Market
Mantra: 15/02/2017 (08:30)
Watch 8855-8745 & 8875-8925 Zone In
Nifty Fut (Jan), Which May Open Around 8840 Today
As
par early SGX indication, Nifty Fut (Feb) may open around 8840 (+35 points), in
a positive note following overnight rally in US market (+0.45%) and another
record high closing supported by financials & banks. Japan (Nikkei) is also
trading above 1% higher as USDJPY rallied good after Yellen sounds more hawkish
than expected by the market. Although, there were various conditions in Yellen’s
testimonial speech yesterday for rate hikes projection in 2017, her comments
that “waiting too long to hike interest rates would not be wise” and repeated
emphasis on rate hikes (plural) rather than rate hike (singular) may have
convinced the market that Fed is quite serious this time for a multiple rate
hikes in 2017, rather than its usual one yearly rate hike of 0.25% (in Dec,
every year as in the last two years).
Although,
there is little probability of a March’17 rate hike (FFR now around 35%), probabilities
of June’17 (around 75%) & Dec’17 (around 95%) are getting real and market
may be discounting slowly about 0.50% Fed rate hike in 2017, if Fed is purely
governed by its dual mandate & text book economy (maximum employment and
reasonable inflation). As par Yellen, Fed does not want to be behind the inflation
curve as it may force it abrupt & successive rate hikes, which may also
cause sudden surge in borrowing costs for the US economy, pushing it into a
probable recession.
But,
as of now trajectory of Fed rate hikes may be also dependent more on US politics
(Trump’s twitter handle!!) rather than economics and as such all attention may
be focused on the WH/Trump & Co for a possible jawboning effort to talk
down the USD. Apart from incoming US economic data, Fed may be also dependent
on actual trajectory of “Trumponomics” and also very much concerned about
probable huge fiscal deficit.
Basically,
yesterday’s unusual hawkish script by Yellen may be aimed at Trump itself, who
previously accused Fed & Obama administration to keep the US interest rate artificially
low and thus causing asset bubble and Trump even stamped them as “friend” of
Wall Street rather than “Real Street” in his election rhetoric.
Lately,
Trump & Co may have realized that a stronger USD may not be good for US
economy & its corporates also and a lethal combination of a hawkish Fed and
“Trumponomics” may cause USD stronger without any doubt and US bond yields may spike
towards 3% in the coming days.
As
Yellen did not offer any comment for the Dodd Frank rule just scrapped by Trump
in his deregulation steps, US financials & banks may have rallied
yesterday. All eyes will on this aspect also in her 2nd day of
testimony by Yellen today.
Back
to home, a stronger USD because of an unusual hawkish Fed and attraction of “Trumponomics”
may cause INR more vulnerable despite a hawkish RBI. A strong USD may also be
not good for EM as well as Indian Market.
Hints for actionable trading ideas:
Technically, NF has to sustain over
8875 zone for further rally towards 8925*-8995 & 9035-9075 area for the day
(under bullish case scenario).
On the other side, sustaining below 8855
area, NF may fall towards 8770-8745/8725* &
8665*-8585 zone for the day (under bear case scenario).
Similarly, BNF (LTP: 20296) has to
sustain over 20550 zone for further rally towards 20650*-20800 & 20950*-21350
area for the day (under bullish case scenario).
On the flip side, sustaining below 20500
area, BNF may fall towards 20300-20150* & 20000*-19750 zone for the day
(under bear case scenario).
SGX-NF
BNF
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