US equities retain bullish consolidation mode in the near term
DJIA index held at lower end of 17500/17650-18350/18500 retaining near term bullish consolidation mode into higher end ahead of clarity from FED on shift to rate hike stance. The recovery from 17579 hit 18169 before firm weekly close above 18000 at 18080. This phase is confidence to US investors to stay local and not look elsewhere and comfort to non-US investors for valuation gains from underlying asset + currency gains. The index is up by 6.65% from intra-2015 low of 17037 (around 2% from 2014 close at 17823). It is not better compared against exchange risk adjusted returns for non-US investors. The US investor appetite shift from foreign to local and signs of FED rate hike not before Q4/2015 will extend bullish undertone to stretch all-time high beyond 18500. Now, all-time high at 18288 is at risk for extension into 18450-18550, while near term base is lifted up from 17500/17650 to 17750-17900. Let us set focus at 17750/17900-18450/18600 in bullish undertone.
US 10Y Treasury yield retain neutral undertone in sideways mode
The focus was set at inner-ring of 1.80/1.85-2.0/2.05%, and now losing count of back-and-forth moves here. US investors also get an opportunity to buy India at 7.80-7.85% (against US exit at 1.80-1.85%) and to exit India at 7.75% (against US entry at 2%) to play back-and-forth of India-US 10Y spread at 5.75-5.95%. There are no cues to review the set focus at 1.85-2.0% and economic data ahead will set up trigger for either 1.70-1.85% or 2.0-2.15%. For now, let us continue to stay focused at 1.80/1.85-2.0/2.05%, overshoot into outer corridors not expected to sustain.
DXY in sideways mode when FOMC divided (and not clear) on the way forward
Post (13th March) FOMC, DXY in sideways mode at set focus range of 96/96.50-100/100.50. Since then, DXY reversal from 100.39 found support at 96.10-96.35 for recovery into 99.99 for push back to 96.75 before neutral weekly close at 96.85. DXY YTD 2015 appreciation by over 7% against steady appreciation in equity and sideways mode in Treasuries is investor delight to retain demand for the USD (against major currencies) to retain DXY in bullish undertone, ahead of clarity in timing and quantum of rate hike. Given the expectation of 2-step 50 bps rate hike in Q4/2015, short term bias is for shift of trading focus into 100/100.50-104.50/105 from current sideways mode at 96/96.50-99.50/100. Till then, let us focus here keeping close watch on breakout signals.
Euro steady supported by neutral FED
EUR/USD boxed at set near term focus range of 1.0450/1.05-1.10/1.1050. The worry is from 7 times failure (from 18/3 to 6/4) at 1.10-1.1050, and the comfort is from lift of base from 1.0459 to 1.0519 to 1.0665 and now in sideways mode at 1.0750-1.09. Given the risk of run into parity (and beyond) in Q3/Q4 2015, strategic resistance zone at 1.09-1.10/1.1050 is rock-solid and seen as "no-long zone" for push back to 1.0450/1.05-1.06.
GBP/USD broke out of the 1.4650-1.5150 strategic focus zone with high at 1.5188. The comfort is from near term lift of base from 1.4650 to 1.4850-1.4875 against short term resistance zone at 1.53-1.55, which should hold for retest of 1.4550-1.4650.
USD/JPY held at either ends of set strategic focus range of 118/118.50-121.50/122 (118.60 to 122.02 to 118.30). While the short term outlook is reinstate of bullish undertone for retest of 122 enroute to 123.50-125, near term play seen restricted at 118-120/120.50 in sideways mode.
Brent in solid recovery mode, but seen stretched
It is solid 45% recovery in Brent Crude from 16th January 2015 low of 45.19 to 65.80 with firm weekly close at 65.28. MARKET PULSE strongly urged oil importers to hedge 6-12 month exposures at $45-47 to mitigate against the risk of relief rally to 63.50-65.00. During the journey, the base was lifted up from 45-47 to 50-52 to 60-62 for target 72, not ruling out extension into 80. All cues taken, prefer short term stability at 60-80, seen as win-win for all stakeholders. Having said this, hold at 72-80 will bring the focus back at 45-53. At $72-80, it would be prudent for suppliers to hedge 6-12M exposures to stay protected against risk of reversal into 45-52. For now, let's watch 60/62-71/73; while immediate bias is into higher end, will not be surprised to see reversal from there into 60-62.
Gold steady and sideways against mixed cues
Gold traded to the script between set strategic focus at 1120/1135-1220/1235; recovery from below 1135 failed above 1220 for push back into 1170-1185 intermediate support zone. The near term outlook is not shining for the Gold with bearish undertone into 1120-1135, while resistance zone is pushed lower at 1195-1210.
Over all, Global markets seen steady at set familiar ranges against neutral FED, finding it tough to take a firm stance on the timing of rate hike with limited bandwidth through 2015-2016.
Moses Harding
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