SGX NF: 7880 (CMP)
NSE-NF: 7895 (LTP)
Trading Idea: NSE-NF (May)
Either sell around 7920-7980 or on rise around 8010-8055-8075-8095;
TGT: 7820*-7780-7740-7705-7660*-7605-7540*-7505-7440-7295 (5-15 days);
TSL> 8150-8180
Note: Consecutive closing (3 days) above 8150-8180 for any reason, NF may further rally up to 8240*-8310-8405-8550 & 8750-8935-9210 in the near to mid term (alternative bullish case scenario).
Yesterday's epic BOJ inaction may be an indication that Central Bankers are increasingly out of ammunition for more QQE. Although, there was not so much expectation of more BOJ QQE this time, some of the BOJ/Kuroda comments about GDP and inflation (lower target then previous estimates) in Japan hurts the traders sentiment and consequently USDJPY dumped (risk aversion mode). It seems that BOJ is in no mood for more QQE until USDJPY fall below 105 or more and basically kicking the can to the Japanese Govt for more structural or monetary stimulus. Perhaps, BOJ and Abenomics are not so sure about the effect of the NIRP and they may observe for more time and mood of the Japanese people are also not so great about the possible spillover effect of this NIRP.
After failed NIRP (negative interest of certain bank deposits) in
Jan'16, BOJ is thinking for some negative interest on lending too !!.
All eyes now will be on June end for Fed, G-7 and BOJ meet. Its now almost certain that Fed is not going to think seriously for any hike before Dec'16 (after US election) and until then it will continue its verbal intervention in a co-ordinated manner with ECB/BOJ/PBOC to take care of the market volatility. Ultimately Fed dot-plots may be changed to four hikes in four years rather than the Dec'15 projection of four hikes in a year (2016) and by its own words, one should not pay so much attention in its dot-plots as its a mere academical projection. By this way, Fed is loosing its own credibility and there are some questions that Fed is indeed "Federal Bank Of America or China" as its basically taking care of the USDCNY equation and USD outflow concerns from China.
But the main concern in China is now credit bubble and increasing corporate bond defaults.
Apart from these, Brexit & also some types of Grexit fear may add some more volatility in the market in the weeks/months ahead.
BOJ may consider some 3-D QQE after forthcoming G-7 meeting in Japan at June end so that Japan may not be termed as "currency manipulator" as a "host country".
After all the years of competitive QQE (Fed/ECB/BOJ/PBOC), it seems that its a "zero sum" game as there is little improvement in real economic growth and policy makers are now claiming to avert the deflation/de-growth at least. On the other side, QQE easy money paved the way for excess production of commodities (like oil, steel etc) and the consequent poor demand & excess supply dynamics is now quite visible along with related debt bombs.
Now, the question may be with decades of ZIRP/NIRP, how much more Central Bankers may do in future to avert any serious market meltdown or economic recession ?
Going ahead, C-3 and PBOC also may choose not to use QQE more aggressively and keep some "bullets" in the arsenal for future "war with deflation/recession" and in the meantime, Govt has to do more for structural reform.
Back to home, with ongoing domestic political battle, there is little hope for for passage of GST & other important reform bills this time too in RS. This along with growing concerns for the current state of drought and acute water crisis in major parts of the country and concerns about Bank NPAS fiasco & consequent normal lending activities may put some more pressure on our market apart from global factors.
On the other side, although there are some hopes for better monsoon this year, one good year of monsoon may not be enough to compensate the previous two years of bad monsoon.
On the positive sides, Q4FY16 results so far are decent and there are also some early indication about overall economic recovery (?) and increased infra spending (specially for road sectors) by the Govt.
Among all these, market will be volatile and there will be enough opportunities to trade the same and perhaps, major Central Bankers may also want that too !!.
NF may be also on the verge of "Golden Cross" and for any uptrend from here, it has to sustain above 8125-8180 zone.
Analytical Charts:
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