The inauguration of Trump as the US President comes today with the investors almost totally in the dark about the actual policies he is going to take, driving the money in the sideline and the markets in a pause mode.
Another bout of profit taking pushed Dow (19732.40, -0.37%) to the lower end of the near term range of 19700-18000 but the medium term trend remains up till the support 19500 holds.
DAX (11596.89, -0.02%) has taken a pause as the ECB meet failed to add any momentum. It may stay in the range of 11400-700 for another couple of sessions before rising towards 11800-900.
Shanghai (3121.72, +0.66%) continues its rise as expected as the chances of a weekly close above the weekly open 3105 looks much stronger. The target of 3165-75 remains unchanged which may be achieved by the early part of the next week.
Nikkei (19091.84, +0.10%) is in a pause mode just like the other major indices and the stability of Yen (114.74) may have influenced it too. As discussed in this space yesterday, there is a possibility of an end to the entire corrective phase starting from the Dec’16 high of 19593. A rise above 19300 may strengthen this bullish possibility.
Nifty (8435.10, +0.22%) is stuck in the range of 8370-8460 for the last 5 sessions and there is no visible trigger today for a breakout from this range. Depending on the global cues, Monday may see a trending move.
Fed Chair Yellen has boosted the risk appetite, triggering an outflow of money from the safe havens of Gold and Yen (114.61).
Gold (1207.44) is drawing the battle lines between the bulls and the bears as it bounces from 1195. The zone of 1195-1230 is indecisive but a breakout from this range in any direction will announce the medium term trend. Before the breakout, some more sideways action in 1195-1230 may be expected.
Silver (17.03) found strong buying exactly at our support of 16.70 and recovered most of the losses incurred in the previous 2 sessions. Now it may trade horizontally in the range of 16.70-17.30 for the next few sessions.
Brent (54.28) and WTI (52.23)have remained almost unchanged in the last session. The required push from the lower levels is yet to be seen but if the bulls fail to trigger a bounce from the current levels by the early part of the next week, then the broader range of 50-55 for WTI and 53-58 for Brent run the chances of an eventual breakdown.
Copper (2.617) is still trading above the target/support area of 2.59-56 which must hold for the upward possibilities to remain open. A break below 2.56 may extend the decline to 2.48-45.
The ECB meet turned into a insignificant event as it changed nothing. Draghi reiterated the sagging inflation and the necessity for more fiscal stimulus, effectively keeping his stance the same old.
The Euro (1.0688) dipped initially after the Draghi speech but found strong support exactly at 1.0580, the price we were watching in the lower levels. The latter recovery has gone beyond our expected 1.0650 and now the chances of seeing 1.0750-75 can’t be ruled out.
Dollar-Yen (114.58) broke above the resistance 115.25 for a while but failed to sustain above it. Failure to rise above yesterday’s high of 115.62 may trigger a retesting of the area 113.00- 112.50.
The Pound (1.2364) is approaching the immediate resistance of 1.2400 but it lacks the strength to rise above 1.2400 immediately, which makes the sideways movement in the range of 1.20-24 for the next few days a more likely scenario.
The Aussie (0.7582) has overshot our near term target of 0.7550 and may rise further to 0.7645 but the overstretched state of the currency demands a cautious stance at the higher levels.
Draghi is going to continue to buy bonds till December, but will reduce the amount to EUR 60 bln per month from April, down from EUR 80 bln per month just now. He has kept rates unchanged and wants to be sure that increases in inflation, as measured by HICP is not transient. He also wants the benefits of low rates to impact the whole of Europe before he raises rates.
The German 10Yr (0.37%) has moved up slightly from 0.36% a day before, but breaking above long-term Resistance at 0.40% will not be easy. The Yield Curve may have potential to rise further, but the German 10-5 and 10-2 Yr Spreads and the 30-10 and 30-5 Yr Spreads also face near term Resistance near current levels. Whether these are able to rise further or will fall back dramatically will be very interesting to watch.
US yields have risen further, but face near-term Resistance just overhead, in line with our warning yesterday. The US 30Yr (3.04%) is already at the Resistance and the 10Yr (2.46%) and 5Yr (1.95%) have Resistances at 2.48% and 1.98% respectively.
The German-US 2Yr Spread (-1.93%) has strong Resistance at -1.90% which may prevent the Euro (1.0688) from flying much higher, unless the Spread rises past -1.90%.
2:00 7:30 CN IIP (YoY)
...Expected 6.1 % ...Previous 6.20 % ...Actual 6.0 %
2:00 7:30 CN GDP
...Expected 6.70 % ...Previous 6.70 % ...Actual 6.8 %
13:30 19:00 CA Inflation Y/Y
...Previous 1.5 %
Australia Labour Force
...Expected 10.2 K ...Previous 37.06 K ...Actual 13.48 K
EU EA (17) Curr Acct Bal
...Expected 29.30 EUR Bln ...Previous 28.30 EUR Bln ...Actual 36.10 EUR Bln
...Expected 0.00 % ...Previous 0.00 % ...Actual 0.00 %
US Philifed Index
...Expected 16.3 ...Previous 21.5 ...Actual 23.6
US Housing Starts
...Expected 1190 K ...Previous 1110 K ...Actual 1123 K