Wednesday, February 21, 2018
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Market Morning Briefing: Euro As Per Expectation Is Consolidating Currently At Levels Near 1.225
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STOCKS

Dow (26214.60, +0.55%) moved up again yesterday and could continue to rise towards 26400-26500 in the next few sessions.

Dax (13463.69, +0.22%) may take support near 13400 (earlier resistance, now turned into support) and possibly try to move up towards 13600 in the coming sessions. While above 13400, view remains bullish.

Nikkei (24037.86, +0.93%) is trading above 24000 and is likely to move up towards 24200 in the coming sessions.

Shanghai (3530.32, +0.84%) has moved up to test 3530 and would soon move up to 3550 in the next few sessions. Note that 3550 is an important resistance and could come off from there back towards 3500 in the medium term.

Nifty (10966.20, +0.66%) and Sensex (35798.01, +0.81%) moved up sharply yesterday. The markets are currently driven by liquidity flow into the emerging markets, India being a beneficiary of that. As news suggests, foreign institutional investors have bought Indian shares worth $993.16mln so far in Jan’18.

Equity allocation seems to be at the highest levels since Mar’15. While the fows keep coming in, the index could be moving higher for some more time in the near term.

Targets for Nifty remains at 11000 and for Sensex near 36500 for the coming sessions.

COMMODITIES

Our expected correction from respective resistances near 70 and 65 have not yet materialised keeping both Brent (69.37) and WTI (63.94) at levels just below the resistances. While the rise continues, a re-test of the upside resistances could be seen in the next couple of sessions. While we still expect the crude prices to see a short corrective fall, it would be important to note the price action near resistance levels.

Gold (1335.60) has moved up a bit but has scope of eventually moving up towards 1345-1350 levels in the coming sessions.

Copper (3.2020) may again try to move up towards 3.25. Narrow movements within 3.25-3.15 is likely in the next few sessions.

FOREX

Dollar Index (90.377) is currently near support (90.3-90.4; earlier mentioned as 90.4-90.5) on the daily line chart. It should respect this support and stay above it, or, at max, go down further to test support near 90 on the 3 day candles. However, in either case, there should be a bounce for the index towards 91.5 in the near term.

Euro (1.2257) as per expectation is consolidating currently at levels near 1.225. Ranging between 1.21 and 1.2325 might continue for the Euro for some more sessions. We have a preference for a correction towards 1.21 in the near term followed by a rise back towards 1.225-1.23 again.

As mentioned yesterday, Dollar-Yen (110.63) should stay above support near 110.5 on the 3 day candles and make another attempt at a rise towards 112 in the near term.

Euro-Yen (135.65) is trading in a very narrow range of 135.5 and 136.2 currently and with some Yen strength in the past couple of days, it is struggling to move beyond 136. The anticipated upmove towards resistance near 137 on the daily candles might extend into next week.

Pound (1.3982) is currently testing resistance near 1.4 on the daily line charts. However there is some room on the weekly candles for it to move further up towards resistance near 1.41 in this week before dipping again.

Aussie (0.7994) is continuing its ranging near 0.7990-0.8030 as it struggles to move past resistance near 0.80 on the weekly line charts.

Dollar-Rupee (63.87) could extend to 64.20 also. The strong Support to watch out for now is 63.70. The bigger question is whether the Dollar will try to rise past 64.20 in the medium term, or not.

INTEREST RATES

US 10 Yr (2.65%), 30 Yr (2.9122%), 5 Yr (2.4476%) & 2 Yr (2.0608%) are all slightly below the highs which were seen yesterday. The 30 Yr is testing resistance near 2.92% on both short term and medium term charts. In the absence of further volatility this week, we might see the 30 Year consolidate below this level for the time being.

A consolidation in the 30 Yr yield could mean no improvement in the yield curve flattening situation, unless the shorter term yields also consolidate. US 10 Yr – 5 Yr (0.2024%) & US 30Yr – 10Yr (0.2622%) for now continue to stay above supports near 0.19% and 0.24-0.25% respectively.

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