index (89.10) as mentioned yesterday, has weakened more and has broken below support near 89.4 on daily candles. It has also dipped below crucial long term support on weekly line chart near 89.2-89.4 (earlier mentioned as 89.3-89.4). If this break on the weekly line chart sustains, the Dollar Index could turn bearish in the medium term after having ranged in the 88.5-91.0 region for the past 10 weeks. The next downside target would be horizontal support near 88.5 on daily candles.

Euro (1.2449) – after breaking resistance on daily candles near 1.235 yesterday, the Euro is moving towards higher resistance level on 3 day candles near 1.255-1.260. However, on the weekly line chart, it is testing crucial long term resistance near 1.245, which would have to be breached for a medium term rally to be confirmed. We prefer the breach of this level and a move towards 1.255-1.260 in the next couple of weeks.

Dollar Yen (105.63) , as per our expectation yesterday, didn’t see a break of immediate support near 104.6 on daily candles. It has bounced from there towards immediate resistance near 106 on the daily candles. This is a strong resistance level and should again push the Dollar Yen down towards 104.5. We could see some ranging in the broad 104-106 region in this week.

Euro Yen (131.49), as we had expected, did move up after testing 129 on Friday, but also went on to breach resistance near 131 in the downward channel on daily candles. The crucial downside target of 127.5-128.0 (last seen in Aug ’17) which was mentioned yesterday might well take some time to be tested if Euro continues its rise towards 1.255-1.26 as mentioned above and if the Dollar Yen simultaneously ranges between 106-104.

As per expectation, Pound (1.4231) is continuing to move up in a channel on daily candles towards higher (horizontal) resistance near 1.43. There could be some dip from channel resistance in the next 1-2 sessions towards 1.415-1.420 after which it could again rise, targeting 1.42 by early next week.

Dollar Rupee (64.87) may bounce back from levels near 64.75.

INTEREST RATES

US yields are seeing some ranging after the Fed rate hike last week, but we also believe that this ranging might be part of a broader (slow) decline in yields which might just continue through Apr-May.

US 10 Yr Yield (2.852%), 30 Yr (3.086%), 5 Yr (2.6435%), 2 Yr (2.31%) :

As per our expectation yesterday, the 10 Yr yield did rise from channel support (near 2.8%) on short term chart and might now test channel resistance near 2.88%-2.90% in the next couple of sessions. There could be a possibility for 2.75% to be tested in Apr ’18 if it continues ranging in this channel.

The 30 yr yield should has also moved up from support near 3.04%-3.05%. If it dips from 3.1%, a downward channel for the 30 Yr yield would also be confirmed.

The 5 year yield is has as per expectation bounced from support near 2.6% and could see a rise to 2.7% by end of the week.

The 2 Year yield is near crucial medium term resistance level of 2.3% from where it should see a dip in the coming sessions.

Japan 10 year yield (0.065) exactly as per our expectation is bouncing from horizontal support near 0.03%. Ranging between the broad 0.03%-0.1%, which has been happening since Sep ’17, might continue as long as the Japanese Central Bank sticks to its 0% target for Japanese bond yields.

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