STOCKS
Like the Fed would want to wait and watch before cutting rates, the equity market also seems to be in wait and watch mode ahead of the US-China meeting this weekend. The outcome of this meeting would be key in setting the trend in equities going forward. However, at the moment, the broader bullish view on equities continues to remain intact.
Dow (26536.82, -11.4, -0.04%) remains lower and has dipped marginally. Our view remains the same. Dow can test the support at 26450 and bounce thereafter. But a break below 26450 (less preferred) will see the fall extending to 26250. However, our broader view remains bullish for a rise to 27200-27500
The support at 12170 on the DAX (12245.32, +16.88, +0.14%) is holding well at the moment as expected. The index is likely to reverse higher and keep the broader bullish view intact to test 12500-12600 on the upside. However, as mentioned yesterday, the possibility of the current downmove extending to 12150-12130 cannot be ruled out before we see a fresh upmove.
Nikkei (21255.29, +168.70, +0.80%) has bounced sharply today thereby negating a fall to 20900 which we had mentioned yesterday. While above 21000, a rise to 21400-21500 is likely in the near term. Such a rise will turn the broader bias bullish for the index to break 21500 and test 21750 on the upside.
Shanghai (2,998.7, +22.68, +0.76%) can test the 3010-3020 resistance zone. Inability to break 3020 can keep the index in a sideways range between 2950 and 3020 for some time. The bias is however, bullish to see a break above 3020 toward 3050 and 3100 in the coming days.
Nifty (11847.55, +51.10, +0.43% ) has risen and is showing signs of strength. As cautioned yesterday, our bearish view for a fall below 11600 is getting negated. Nifty can break 11900 and rally to 12000-12100 in the coming days.
Sensex (39592.08, +157.14, +0.40%) is not looking as strong as the Nifty at the moment. However, a strong break above 39750 can boost the momentum and will pave way for a fresh rise to 40000 and 40250.
COMMODITIES
Overall commodities are mixed. Crude prices trade higher while Gold and Silver could consolidate for a few sessions before resuming its rise. Copper looks bullish.
US weekly stock inventory data showed a draw of 12.8 mln barrels against the expected draw of 1.077mln barrels, pulling up Crude prices as expected.
Brent (66.21) has risen sharply and could test immediate resistance near 67. As mentioned over the last couple of days, a break above 67 could pull Crude prices into the 67-69 resistance zone from where a fall could be seen in the medium term.
Nymex WTI (59.15) has similar resistance near 60 which is likely to produce a rejection in the near term.
Gold (1411.60) is holding below 1430 for now and could possibly spend some time in the 1430-1400 region for sometime (maximum possible extension to 1390/80) before again resuming it’s upward rally in the medium term. Overall view is bullish for Gold in the longer run while we may expect some consolidation just now.
Silver (15.31) is almost stable. We keep intact our view of testing 15 on the downside before bouncing back towards 15.25/50 in the longer run.
Copper (2.7210) is also stable and could be headed higher towards 2.80/85 from where a rejection is possible. Outcome from the US-China talks due on Saturday could bring in some volatility in Copper prices in the next week.
FOREX
Currencies are mixed.Dollar Index and Euro are stable while Aussie, Euro-Yen, Dollar-Yen and USDCNY could rise in the near term before facing resistances in the next 3-4 sessions. Rupee looks strong and could test crucial support over the next couple of sessions.
Dollar Index (96.28) and Euro (1.1362) are stable at levels seen yesterday. Euro could be limited to a fall towards 1.1325 in the near term before re-attempting to test 1.1380-1.1400 again. Dollar Index, on the other hand is holding above support at 95.50 and could trade within 95.50-96.50 for sometime before breaking sharply on either side. Over the next 2-sessions this week, both Euro and Dollar Index are likely to remain stable.
Dollar-Yen (107.97) has risen sharply over the last 2-sessions and could test immediate resistance near 108 as seen on the daily candles. While 108 holds, another fall towards 107.0-106.50 could be possible in the near term.
Euro-Yen (122.67) has risen above our expected resistance near 122.50 and while the pair trades higher, it could rise towards 124 in the near term. View is bullish for Euro-Yen.
Aussie (0.6995) has also moved up to test our mentioned level near 0.70. There is scope for rise towards 0.7050 in the near term from where a rejection looks likely. Immediate view is bullish.
Pound (1.2683) is stable and could trade within 1.26-1.28 for sometime before breaking on either side. A fall towards 1.26 looks likely in the next 2-3 sessions.
USDCNY (6.8748) is falling before the US-China meet due this week. While above 6.83/85, there could be scope of rising towards 6.90. A break below 6.80 is necessary to turn the sentiments bearish for USDCNY.
USDINR (69.16) closed below 69.20 yesterday opening up chances of testing 69.00-68.90 on the downside; thus negating chances of rising towards our expected 69.75. It would be important to keep a close watch on the price action near 69 as that could trigger further directional movement for the medium term. A break below 69, if seen could turn the sentiment towards a stronger Rupee for the medium term.
INTEREST RATES
The US Treasury Yields have bounced yesterday across tenors as the increased hopes for a rate cut in July seems to be fading out. Following Powell’s comments on Tuesday that the central bank will wait and watch, James Bullard – the only member to vote for a rate cut in the June meeting, said yesterday that a 50bps cut will be overdone at the moment and a 25bps cut would be enough. This dashed the hopes in the market that the Fed may not go in a hurry to cut rates aggressively.
As a result, the US 30Yr (2.56%), 10Yr (2.05%), 5Yr (1.81%) and 2Yr (1.78%) Treasury Yields bounced yesterday. The bounce yesterday could delay our preferred fall in the yields. The 30Yr can consolidate between 2.53% and 2.60% before it tests 2.50% and 2.48% on the downside. The 10Yr is getting good support at 2%. A break above 2.10% can trigger a corrective rally to 2.15% and 2.20% in the coming weeks.
The German 2Yr (-0.74%) was stable yesterday while the 5Yr (-0.64%), 10Yr (-0.30%) and 30Yr (0.27%) were up slightly. However, the broader trajectory remains down and the yields are likely to come down in the coming days. The 30Yr can inch lower to 0.2% and the 10Yr can test -0.4% in the coming weeks.
As expected, the 10Yr GOI (7.0647%) has risen yesterday to test 7.05%. It has room to test 7.10%, but a rise beyond it is less likely. The 10Yr GOI can reverse lower again to 7.0% and 6.90% after testing 7.10%. As we have been mentioning, the 10Yr GOI can consolidate sideways between 6.90% and 7.10% before resuming its downtrend towards 6.80%-6.75%.
