STOCKS
The rally in the equities seems to be losing steam. The Dow has room for a rise but a crucial resistance is coming up. Dax looks vulnerable for a corrective fall. Nikkei and Shanghai are weak. Sensex and Nifty are coming closer to their crucial resistances which needs to hold to avoid a fresh fall.
Dow (27783.59, +92.10, +0.33%) is managing to hold above 27500 and it will have to be seen if it can sustain the break above 27750. The bias is bullish and we expect the Dow to move higher towards 28000 while it remains above 27750 and 27500.
DAX (13230.07, -53.44, -0.40%) has come-off sharply and seems to be stuck in between 13100 and 13300 over the last few days. We will have to wait for a breakout on either side of 13100 or 13300 to see whether the index is going up to 13400-13500 or will fall to 13000 and 12800.
Nikkei (23263.96, -55.91, -0.24%) is holding well. is coming down in line with our expectation. As mentioned yesterday, the index can test 23200 and 23000 before reversing higher again.
Shanghai (2902.46, -2.78, -0.10%) has a crucial support in the 2870-2865 region which is likely to be tested while it remains below 2920. Whether it manages to bounce from the 2870-2865 support zone or not is going to be crucial in deciding the next move.
Nifty (11840.45, -73, -0.61%) can test 11800 –a crucial level to watch. A break below 11800 will turn the outlook bearish. While 11800 holds, the index can bounce and remain sideways between 11800 and 12050 for some more time.
Similarly, 40000 is a crucial level to watch on the Sensex (40116.06, -229.02, -0.57%) . The sideways move of 40000-40750 will remain intact if it manages to bounce from 40000 in the coming sessions. A break below 40000 will increase the danger of seeing 39750-39500 on the downside.
COMMODITIES
Brent (62.60) and Nymex WTI (57.40) have moved up sharply as Dollar strength weighs on currencies and major equities trade low across the globe. Adding to it, the API reported a crude inventory draw of 500,000 barrels for last week compared to analyst expectation of 1.649mln barrel build. This has also pulled up crude prices. WTI could test 58 and Brent is likely to move up towards 63.0-63.30 in the near term.
Gold (1464) is trading slightly higher just now. While above 1440, we may expect a short rise to 1480/90 before resuming the fall in the medium term.
Silver (16.93) is holding above support region of 16.5-16.0 and could re-attempt a test of 17.5 on the upside while above 16.50.
Copper (2.6420) is likely to trade in the 2.60-2.7250 region broadly in the near term.
FOREX
US Dollar is looking bullish and could extend gains. Major currencies trade weak against the US Dollar. Asian currencies also trade weak against the Dollar but could be impacted largely by the proceedings of the US-China trade deal. While the possibility of a deal between the two countries is expected by the end of the year and is fairly priced in, further strength in the Asian currencies could be limited.
Dollar Index (98.38) is likely to move up towards 99 in the next couple of weeks as support above 97 has held well so far and is likely to continue holding in the near term. A short dip is possible from 98.50 but that could be temporary as the index could resume its rise towards 99. Overall near to medium term looks bullish.
Euro (1.10) has come down to test immediate support near 1.095 as mentioned yesterday. A break below that could be bearish towards 1.0943-1.0900. the 3-day and Weekly candles charts are clearly bearish for the near to medium term.
Resistance at 109.50 is holding well for Dollar-Yen (108.72). The currency pair is likely to extend the current fall towards 108.50-108.24 in the near term before seeing a short corrective rise from there.
EUR-JPY (119.62) has broken below 120 and could be headed towards 119.0-118.60 in the near term. View is bearish while below 120.50.
The earlier resistance near 1.30 has now shifted to 1.29 and while Pound (1.2851) trades below 1.29, it has fair chances of falling towards 1.27 in the near term. Movement in the currency has been very small and narrow hence no sharp movement is expected just now.
Aussie (0.6796) has broken below our mentioned interim support at 0.6825, falling sharply towards 0.6750. We would like to watch price action near 0.6750, a break below which could open up chances of medium term fall towards 0.6700-0.6675 in the next couple of weeks.
USDCNY (7.0209) has moved up on fresh comments from Trump reminding markets of the possible tariffs that are due to be imposed in December on absence of a positive deal between US and China. The Yuan has depreciated and could test 7.0474-7.0644 in the near term.
Dollar-Rupee (72.09/10) has broken sharply above our expected resistance at 72. It would be important to watch whether it sustains above 72 today or comes off towards 71.75. Sustained trade above 72 would be a clear break indicating an upward rally towards 73-74 levels. We would wait to see price action today to confirm if we would revise our targets upwards.
INTEREST RATES
News reports stating that the US-China trade talk has hit an obstacle had dragged the US Treasury yields sharply lower. The Treasury yields have room to fall further. The German Yileds have also declined sharply across tenors and can dip further. The 10Yr GoI can test its near-term support and then can possibly move up again.
The US 2Yr (1.63%), 5Yr (1.68%), 10Yr (1.88%) and 30Yr (2.35%) Treasury yields have declined sharply across tenors. The resistances that we had mentioned seem to be holding well. The 30Yr can fall to 2.30%-2.28% on a break below 2.35%. The 10Yr on the other hand has room to test 1.78% on the downside while it remains below 1.95%.
The German 2Yr (-0.64%), 5Yr (-0.56%), 10Yr (-0.30%) and 30Yr (0.20%) have come-off sharply across tenors in line with our expectation. . The 30Yr can extend the fall towards 0.16%-0.14% on a break below 0.20%. The 10Yr can test -0.35% and even -0.30% in the coming days.
The India 10Yr (07.26 GS 2029) GoI (6.7284%) has come-off below 6.75% yesterday. While below 6.75%, the near-term outlook is negative to see a dip to 6.70% and even 6.67% in the coming sessions.
The 10Yr (06.45 GS 2029) GoI (6.5317%) has support at in the 6.53%-6.52% region which will need a close watch and has to hold to keep the possibilities alive of seeing a bounce-back to 6.58%-6.60% in the short-term.
