Gold Price, Rupee and Equity Markets II Technicals explained

Prices took strong support in the last session and recovered from a sharp decline in the previous session, as investors cheered a Democratic win in the US Senate race that is expected to unleash more fiscal stimulus. Hence, ICICI Securities expect gold prices to remain positive towards Rs 51300 level in the short-term.
 
Ahead of the weekly expiry and narrow trading range for the week, the US$INR pair moved higher. However, supply could be seen above 73.5 levels due to writing in OTM strike Calls. The dollar-rupee January contract on the NSE was at | 73.55 in the last session. The open interest fell 1.67% of the January series contracts.
 
Market Outlook:
 

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Equity benchmarks concluded the weekly derivative expiry session on a flat note amid rise in volatility. The Nifty ended the session at 14137, down 9 points or 0.1%. The market breadth turned positive with an A/D ratio of 1.7:1. Sectorally, metal and financials continued to outshine while IT and FMCG extended breather.
 
Technical Outlook:
 
The daily price action formed a bear candle carrying higher high-low, indicating extended breather as profit booking seen in recently ran up stocks after scaling a fresh all-time high of 14256. However, the broader market relatively outperformed as the Nifty midcap index clocked a new all time high (22063) after three years, indicating rejuvenation of upward momentum.
 
The formation of higher peak and trough on the larger degree charts supported by strong market breadth signifies the broader structure remains intact. This makes us confident to reiterate our positive stance on the index. We expect the Nifty to gradually head towards 14600 in coming weeks as it is an implication of December range breakout (13778-12962) at 14594. ICICI Securities believe subsequent rally from here on would be in zig-zag formation wherein intermittent episodes of profit booking at higher levels cannot be ruled out. As past twelve sessions 1125 points rally hauled weekly stochastic oscillators in overbought territory (currently placed at 95). Therefore, temporary breather should be capitalised as an incremental buying opportunity
 
Key point to highlight is that, the midcap index has seen structural improvement on the larger degree as it retraced 27 months decline (21840-10750) in just 10 months, indicating faster pace of retracement backed by sturdy market  breadth augurs well for next leg of major up move.
 
The index has not closed below previous session’s low and formed consecutive higher high over past 11 consecutive sessions, indicating inherent strength, that makes us confident to retain support base at 13800 as it is confluence of 38% retracement of current up move (13131-14256) placed at 13826 coincided with the bullish gap area of December 28 (13749-13812) and last week’s low of 13812