STOCKS
The news on the US-China trade talks setting to re-start next week has given a boost to the equities. The US and the European indices have risen overnight and the Asians are trading in green. The Dow and the DAX can move further higher in the near term. The positive sentiment might help the Indian indices, the Sensex and Nifty to sustain above their crucial supports and move higher in the coming sessions.
Dow (27349.19, +177.29, +0.65%) has bounced. The support at 27000 is holding well. However a strong rise past 27500 is needed to gain fresh momentum. While below 27500, a sideways consolidation between 27000 and 27500 can be seen for some time.
Contrary to our expectation, DAX (12490.74, +201.34, +1.64%) has surged above 12400 and has negated our expected fall to 12100-12000. While above 12350, the outlook is positive now to test 12600 in the near term.
Nikkei (21727.60, +106.72, +0.49%) has risen further and is heading towards the key resistance level of 21750. As mentioned yesterday, a strong rise past 21750 will boost the bullish momentum and take Nikkei further higher to 22000 and 22200. Inability to breach 21750 can drag it to 21300-21250 again.
Shanghai (2929.06, +29.11, +1.00%) has bounced above 2900 again. But it has to surpass 2950 to turn the outlook bullish. While below 2950, it broader picture look weak for it to decline below 2900 again and test 2850 or even lower levels.
Sensex (37982.74, -48.39, -0.13%) is holding above its key support level of 37900. While above 37900, a bounce to 38350-38500 is possible in the coming sessions. But need to remain cautious as a break below 37900 will open doors for 37000 on the downside.
Nifty (11331.05, -15.15, -0.13%) is holding above 11300 but has to rise past 11400 to ease the downside pressure and test 11500 on the upside. Nifty will come under renewed pressure on a break below 11300 in which case a fall to 11000 is possible.
COMMODITIES
Crude prices could see a rise in the near term while Copper looks bearish. Gold and Silver could have some scope of rising in the very near term but that is likely to be short lived as the medium term looks bearish. Strength in the US Dollar (refer forex section below) could push Gold and Silver down in the near term.
The API inventory data reported a draw of 10.96 mln barrels for the week ended 19th July pulling up Crude prices for the day. The EIA Crude stock inventory data is due today and the market expects a decline by 4.4 mln barrels for the week ended 19th July. Such a decline if seen could continue to keep Crude prices at higher levels over the next 2-3 sessions.
Brent (64.15) and Nymex WTI (57.07) have risen and could trade higher over the next 2-3 sessions. Brent could rise towards 65-66 while WTI could test resistance near 58-60 in the very near term. Looking at the weekly and 3-day charts, Brent and WTI has been rising from supports near 62 and 54 respectively and may now move up for sometime before pausing. Near term looks bullish.
Gold (1420.40) has held well below 1460 and has been fluctuating in the broad 1380-1460 region. Currently trading near crucial levels, if the gold prices fall below 1420/10 and sustains, it could indicate that a near term top could be in place and that the gold prices could fall in the medium term.
Silver (16.48) has horizontal near term support near 16.20 and seems to be holding well just now. However the rise is short lived and the prices could soon decline as 16.60 could prove to be a strong resistance as seen on the longer term charts taking down prices towards 16.0-15.75 eventually.
Copper (2.7045) has been sharply coming off in line with our expectation. A test of 2.68-2.66 looks likely in the near term. View remains bearish for the coming sessions.
FOREX
US Dollar looks strong for the near term indicating weakness setting in for the major currencies including some of the EM currencies. Aussie, Pound and Euro looks bearish while Dollar-Yen could rise towards near term resistance. Dollar-Rupee has some room on the upside while Yuan could see some weakness too within the broad sideways range.
Dollar Index (97.75) has risen above 97.60 and looks strongly bullish for the near term. If the index sustains above 97.50/60, it could move higher towards 98.50 in the near term. View is bullish above 97.50.
Euro (1.1143) has moved down in line with our expectation and could test 1.1125-1.1100 on the downside while the Dollar Index targets 98.50 on the upside. The break below 1.12 is significant indicating a bearish Euro for the near term.
Dollar-Yen (108.17) could move higher to test immediate resistance at 108.50. Thereafter, it could either come off towards 108.0-107.5 or move up to test 109. We would watch price action near 108.50.
Euro-Yen (120.54) has broken clearly below 121 but could get some support near the Jan’19 low of 118.82. This would be crucial levels to watch and a bounce or break on either side from 118.82 would be crucial decider of further direction in the longer run. Immediate view is bearish towards 118.82 while we would wait to get more clarity on the medium term direction.
Aussie (0.6979) and Pound (1.2432) are sharply down on fresh Dollar strength. Aussie could come down towards 0.6950-0.6900 in the near term while Pound could target 1.2350 before bouncing from there.
USDCNY (6.8818) is likely to rise towards 6.90 in the near term While there is immediate support on the daily candles, the par is stuck in between the 6.90-6.85 region in the longer term charts and indicates some consolidation within this broad range for the medium term.
USDINR (68.95) could not sustain the break above 69 yesterday. With the sharp rise in the US Dollar overnight, it would be important to see if the Dollar Rupee moves higher today targeting a test of 69.10/15 during the day. Eventual test of 69.25 still looks possible in the near term.
INTEREST RATES
The US Treasury yields have bounced yesterday and might see some upticks in the near-term as against our view to dip further. The German yields keep our bearish view intact and can fall further. The outcome of the European Central Bank (ECB) meeting tomorrow will need a watch which could influence the yield movement. The Indian 10Yr GoI is bullish in the near-term and can move further up from current levels.
The US 2Yr (1.83%) and 5Yr (1.83%) Treasury yields were up 1 bps and 2 bps respectively. The 10Yr (2.08%) was up 3 bps and the 30 Yr (2.61%) was up 4 bps yesterday. It will have to be seen if the yields can sustain higher which will then negate the dip that we have been expecting over the last few days. The 10Yr can gain momentum to target 2.15% and 2.20% if it breaks above 2.10%. The 30Yr can rise to 2.65% while above 2.60%.
The German yields continue to fall in line with our expectation. The 2Yr (-0.79%) was down 3 bps while the 5Yr (-0.68%), 10Yr (-0.36%) and the 30Yr (0.24%) yields were down 2 bps each. The bearish view is intact. As expected the 2Yr is heading towards -0.85% and the 10 Yr can test 0.40% in the near-term.
The 10Yr GoI (6.4648%) has risen above 6.45%. The yield is gaining strength slowly and keeps our bullish view intact to test 6.50%-6.55% on the upside in the near term.
