STOCKS
Global equities do not look very strong just now. Either the indices could see a rejection from resistance levels above current levels or sideways consolidation would be preferred.
Dow (25669.32, +0.43%) has moved up to again test immediate resistance near 25750. If the resistance holds, a fall back to levels near 25500 or lower is possible else a rise above 25750 could indicate bullishness and take the index towards 26000-26500 in the medium term.
Dax (12210.55, -0.22%) is trading lower and while it remains below 12300, there is scope on the downside towards 12000. Immediate support is visible on the 3-day candles but that could break on the downside if the index chooses to trade lower and come off in the next few sessions. Weekly charts show a break below immediate trend support.
Nikkei (22226.45, -0.20%) is trading higher after bouncing from support near 21850. Trade within 22800-21850 is likely to continue for a couple of more weeks. A break on either side of this range is needed to interpret the next directional movement.
Shanghai (2680.87, +0.45%) looks weak towards support near 2650 from where some corrective rise or consolidation could take place. Overall weakness is visible for at least some more time. Trade within 2750-2650 may continue for the next 3-4 sessions.
11500 on Nifty (11470.75, +0.75%) is still a level to keep an eye on. A break above could trigger a rise towards 11600-11800 in the medium term while a fall from here could lead to some sideways consolidation in the resistance at 11500 and prefer a fall towards 11300-11200 in the 11300-11500 region.
COMMODITIES
Commodities mostly look stable to weak in the medium term. Some sideways consolidation in the near term is possible with a possible test of respective resistances on the upside.
Nymex WTI (65.01) and Brent (71.59) are slightly higher than the levels seen on Friday.WTI could test resistance near 67 which if holds could bring in more weakness in the medium term towards 64-62. Brent is trading in the narrow 70-73 region and could continue to remain so for the next 2-3 sessions at least.
Gold (1191.80) could see some sideways range trade in the 1160-1200 region for this week with an attempt to rise back above 1200. While below 1200, gold looks weak towards 1160-1150 in the medium term.
Copper (2.6460) has risen from 2.55 and could test immediate trend resistance near 2.70. A sharp fall in the Shanghai composite index if seen could bring down Copper prices also to lower levels below 2.60. Watch if important resistance near 2.70 holds or breaks this week.
FOREX
Dollar strength could see some pause in the first part of the week with Euro strengthening towards 1.147-1.155 and Yen towards 110.0-109.5. However,the broader trend looks supportive of continued Dollar strength in the weeks ahead.
Euro (1.143):As per expectation Euro has risen towards 1.145. There is resistance in the 1.147-1.155 zone. Current preference is for the resistance to hold, leading to another downmove towards 1.13 later in the week.
Dollar Index (96.17): Dollar Index could find support near 95.75-95.50, or else, it could rise from current levels itself back towards 97 in this week. A break below 95.50 is currently not preferred.
Dollar Yen (110.54): While below 111.0-111.2, Dollar Yen in the next 2-3 sessions looks bearish towards 110.0-109.5 – which is a crucial support zone. A break below this zone would be quite bearish and is currently less preferred.
Euro Yen (126.38): Resistance near 126.6-127.0 could keep the upside capped in this week. Previous low of 124.62 is the crucial level on the downside which needs to break to confirm bearishness towards 1.23-1.22.
Pound (1.2742): Although the broader trend is bearish towards 1.25-1.24 in the next 2-3 weeks, this week could see some upward correction towards 1.285 (max till 1.295).
Dollar Rupee (70.155): Range 69.90-70.40 within overall uptrend. May look to buy dips to 70.00-69.90 for the near-term. NDF trading lower near 69.86 could be an indication of an opening near 69.90.
INTEREST RATES
The dip in US Yields since the beginning of August might have been attributed to “flight to safety” in a trade-war and “risk-off” environment. It is to be seen whether they inch up a bit this week if the US-China trade talks are seen as anywhere near meaningful.
Possibly more importantly, the market will try to read between the lines of the FOMC Minutes (22nd Aug, Wed) and the ECB Monetary Policy Meeting Accounts (23rd Aug). Also, how the market interprets these Minutes in light of the recent dip in Crude prices will be important.
As mentioned on Thursday (16th Aug), the US 10Yr (2.86%) may be ranged between 2.82-90% for now and may have room down to 2.75-70% while below 2.90% and on a break below 2.82%.
An eye should be kept on the US Yield Curve, where there has been a bit of curve-steepening between the 30-10Yr (0.16%) and 30-5yr (0.28%) has been going on since July. It can also be seen slightly in the 10-5 (0.12%), but less than the steepening at the Far end. We need to see if the US 5Yr (2.74%) falls more sharply, towards 2.60%. This could lead to greater Curve Steepening.
Watch also the German-US 2Yr Spread (-3.27%) to see whether it can rise past -3.24%. A rise past -0.60% on the German 2Yr would help that. Such a rise could help the Euro (1.1430) rise some more.
Over in Japan, the 30Yr JGB (0.84%) has got good Resistance just overhead. It will be crucial to see if that holds or breaks. Note that the 10Yr JGB (0.10%) has broken out of the long-term downtrend has been in since levels near 1.8% in 2008.
