Overall major stock indices are mixed. While Dow looks bullish, Dax may trade sideways. Nikkei is trading near crucial support which may either hold or break on the downside. Shanghai has recovered from deep lows and may now be on the recovery mode. No strong trend visible for the week.
Very sharp recovery seen in Dow (24640.45, +0.16%) from levels near 24190. While support near 23200 on the 3-day candles hold, we may see an attempt to rise towards 25000-25200 levels in the near term before again coming off towards 24000 or lower.
Dax (12196.50, -0.70%) has an immediate resistance near 12400 and higher at 12600. While these hold, some sideways range-trade is possible in the 12400-12100 region with a possible extension to 12600 in the medium term.
Nikkei (21109.29, -0.64%) is holding above the support near 21000 on the 3-day candles. While the support holds, an attempt to rise towards 22200 is possible in the coming sessions. A break below 21000, if seen could be vulnerable for the index taking it towards 20500 or even lower in the medium term. But for now we may expect 21000 to hold.
Shanghai (3176.95, -0.25%) has recovered from levels near 3060. A possible test of the earlier support turned resistance near 3250-3260 could be again seen in the coming sessions. Immediate support is seen in the 3060-3100 region which is likely to hold in the near to medium term.
Nifty (10539.75, +0.81%) and Sensex (34300.47, +0.87%) have recovered from the previous lows seen last week. The indices may trade in the green for a few more sessions before coming off to lower levels. Immediate targets for Nifty and Sensex is seen at 10600-10800 and 35000 respectively.
Brent (62.80) has support in the 61-62 region and while that holds, a bounce back towards 65 Is preferred just now. WTI (59.17) has similar support near 57.30-58.00 region which may push the price upwards to levels near 60-62 in the coming sessions. Near term likely to be bullish.
Gold (1337.20) is gradually moving up. A re-test of 1340-1345 is possible in the near term. View is bullish for this week.
Copper (3.1560) has managed to move back above 3.0750 and while that holds, the price may continue to move up towards 3.20-3.25 in the coming sessions. Near term looks bullish.
The Dollar has weakened considerably against major currencies, thereby bringing the Dollar Index (89.51) down to levels near 89.50 from levels near 90.5 prevailing till Monday. The US CPI data release today is being looked at very closely for cues on inflation trends. Higher than expected inflation numbers for Jan’18 could lead to some near term selloff in both equity and debt markets, weakening the Dollar further in the next 1-2 weeks. On the 3 day candle and weekly candles,support near 88.5 could be tested.
Euro (1.2382) has risen 100 pips as the Dollar Index fell by approximately 1 point over the last 2 days. If the Dollar Index falls by 1 more point towards 88.5 by next week, the likelihood of which is projected above, Euro could again test resistance on the weekly line chart near 1.245-1.248.
Contrary to our expectation, Dollar Yen (107.09) didn’t see the strong support zone near 108.0-108.5 hold up and has broken below it. This downmove has also broken long term support on the weekly line charts (which was seen on a trend line coming from 2012). This could signal the onset of bearishness for Dollar Yen in the medium term. The next target on the downside could be 106.5 – seen as supports on both 3 day and weekly candles.
Our expectation for Euro Yen (132.51) to move up has also not surfaced due to renewed Yen strength. It could again test horizontal support near 132 on the 3 day candles by next week as Euro moves towards 1.24 and Dollar Yen towards 106.5.
The Pound (1.3913) might have just found support near 1.380-1.385 on the daily and 3 day candles which negates our view of seeing it drop till 1.37. We will have to wait and watch for the same to be confirmed in the coming sessions.
Dollar Rupee (64.135) – is trading at much lower levels compared to Monday in the morning session. There is a possibility of testing 64 soon if the Dollar weakens further against majors.
US 10 Year Yield (2.81), US 30 year Yield (3.09), US 5 year yield (2.527), US 2 year yield (2.094) : US longer term yields have been consolidating ahead of the important inflation data release . However, the 10 Year had tested highs near 2.89% on Monday and has come down from there, thereby lending some validation to our view that yields will respect their long term resistance levels. We repeat that our expectation is for the 4 yields to respect their long term resistance levels (2.85-2.90 -earlier mentioned as 2.85, 3.20 , 2.7 and 2.2 respectively) in this month.
US 10-5 Year Yield Spread (0.28) as expected has come down a bit after touching 0.31 on Monday. It could slowly move towards 0.35 by Mar’18.
German 10 Year bond yield (0.75) is continuing its ranging between 0.7 and 0.76 as predicted.
Japan 10 year bond yield (0.067) has broken important support on short term chart near 0.07. It is dips further, we might see further strengthening of Yen against the Dollar.