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02-22-2019, 08:51 AM
Daily forecasts on global Stocks, Commodity, Forex and Interest Rates markets
22 Feb 19. 0959 IST or 0429 GMT or 2329 EST

STOCKS

The rally in the global indices seem to be losing steam. A near-term corrective fall looks likely in Dow, Nikkei and Shanghai on the back of some profit-taking. On the Indian front, the Sensex and Nifty have moved up closer to their key resistances. Whether the indices breaks the resistance or not will decide the next move.

The psychological resistance level of 26000 is holding well on the Dow Jones (25850.63, -103.81, -0.40%). A corrective fall to 25600-500 is possible in the near-term before the uptrend resumes.

DAX (11423.28, +21.31, +0.19%) has key resistances at 11470-500 which can cap the upside. A pull-back from this resistance can take the index lower to 10400-300.

Nikkei (21387.20, -77.03, -0.36%) can dip to test is intermediate support at 21230, or even 21000, before we see a fresh rally towards 21650.

Shanghai (2738.06, -13.75, -0.50%) has come-off sharply from the day's high of 2794. A test of 2710 and 2700 looks possible in the near-term before the overall uptrend resumes in line with overall bullishness.

Sensex (35898.35, +142.09, +0.40%) and the Nifty 50 (10789.85, 54.40, 0.51%) tested their respective resistance levels of 36000 and 10800 yesterday as expected. If the indices breaks above these resistances then Sensex can move further higher to 36450 and the Nifty 50 can test 10860-10880. But while below 36000 Sensex can dip to 35680 and Nifty 50 can test 10720 on a failure to breach 10800.

COMMODITIES

The upmove in Gold, Silver and Copper have paused yesterday as expected. While Gold can bounce and remain range-bound, Silver and Copper can dip further before reversing higher. Outlook for oil continues to remain positive although it is inching higher at a slower pace.

Gold (1325) fell sharply as expected. It has bounced slightly from the support level of 1320. While above 1320, a bounce to 1340 is possible in the near term. Cluster of Supports are poised between 1320 and 1310 which can restrict the downside and also the pace of fall if Gold breaks below 1320.

Silver (15.82) has declined below the psychological level of 16 and looks vulnerable to dip further towards 15.70-65 in the coming sessions, from where a last-leg rally towards 16.45 could be a possibility next week.

Copper (2.90) has come-off from a high of 2.925. A break below 2.89 can take it further lower to 2.85 and 2.83 before a fresh leg of upmove begins. However, given the double bottom on the medium-term charts, Copper remains bullish for a test of 3.2 and 3.25 in the longer term.

WTI (56.9), although it remains bullish, looks to be lacking strength at the moment. It could remain range bound between 55 and 58 for sometime before we see a fresh rally to 60.

Brent (67) is continuing to hold higher and remains bullish in the short-term for a test of 68-70. A key near-term support is at 65.55 (100-day moving average)

FOREX

The Support at 96.25-00 on Dollar Index (96.62) continues to hold well keeping chances of a longer term rise towards 98 alive, but we also have to reckon with near-term Resistance at 97.25. So, the outlook is indecisive/ ranged. Similarly, the Euro (1.1337) remains below Resistance at 1.1375, but also has immediate intra-day Support at 1.1330, which can yet produce a rally towards 1.1450 next week.

We have German IFO and EU CPI data being released today. Both are expected to be soft. But that is not a guarantee that the Euro will be pushed lower.

Dollar-Yen (110.72) has traded narrowly sideways between 110.60-90 since yesterday, in line with expectation. There are two-way chances of either a fall towards 109 or a rise towards 112 in the medium term. The Euro-Yen(125.58) saw rejection from Resistance at 126 yesterday, but has been finding Support at 125.30 through yesterday. So, we have to wait to watch both 126 (Resistance) and 125.30 (Support). Of these, the Resistance at 126 might be a little stronger.

The failure to build on its bounce to 0.7206 yesterday seems to be pushing the Aussie (0.7098) lower with chances of a decline towards 0.7025 or lower.

Dollar-Yuan (6.7220) dipped below 6.70 yesterday but has been bought back well, suggesting a possible near term rally towards 6.74-75. Dollar-Rupee (71.25) also got bought on the dip to 70.91 yesterday. We have to see if it tries rise towards 71.50-60 now.

INTEREST RATES

European CPI and German IFO data to be released today. Both are expected to be soft. These could push German Yields (2Yr -0.547%, 5Yr -0.32%, 10Yr 0.129% and 30Yr 0.744%) down a bit, especially since there is Resistance at 0.1350% and 0.75% on the 10Yr and 30Yr Bunds respectively.

While the German-US 2Yr Spread (-3.07%) remains well below -3.05%, the German-US 10Yr Spread (-2.56%) has Support near current levels and has some chances of moving up towards -2.53% in th4e near term. We need to see how these impact the Euro.

Importantly, in the USA, the 30Yr yield (3.05%) has seen a sharp rally up from 3.01%, possibly breaking the downtrend that was in place since 3.45% (Nov-18). Correspondingly, the 10Yr (2.68%) and 5Yr (2.51%) have also risen, challenging their downtrends since Nov-18. Good Support is available at 2.44% on the 5Yr, suggesting chances of a further pick up in Yields, in line with the outlook in our Feb-19 monthly forecast on US Treasuries.

The RBI's MPC Minutes were released yesterday, which were dovish. The 10Yr GOI ended a tad lower at 7.5439% yesterday. With the further rise in US yields yesterday, the Indo-US 10Yr Spread (4.8799% yesterday) may well dip towards 4.85% or lower today.

Author: Kshitij Consultancy Service
Website: http://www.kshitij.com
Kshitij Consultancy Service