STOCKS
Almost all equities globally are in a corrective dip mode except Shanghai which seems to have begun a fresh rally for the medium term.
Dow (21136.23, -0.23%) came off from resistance near 21230 and may test 21000 on the downside before bouncing back towards 21300 and higher in the medium term. Near term could see some consolidation or a corrective dip but overall long term looks bullish.
Dax (12690.12, -1.04%) is also in a short correction mode and could rise back soon towards 13000.Downside could be limited to 12600 just now.
Shanghai (3127.91, +0.83%) has risen sharply breaking the immediate resistance near 3120 instead of testing lower levels of 3050 as mentioned yesterday. While the index sustains levels above 3120, it could move higher towards 3170 else a re-test of 3070 is possible.
Resistance near 20200 has held well for Nikkei (19936.42, -0.22%) which fell sharply in the last 2-sessions. It could test 19820 in the next 2-sessions before again bouncing back from there.
Nifty (9637.15, -0.39%) is in a corrective mode now and could extend losses to an extent of 9600-9550 levels. Thereafter a rise back towards 9700-9800 is possible in the near term.
COMMODITIES
In the smaller time frame, Gold (1294) is overbought and needs a pause before attempting higher levels. We have been talking about 1295 for the last few weeks, which has been achieved yesterday. Now a break above 1300 is required before the higher levels of 1350-68 can be seen but a pause in the range of 1245-75 can provide the necessary bullish momentum.
In Silver (17.67) the daily close took place at par with the immediate resistance of 17.65-70. A failure to rise above 17.65-70 levels may trigger a sharp fall towards 16.91 regions.
Copper (2.55) is hovering around its support area of the short term range of 2.55-2.65. Only above 2.65, higher resistances of 2.72-80 can come into consideration.
We have been tracking the support of Brent at 48.50-49 and 47 for WTI for the last few days and it has held due to oversold condition, driving both Brent (50.06) and WTI (48.12) up as expected. Now the short term oversold condition has been rectified with this upward movement and the chances of more sideways movement in the range of 50.20-52 (Brent) and 48-49.50 (WTI) are stronger now. The US weekly inventory data (expected a fall by 3.1M B) today at 8:00 P.M is supposed to trigger sharp directional moves this week. At the same time it could be prudent to be prepared for a sudden turnaround to the downside if there is a mismatch between forecast figure and the actual outcome.
FOREX
Tomorrow is going to be a very significant day for the markets as UK election, ECB policy decision and ex-FBI chief Comey’s testimony will take place and the investors play safe till then with the prevalent trend continuing so far. RBI policy decision is to determine the near term Rupee direction today.
Dollar Index (96.64) has tested the major resistance of 96.50 which makes it ripe for a turnaround if the events tomorrow dictate that. For the last couple of sessions, we have been cautious about the highly overbought state of Euro (1.1265) and the proximity of the major resistance cluster of 1.1300-1.1450 which may invite a sudden selling. If Euro really weakens from the higher levels, Dollar may bounce back from its support of 96.50-25. Please note, the Euro trend remains up and Dollar trend remains down till now but we stay prepared for the possibility of a sudden trend reversal, which at the moment has 45-50% probability.
Dollar Yen (109.47) has achieved our initial downside target of 109.20 fast below which comes 108.00. It may rise only if Dollar Index manages a turnaround in the next couple of sessions.
Pound (1.2900) remains comatose and may continue for the next 24 hours till the UK election tomorrow, 8th June. While a break beyond the range of 1.2750-1.3050 is required for a clear trending move, we repeat – if the result threatens the current ruling party, then a decline towards 1.2650-00 can be expected but we prefer to wait for the actual result before taking a firm stance.
Aussie (0.7536) has surged on the back of the annual GDP coming in line with the expectations and the RBA seeing the growth accelerating above 3% in the next 2 years. Immediate resistance at 0.7550-60 must be overcome to extend the rally to 0.7600 levels and above.
Dollar Rupee (64.43) saw mild short covering before the RBI policy meet conclusion. This short covering, more than any fresh position, may be just cautionary steps to avoid any event risk. RBI is expected to maintain the status quo tomorrow but any change from the current hawkish bias can trigger an expansion of volatility. Immediate support remains 64.30 with resistance coming at 64.70.
INTEREST RATES
The US yields are almost stable and could bounce a little in the near term. the 10-5 Yr (0.43%) has come off sharply and could test 0.40% in the near term if the current momentum continues. In that case we may expect the near end US yields to remain stable or rise slightly compared to the longer end yields (10Yr and 30YR ) respectively.
The UK-US (-1.17%) has indeed come off sharply as expected and could pull down Pound with itself to lower levels this week. The yield spread could move lower towards -1.25% in the near to medium term.
The Japan-US 10Yr yield spread (2.11%) is headed lower and seems bearish for the medium term. While it moves down, Dollar YEna dn Nikkei could also move down with limited upside for now.
The German-US 2Yr (-2.08%) is trying to break below immediate support levels and could possibly move lower in the near term. the German-US 10Yr (-1.90%) is also moving down and could test -1.95% in the near term. This could possibly indicate an upcoming corrective dip in Euro in the coming sessions.
