STOCKS
The US and China agreeing to remove the tariffs on each other simultaneously has given a boost to the equities. Dow has risen above its key resistance and can move higher while it sustains above it. DAX continues to remain strong. Nikkei has to break above an intermediate resistance to gain momentum. Shanghai continues to trade mixed. Sensex and Nifty have room to move higher.
Dow (27674.80, +182.24, +0.66%) has risen past the crucial resistance level of 27600 and has to be seen if it can sustain above it. While above 27600, the outlook is bullish to see a rise to 28000 – the next crucial resistance to watch.
DAX (13289.46, +109.57, +0.83%) has moved up further breaking above the intermediate resistance level of 13250 which we had expected to hold on its first test. The broader bullish outlook is intact to see a test of 13400-13500 on the upside. is moving up in line with our expectation.
The resistance at 23400 on the Nikkei (23368.87, +38.55, +0.17%) continues to hold as of now. But the broader bullish view remains intact to see a rise to 24000-24200 eventually. We will have to wait and see whether the rally happens from here itself or after a corrective dip.
Shanghai (2985.09, +6.37, +0.21%) continues to trade mixed. As mentioned yesterday, a strong rise past 3000 is needed for it to gain strength and move higher to 3050. The bias is positive as long as the index trades above the support level of 2950.
Nifty (12012.05, +46, +0.38%) has risen past 12000 and has to be seen if it can sustain above this psychological level. While above 12000, a further rise to 12200-12300 can be seen in the coming days. A strong rise past 12100 can accelerate the rally.
Sensex (40653.74, +183.96, +0.45%)on the other hand has broken above 40600 and can test 41000 and even higher levels in the coming days. Near-term support will be in the 40500-40400 region.
COMMODITIES
Precious metals fall as Dollar strengthens and equities rally globally. Optimism on US-China trade deals and news of agreement to cancel some tariffs in phases added to the rebound seen in Crude prices, although it would be important to see if the current bounce sustains.
Brent (62.13) has rebounded sharply. While above immediate support at 61, Brent could rise towards 64.0-64.5 in the near term.
Nymex WTI (56.90) has sustained above 56 breaking above the medium term trend resistance as seen on the 3-day charts. While the price trades above 56, it could attempt to test 59 on the upside. Near term looks bullish.
Gold (1469.30) has finally broken below 1480, after being stuck in the 1480-1540 region for almost the last 7-weeks. This break of support was much needed and awaited by the markets to turn bearish on Gold prices. We could see fall in prices towards 1440 in the near term.
Silver (17.00) has fallen exactly in line with our expectations and could get some support near 16.80-16.50 region in the next few sessions. Overall view is bearish while below 18.
Copper (2.7070) has risen sharply from 2.6655, the near term support on the daily candles. A re-test of 2.7250 is on the cards a break above which, if seen would take it higher towards 2.80 in the medium term.
FOREX
Dollar Index (98.12) rose sharply after positive news from US-China agreement stated cancellation of some tariffs in phases. The index has to sustain above 98 in order to turn bullish for the medium term. Watch price action near current levels. While above 98, Dollar Index could move higher towards 99.
Euro (1.1052) tested 1.1036 yesterday after bouncing back briefly from there. A possible bounce to 1.11 is expected but outlook remains bearish for a fall towards 1.1025/20 in the near term.
Dollar-Yen (109.22) is up sharply aided by the rise in Nikkei and Dollar Index and the sharp fall in Gold prices. The currency pair is likely to test 109.50 before coming off from there.
EUR-JPY (120.71) tested 120.14 but rose back to levels above 120.50. While there is scope of testing 119 on the downside, there could be equal chances of rising back towards 121.50 or higher. We would need a confirmed break below 120.5 to turn bearish for the medium term.
Pound (1.2813) is stuck in the 1.28-1.30 region. Our preference is for a break on the downside to test 1.26 in the near term. Watch resistance at 1.30. Near term is potentially bearish.
Aussie (0.6883) has also been trading sideways but has important trend resistance on the 3-day candles at 0.6950 which if holds could drag down Aussie towards 0.68. View is bearish for the near to medium term while below 0.6950.
The USDCNY (6.9756) is down sharply. As the agreement with US states removal of tariffs in phases gets implemented, we may expect Yuan to strengthen towards 6.93/90 or lower in the near term.
Dollar-Rupee (71.044) is likely to hold below 71.10 today with downside limited to 70.80. We do not negate a test of 71.25 just now. A possible break above 71.10 next week could take it higher to test important resistance at 71.25.
INTEREST RATES
Increased risk appetite in the market following the US and China agreeing to cancel some of the tariffs simultaneously has taken the US Treasury yields sharply higher. However, key resistances are coming up for them which needs a close watch. The German Yields remain bullish. The 10Yr GoI is also bullish and can see a further rise in the near term.
The US 2Yr (1.67%), 5Yr (1.73%), 10Yr (1.92%) and 30Yr (2.39%) Treasury yields have surged across tenors. The 10Yr has room to test 2% which is an important resistance level to watch. We expect the 10Yr to reverse lower from 2%. The 30Yr has resistance near current leels at 2.40% which has to be broken for it to rise further towards 2.50% going forward.
The German 2Yr (-0.6%) remains stable while the 5Yr (-0.51%), 10Yr (-0.24%) and 30Yr (0.30%) have risen sharply. The 10Yr is heading towards -0.20% in line with our expectation. The 30Yr on the other hand has risen past the key resistance level of 0.28% and needs to be seen if it can sustain above it. While above 0.28%, a further rise to 0.40% looks likely.
The Indian 10Yr (07.26 GS 2029) GOI (6.7232%) has bounced after testing the 6.68%-6.67% support zone. The outlook remains bullish to see a rise to 6.75% and 6.80% in the coming days.
The 10Yr (06.45 GS 2029) GOI (6.5064%) on the other hand can rise to 6.53% and 6.56%. Support is in the 6.48%-6.47% region. A range bound move between 6.47% and 6.53% for some time cannot be ruled out before we see a rise to 6.56%.
