The FOMC held interest rates steady and kept the target range for the federal-funds rate at 5.25-5.50%. The markets have been expecting a rate cut as early as March-24 but the FED statement overnight has indicated no hurry to cut rates and seemed slightly hawkish, stating that “the Committee does not expect it will be appropriate to reduce the target rate until it has greater confidence that inflation is moving sustainably towards 2 percent”. Dollar Index continues to trade within 103-104 while Euro could have scope to test 1.0750 while below 1.0850. EURJPY and USDJPY may decline to 158 and 146/145 respectively while Aussie can also fall towards 0.65/0.64 while below interim resistance at 0.6650. USDCNY needs to break past 7.18 to rise towards 7.20/22/24 else can fall to 7.16. Upside chances look more likely. Pound remains stuck within 1.26-1.2750 zone. EURINR could hold above 89.70 for the very near term but looks overall bearish for the medium term towards 89/88. USDINR could face some volatility today as Union Budget is scheduled. Immediate range of 82.90-83.10/20 can continue to hold.
Dollar Index (103.45) fell to 102.92 post the FOMC statement release but has bounced back from there to 103.45 now. Our initial expected range of 103-104 remains intact for now.
EURUSD (1.0820) is now back within the range of 1.0860-1.0800 after its failed attempt to rise towards 1.09. Note that 1.0860/0850 is an interim resistance which is likely to hold and push Euro down to 1.0750 in the next few sessions.
EURJPY (158.61) broke below 159 as expected and could be headed towards 158-157.50 where it can find a decent support to bounce back towards 160.
Dollar-Yen (146.62) fell sharply breaking below 147, much faster than expected but in line with our bearish sentiment iterated in yesterday’s edition. View continues to remain bearish towards 146/145.
USDCNY (7.1785) seems to be stuck within a narrow region of 7.16-7.18. Note that 7.18 is a decent resistance on the near term charts which has to hold and push the pair down towards 7.16 or lower else the pair may attempt to rise past 7.18 which could open upside chances of 7.20/22 or even 7.24 in the coming weeks.
Aussie (0.6574) fell from yesterday’s intra-day high of 0.6622 but seems to be holding above 0.6559 just now. Interim resistance is seen at 0.6650 which if holds can produce a decline towards 0.65/0.64 in the coming sessions. View remains bearish below 0.6650.
Pound (1.2693) continues to remain volatile within 1.2750-1.26 which may continue for some more time unless a breakout on either side is seen. Lack of directional clarity for the medium term persists.
USDINR (83.0450) closed lower at 83.0450 ahead of the FOMC meeting and India’s Union Budget today. The Rupee may see some volatility today. Note there could be scope for a fall to 83.00-82.90 while 83.10 and 83.20 are immediate resistances above current levels.
EURINR (89.8872) is holding above support around 89.75 and needs to sustain rise to avoid falling towards 89.50-89 or lower in the coming sessions. But medium term view is still biased to see a fall towards 89-88.
The US Treasury yields have declined sharply and can fall further from here. The US Fed left the rates unchanged as expected. Contrary to the market expectation, the central bank ruled out the chances of beginning the rate cuts in March. The German yields are also falling in line with our expectation thereby confirming the resumption of the overall downtrend. The 10Yr and 5Yr GoI are coming down as expected and have room to fall more from here.
The US 10Yr (3.95%) and the 30Yr (4.19%) yields have declined sharply. The fall to 3.9%-3.8% (10Yr) and 4.1%-4% (30Yr) is happening in line with our expectation.
The German 10Yr (2.16%) and the 30Yr (2.40%) yields have reversed lower again as expected. We retain the view of seeing a fall to 2% (10Yr) and 2.2%-2.1% (30Yr) while below 2.35% (10Yr) and 2.5%-2.6% (30Yr).
The 10Yr GoI (7.1442%) and the 5Yr GOI (7.0274%) are coming down as expected towards 7.1% and 7%-6.95% respectively.
Dow Jones, DAX and Nikkei fell after Fed’s hawkish comment that a rate cut is unlikely in March. All these indices have resistances overhead. While so, there are chances of further dip in the coming sessions. Nifty has been oscillating in a narrow range and broadly look mixed for the near term. Shanghai tested the support at 2750 as expect and has bounced back from there and may extend the bounce further in the near term.
Dow (38150.30, -0.82%) has come down sharply, failing to sustain the break above 38400. A test of 38000 or 37900-37850 is possible on a break below 38100. Thereafter a rise can happen again. Our view of seeing 39000-39300 will get delayed now.
DAX (16903.76, -0.40%) has come down after testing 17000 but can get support in the 16850-16800 region. Lower support is at 16500. While these supports hold, the view of seeing a rise to 17200-17500 will remain intact before getting a sharp correction.
Nifty (21725.70, +0.95%) has been oscillating between 21400 and 21800 so far this week. While the fall in Dow can drag it down within the range today, it has to be seen if the interim budget today can provide any support. Broadly we look for a range of 21000-22000 for some time now.
Nikkei (36028.50, -0.71%) appears ranged within 35500-36500 but has strong resistance at 37000. While below that, a break below 35500 and fall towards 35000 or maybe lower will remain intact.
Shanghai (2802.29, +0.49%) tested the support near 2750 as expected and has bounced back from there. While it sustains above 2750, a rise towards 2850 is possible.
Most of the commodities have dipped after the hawkish comment from Fed Chair Powell, who said that it is not appropriate to lower the target range until it has gained confidence that inflation is heading steadily towards 2%. Crude prices have declined and look vulnerable to come down towards their immediate support in the near term. Gold and Silver too have come down but downside could be limited to 2040/2035 and 22.60/50 respectively which will keep our bullish view intact. Natural Gas has scope to break above its resistance and target further upside while above 2.0. Copper has fallen back as expected from the resistance at 3.95.
Brent ($ 81.10) has dipped towards $ 80. It can come down further towards $ 79-78 in the near term.
WTI ($ 76.36) has come down towards $ 76. Can fall further towards $ 74-72 while below $ 80.
Gold (2058.80) rose to 2074.60 yesterday in line with expectations for a rise towards 2080 and has fallen back from there. Support is at 2040/2035. It could trade in a narrow range of 2080-2035/2040 for a while before moving up towards 2100.
Silver (23.03) has dipped to 23 failing to rise above 23.50. It can come down to test 22.60-22.50 before again starting to rise towards 23.50-24.00. Overall outlook will remain bullish while above 22.
As expected, Copper (3.8825) rose sharply to test the resistance at 3.95 yesterday before coming down below 3.90. A fall towards 3.83-3.80 is possible while below 3.95.
Natural Gas (2.1380) is hovering below the resistance at 2.15. There is potential for a break above 2.15 and rise towards 2.3-2.5 while above the support at 2.0.
0:30 06:00 JP PMI
Expn 47.6 …Expected – …Previous 47.9
1:45 07:15 CN PMI
Expn – …Expected – …Previous 50.8
5:00 10:30 IN Manufacturing PMI
Expn 54.9 …Expected – …Previous 54.9
8:30 14:00 CH PMI
Expn 42.5 …Expected – …Previous 43.0
9:00 14:30 EU PMI
Expn – …Expected – …Previous 44.4
9:30 15:00 UK PMI
Expn 45.8 …Expected – …Previous 46.2
10:00 15:30 EU Unemp
Expn 6.5% …Expected – …Previous 6.4%
12:00 17:30 BOE Mtg
Expn – …Expected – …Previous 5.3%
12:00 17:30 UK BOE Minutes
Expn – …Expected- …Previous 3-0-6
14:30 20:00 CA PMI
Expn – …Expected – …Previous 45.4
15:00 20:30 US Manufacturing ISM
Expn 46.9 …Expected – …Previous 47.4
DATA YESTERDAY
—————
0:30 06:00 AU CPI
Expn 4.9% …Expected 4.3% …Previous 5.4% …Actual 4.1%
13:15 18:45 US ADP Emp
Expn – …Expected 143K …Previous 158K …Actual 107K
13:30 19:00 CA GDP
Expn – …Expected 0.1% …Previous 0.0% …Actual 0.2%
19:00 00:30 US FOMC Meeting
Expn 5.50% …Expected 5.50% …Previous 5.50% …Actual 5.50%