STOCKS
Dow and Dax have dipped a bit. Shanghai and Nikkei looks bullish just now with Nikkei expected to move above 24000 for a short while. Nifty is down sharply but may test support near 10800.
Dow (26562.05, -0.68%) came off sharply instead of moving up higher, pushed by the daily resistance on the daily candles mentioned yesterday. Although the longer term charts suggests a rise towards 27000 or higher, the current dip is short lived and could be limited to 26250. Thereafter the index could resume its up move.
Dax (12350.82, -0.64%) has also dipped to levels below 12400 but looks bullish in the longer run towards 12700-12900 levels. The index could again bounce back from 12300 in the near term.
Nikkei (23903.32, +0.14%) is stable and has inched up a bit. It is likely to test the previous high above 24000 on the 3-day candles and if that holds, could face some interim rejection towards 23500 again. But overall while above 23000, index is bullish in the longer run.
Shanghai (2782.96, -0.52%) was closed yesterday. We repeat a possibility of testing 2900 on the upside in the medium term if the index moves above 2750-2800 in the near term.
Nifty (10967.40, -1.58%) has important support on the weekly candles near 10800 which if holds could produce a bounce in the near term. A break below 10800, if seen would make the index vulnerable to a sharper fall and we will have to re-visit the downside targets. For now support at 10800 is likely to hold.
COMMODITIES
Signal from OPEC that they won’t boost output and a tightening oil market took the crude prices higher yesterday. There could be some concerns of undersupply as US sanctions on Iran pose a threat to reduce supply by 1mln barrel/day.
Brent (81.37) and WTI (72.22) are trading higher. Brent could move up towards 85 while it sustains above 81. WTI also has enough room on the upside towards 74-75 and both look bullish in the near term.
Gold (1202.50) is in a sideways mode and is likely to continue trade below 1220 in the near term. The narrow 1190-1220 zone remains intact for Gold trade at least for this week unless we see a break on either side to trigger some volatility.
The 21-week MA at 2.8575 produced a rejection in Copper (2.7935) as mentioned yesterday. The dip could test 2.75-2.72 on the downside before again moving up higher in the medium term. The rise from long term support at 2.60 is likely to keep the prices in the uptrend for the medium term with short corrective dips such as the one seen just now.
FOREX
Currency markets are quiet as everyone awaits the FOMC policy decision tomorrow – meanwhile the Indian Rupee could weaken towards 73+ while above 72.
Dollar Index (94.33) looks bearish after having broken below the 21 weeks MA on weekly line chart. As mentioned yesterday, it could move down to test horizontal support on daily candles near 93.20 by next week. However it might all depend on the FOMC tomorrow – a hawkish view could reverse Dollar weakness. 94.5 is a crucial resistance level – whose breach might negate near term bearishness.
Euro (1.1736) came off from resistance in the 1.180-1.185 zone yesterday. While it stays above support near 1.17, a decisive rise past 1.185 could still happen towards higher resistance near 1.190-1.1925 (daily candles). Alternatively, if the Fed’s policy tone is very hawkish tomorrow, we might see Euro break below 1.17.
Dollar Yen (112.83), as expected, is continuing to rise. Its first target could be the July ’18 high of 113.18 – after that, there could be some resistance in the 113.18-113.75 zone – which if breached, could lead to 115 in the medium term.
Euro Yen (132.43) again came off after testing a high near 133 yesterday. Looking at the 3 day and weekly line charts, it looks quite bullish (maybe towards 135) in the weeks ahead – we currently give preference to that.
Pound (1.3104) : As mentioned yesterday, on a break below 1.305, we could again start looking at the downside for Pound. However, while it stays above 1.305, chances of bullishness towards 1.34 still remain. The 21 weeks MA (1.313) continues to be crucial – a week close above that would be bullish.
Aussie (0.7243) has support near 0.722-0.723. While above this support, it could still break above the resistance at 0.73 to target higher resistance near 0.74.
Dollar Rupee (72.635) A rise towards 73.50 is possible while above 72.00. There could be an interim dip towards 72.30 before resumption of the rise. Also while Brent has broken above resistance at 81 and continues to rise higher, pressure on the Rupee could persist. We will have to see if this allows for a dip towards 72.30 or directly takes the currency pair towards 73 and higher.
INTEREST RATES
The Japanese 30 Year yield ( 0.89%) seems to be sustaining its breach of resistance near 0.85% on long term chart. This could prove to be quite bullish for yields globally.
Repeating yesterday’s comment: the FOMC on Wednesday is set to hike the federal funds rate by 25 bps – this hike has already been factored in by traders. The attention now shifts to the FOMC’s indications for future rate hike decisions in Dec ’18 and in 2019. Any dovishness or hawkishness on that front would be crucial for whether the 10 year yield stays below its 2018 high of 3.100%-3.125% or breaches it.
US 10 Year yield (3.09%) has risen closer to 3.10%. As mentioned on Friday, the important upside levels to watch out for are: 3.10%, 3.125% and 3.16%. Our current preference is for the yield to not breach 3.16% (800 weeks MA).
The 10 Year German-US spread (-2.58%) has risen slightly after testing support on medium term chart near -2.6%. There is resistance near -2.55% which could keep the upside capped.
Meanwhile, the German 10 year yield (0.51%) could target 0.6% in the near term, now that it has risen past 0.5%. On the long term chart, there is room for a rise till 0.75% in the coming months.
Combining the views above, if the German-US 10 year spread stays below -2.55% and the German 10 year continues its rise towards 0.60% in the near term – it could ensure that a dip back below 3% on the US 10 Year doesn’t happen.
