STOCKS
The Dow and DAX seems to lack momentum to breach their range resistances. While the Dow remains stable, the DAX has come down. We see high chances of the sideways range of 22500-25000 on the Dow and 10200-11350 on the DAX to remain intact and the indices can come down within their range in the coming days. Nikkei has dipped but has near-term supports that can limit the downside and take the index higher again. Shanghai has come-down sharply but has a strong support near current levels which can halt the fall and trigger a reversal to keep the broader uptrend intact. Sensex and Nifty have moved up but will have to break above their crucial resistances at 32000 and 9250 respectively in order to become bullish and also to avoid any further fall.
Dow (24474.12, −101.78, -0.41%) seems to be lacking momentum to rise further although it is holding well above 24000. As we have been mentioning over the last couple of days 24700-25000 is a crucial resistance zone and a strong rise past 25000 is needed to become bullish for a further rise to 26000. While the 24700-25000 resistance holds, the Dow can decline below 24000 an fall to 23000-22500. In that case the 22500-25000 range will continue to remain intact.
DAX (11065.93, −157.78, -1.41%) is also struggling to gain strength to breach its 11200-11350 resistance zone. A fall below 11000 now can drag the index lower to 10800-10700. It will also indicate that the 10200-11200/11350 range is remaining intact. The rise to 11500 that was mentioned yesterday is not happening now.
Nikkei (20462.11, −90.20, -0.44%) has come-off below 20500 and might dip to 20300-20200 in the near-term. However, as mentioned yesterday, while the Nikkei remains above 20000, the outlook is bullish to see a test of 21000-21500 in the coming days. Only a strong break below 20000 will prove our bullish view wrong and drag the index lower.
Shanghai (2837.33, −30.59, -1.07%) has declined sharply below 2875 and has come closer to the key support level of 2825 in line with our expectation. 2825-2820 is a strong support zone which we expect to hold. Shanghai can bounce-back from this support zone towards 2900 levels again in the coming days.
Nifty (9106.25, +39.70, +0.44%) moved up during the day yesterday but had come-off from the high of 9178.55. As mentioned yesterday, 9200-9250 is a crucial region and a strong rise past 9250 is needed to reduce the danger of falling below 9000 to test 8800 and even lower levels again. A sustained break above 9250 will only turn the view bullish to see further rise to 9300-9400 levels.
Similarly, Sensex (30932.90, +114.29, +0.37%) will have to breach 32000 decisively to move further up towards 33000-34000 levels. A decisive break above 32000 will only reduce the danger of the index breaking below 30000 on the downside.
COMMODITIES
Almost all commodities are trading lower today on a stronger Dollar. China-US tensions seem to resurface that dragged Copper prices lower. Crude prices have dipped a bit but may expect some short term correction before they start to rise from here. Gold and Silver trade lower too and could turn bearish if it manages to break below immediate supports below current levels.
Brent (35.30) and Nymex WTI (33.23) have come off sharply after testing 36.23 and 34 respectively. A slight dip is possible in the near term but upside is likely to be limited at $37.50 for Brent and $35 for WTI.
Gold (1724.60) and Silver (17.28) have come off sharply on Dollar strength with Gold trading near our mentioned support near 1720. A break below 1720 needs to be seen and sustained to take Gold lower towards 1700-1680-1660 in the coming sessions. At the same time the price will have to break below 1680 in the longer run to turn bearish. While above 1660/80, Gold remains fairly bullish. Silver could test 17 before rebounding from there. Overall view is bullish while above 16.5. Our expected rise to 19 could be delayed.
Copper (2.4015) plunged on news of China’s plans to impose a national security legislation on Hong Kong that further lead to a warning from Trump that Washington would react “very strongly” against such an attempt. Our expected 2.50/55 has been negated for the near term but copper could again rise back if China-Us tensions do not escalate further. Watch price action near 2.40.
FOREX
Dollar Index trades higher and could continue to move up in the near term while Euro, EURJPY, Aussie and Pound trade lower and likely to remain bearish for the coming sessions. BOJ’s emergency monetary policy decision has started and is in progress just now and its tone on decision of fiscal package for businesses and financial institutions may impact the Yen and keep the currency volatile today. We may have to watch for a possible break above 108 today on USDJPY. Yuan trades weak and USDINR is likely to trade in the broad 50p range mentioned earlier.
Dollar Index (99.51) has risen from 99 as expected and could be headed towards 100.5 or even higher in the next few sessions. View is bullish for the near term.
Euro (1.0939) has also been coming off from 1.10 and looks bearish towards 1.09-1.0875 in the near term.
Dollar-Yen (107.58) is trading lower, deviating from the otherwise positive directional correlation with Dollar Index. Trade within 107.45-108.30 region is likely to hold in the near term.
EURJPY (117.72) has dipped along with the fall in Euro and while the Euro heads lower, EURJPY could also be seen falling towards 117 or even lower. View is bearish.
Aussie (0.6547) has scope to test 0.65 on the downside before bouncing back from there towards 0.66 or even 0.67 in the longer run.
Pound (1.2218) is bearish while below 1.2370 and while that holds, Pound looks potentially weak and could well fall towards 1.21/1.20 in the medium term.
USDCNY (7.1174) has risen on the upside above 7.11 and nearing 7.1250. If the pair resolves to the upside on a confirmed break above 7.1250, the Yuan could turn weak and move faster than currently expected. Watch closely as that could trigger some weakness in Rupee too.
USDINR (75.6150) may continue trade in the 76.00-75.50 region in the near term. Current sideways consolidation may continue for some more time.
INTEREST RATES
The US Treasury yields remain lower and can dip in the near-term within the current sideways consolidation. The German yields are also turning lower and may resume their broader downtrend from here itself instead of seeing further rise that we had been expecting. The 10Yr GoI remains lower and keeps intact our view of testing the 6%-5.95% support zone before reversing higher again.
The US 2Yr (0.16%) and 5Yr (0.33%) Treasury yields remain stable while the 10Yr (0.65%) and 30Yr (1.36%) have dipped slightly. Our view remains the same. The 30Yr can dip to test 1.30% in the near-term and a strong break below 1.30% will be needed to turn the outlook bearish. While 1.30% the yield can bounce back and remain in a range of 1.30%-1.43%/1.45% and the bias will be bullish to see an eventual break above 1.45%. The 10Yr can dip to 0.60%-0.58% and can continue to consolidate in the -0.58%-0.70%/0.75% range for some more time.
The German 2Yr (-0.70%), 5Yr (-0.69%), 10Yr (-0.50%) and 30Yr (-0.07%) yields have dipped across tenors. The expected rise seems not to be happening. We will have to wait and watch for a few sessions to see if the broader downtrend resumes from here itself towards -0.20% (30Yr) and -0.60% (10Yr) instead of seeing a further rise towards 0.05% (30Yr) and -0.40% (10Yr) that we had been expecting.
The 10Yr GoI (6.0332%) remains lower and stable below 6.05%. Out view of seeing a dip to 6%-5.95% and then a bounce-back remains intact. As mentioned yesterday, the pace of downmove is slowing down and there are high chances to see a reversal from 6% itself targeting 6.15%-6.20% on the upside.
