STOCKS
A strong recovery in the Dow on Friday following the fall in unemployment rate and higher revisions of the non-farm payroll numbers for the last couple of months. All eyes now will be on the US-China trade talk that is set to begin on Thursday which is likely to keep the market volatile. Dow can move up further if it can sustain last week’s bounce. Nikkei and DAX look weak and can fall in the coming days. Sensex and Nifty are coming closer to their crucial supports which are expected to hold. A close watch is needed on the Sensex and Nifty.
The Dow (26573.72, +372.68, +1.42%) has surpassed 26500 and it will have to be seen if it can sustain higher or not. While it remains above 26250, a rise to 27000 and 27500 is possible in the coming days.
DAX (12012.81, +87.56, +0.73%) bounced on Friday, but remains weak for a fall to 11800 and 11600 in the coming days while it trades below 12200.
Nikkei (21346.63, -63.57, -0.30%) remains lower. As we had mentioned earlier it has to surpass 21500 decisively to bring back the bullishness. While below 21500, a fall to 21000 can be seen in the near term.
As expected, Sensex (37673.31, -433.56, -1.14%) and Nifty (11174.75, -139.25, -1.23%) tumbled on Friday. Both the Sensex and Nifty are coming closer to their crucial support levels of 37550-37500 and 11100-11050 respectively. We expect these supports to hold and the see the Sensex and Nifty reversing higher in the coming days.
Shanghai is closed today.
COMMODITIES
Commodities are mixed. Crude may rise in the near term while support holds. Gold and Silver could stabilize. Copper looks bullish.
Gold (1512.80) has important near term resistance near 1525 and while that holds, we may expect a fall towards 1480 and eventually to 1460/50 in the medium term. While below 1525, our view remains sideways to bearish with downside capped at 1480 for the next 2-3 sessions.
Silver (17.60) is likely to trade below 18.0-18.2 to test 17.0-16.50 on the downside before bouncing from there.
Copper (2.5680) is holding well above immediate support near 2.5250 and could move up towards 2.6250 in the next couple of sessions. Beyond that resistance is seen near 2.65 on the 3-day candles.
Brent (58.06) is likely to rise towards 60-62 while support near 56 holds. WTI (52.62) is also holding above support at 51 and could produce a decent bounce towards 54-55 in the near term.
FOREX
US non-farm payroll came out slightly lower at 136k against expectations of 140k, down from previous figure of 168k. Dollar Index continues to trade lower just now but could be nearing immediate support level.
Dollar Index (98.80) could find some support below current levels near 98.50. Preference is for a bounce from 98.50 towards 99.25-99.40 again in the near term. But a break below 98.50, if seen over today or tomorrow could drag the index sharply down towards 98.25 or even lower. We would keep an eye on 98.50 just now.
Euro (1.0984) is holding above support near 1.0945 mentioned last week but could face limited upside as 1.1020/25 could provide some immediate resistance in the near term. In the meanwhile Euro could spend a few sessions in a narrow sideways range of 1.0945-1.1025. Support at 98.50 on dollar Index would be important to watch. We would turn bullish on Euro only on a break above 1.1030.
Dollar-Yen (106.79) seems to have got some support at 106.48 and while that holds, Dollar-Yen could be stable in the 106.48-107.20 region before again falling towards 106.50. Our earlier mentioned possibility of testing 106.20 cannot be ruled out.
The support in the 117.10-117 region continues to hold well on the EUR-JPY (117.32). Narrow range between 117 and 117.70 could continue to hold for the near term. On the medium term there is room for further fall towards 116 but that would confirm only on a break below 117.
Aussie (0.6752) is trading slightly lower today after testing 0.6774 on Friday in line with our expectations. The current dip if continues could extend towards 0.6736 over the next 1-2 sessions. In the medium term the currency is likely to be stuck in the 0.6650-0.68 region.
Pound (1.2326) is trading slightly lower today and could possibly spend some time in the 1.22-1.2450 region just now. Interim resistances below 1.2450 are seen near 1.2400 and 1.2430 respectively. A fall from anywhere between 1.2450-1.2400 is possible which could drag the currency back towards 1.22. For now a short rise is possible.
The USDCNY (7.1476) has been stable near 7.14 and is preferred to come down towards 7.10 or lower. However while above 7.14, we may keep a possible rise to 7.18 intact. Only a sustained trade below 7.14 would reduce chances of a rise towards 7.17/18.
Dollar-Rupee (70.8850) could see sideways trade within 70.75-71.00 today. Only on a break on either side of the range, we may look at further extension of the move. A fall below 70.75, if seen could set lower targets of 70.62-70.46. However we would watch price action today.
INTEREST RATES
Though the fall in unemployment numbers on Friday had given some breather most of the damage on the US Treasury Yields were already done by the other weak economic data releases earlier in the past week. The US Treasury yields had tumbled across tenors last week and are likely to remain under pressure had tumbled across tenors last week with a possibility of seeing an intermediate bounce. German Yields remain bearish at the near-end while at the far end the 30Yr can consolidate before seeing a fresh fall. The 10Yr GoI has risen sharply after RBI’s 25 bps rate cut on Friday and can move further higher if it manages to breach 6.70%.
The US 2Yr (1.369%) and 5Yr (1.33%) tumbled 25 bps and 24 bps respectively while the 10Yr (1.52%) and 30Yr (2.01%) were down 16 bps and 12 bps respectively last week. The 10Yr has support near current levels at 1.50%. While it holds, an intermediate bounce to 1.63% is possible before we see a fresh fall to 1.45%. The 30Yr on the other hand has room to test 1.95% from where a corrective bounce to 2.03%-2.05% is possible before we see a fall to 1.85%-1.83%.
The German 2Yr (-0.80%), 5Yr (-0.81%) and 10Yr (-0.59%) were down between 2 and 4 bps while at the far-end the 30Yr (-0.08%) inched slightly up by 3 bps last week. The broader view remains bearish. Both the 2Yr and 5Yr can test -0.90% on the downside. The 10Yr can fall to -0.68% and -0.73% on break below 0.60%. The 30Yr on the other hand remains mixed in the near-term and can consolidate before seeing a fresh fall.
The 10Yr GoI (6.6808%) rose sharply after the RBI’s 25 bps rate cut on Friday. If the yield manages to surpass 6.70%, a further rise to 6.80% is possible. We will have to wait and watch it closely today.
