STOCKS
Dow (24262.51, +1.39%) has moved up from support levels near 23500 and while that holds, there is scope for the index to rise towards 24400 in the coming sessions. Overall broad range of 24400-23500 is likely to hold for the medium term.
Dax (12819.60, +1.02%) has moved up a bit and could gradually rise towards 12900-13000 levels in the near term. View remains bullish while above 12700.
Japan was in a holiday mood since 3rd May and the stock index has opened today on a negative note, trading below the resistance at 22600. Nikkei (22372.14, -0.45%) could dip from current resistance levels and head towards 22200 or lower in the coming sessions. Only on a sustained break above 22600, we may expect a sharp rise towards 23000; else the index is likely to remain bearish.
Shanghai (3116.66, +0.83%) needs to break above 3150 in the coming sessions to be able to move higher towards 3200 or above. For now while below 3150, the index is likely to remain trapped in the 3150-3050 region.
Nifty (10618.25, -0.57%) has been coming off from levels near 10800 as expected and while that holds, the fall could continue targeting 10500 in the near term.
COMMODITIES
Crude oil trades higher as the deadline of Iran sanctions (May 12th) nears. Brent (75.22) is ready to test the previous high near 75.60 and looks bullish just now. Brent could continue to move up to make fresh highs in the current rally this week.
Nymex WTI (70.18) is up as well and could head towards 71-72 levels soon. Near term looks bullish. Note that 72 is an important resistance which may hold in the medium term.
Gold (1317.66) is stuck in the 1310-1325 region and is unable to decide which direction to take. While the metal price remains above 1300-1310, eventual rise towards 1350 is possible.
Copper (3.0834) is likely to trade sideways in the 3.05-3.15 region for the coming sessions.
FOREX
Dollar index (92.474) saw a low of 92.35 on Friday but has risen from there once again. While it stays below 92.5, there are chances of it ranging between 92.5-92.3 for some time; if it goes below 92.3, it could test 92.0-91.50 as well. A breach of 92.5 could take it higher towards its medium term target of 94-95 (which corresponds to the 5th wave starting point of the downmove since Dec ’16).
Euro (1.1971) couldn’t move up past 1.20 on Friday. There are still some chances for it to rise towards 1.20. If it moves above 1.202 (earlier mentioned as 1.201), it could then go up till 1.205-1.210 before resuming its downtrend again in the medium term. A dip below 1.193 would make it bearish towards its medium term target near 1.16-1.17 (which is the 5th wave starting point of the Euro’s upmove since Dec ’16).
Dollar Yen (108.98) had dipped to 109 after testing highs near 110.04 last week. It has support on daily candles near 108.75-108.90 from where it could again move higher towards 110.5-110.75 in the near term. The broader uptrend looks capped till 110.50-110.75 in the medium term, after which Dollar Yen could turn bearish.
Euro Yen (130.47) had broken below support near 131 on weekly candles last week. Lower support on weekly candles near 130.00-129.75 is expected to give it support this week since both Dollar Yen and Euro could rise towards 110 and 1.20 respectively.
Pound (1.3554) turned very bearish last week after breaking below crucial long term support level near 1.385 on weekly line chart. It is continuing to move down towards its next downside target of 1.35-1.345 (seen on daily candles), which could possibly be tested this week.
Dollar Rupee (66.885) tested previous high near 66.91 on Friday, but did not break above it. The market closed relatively strong on Friday (rather than relatively weak) and as such there can be chances of further extension on the upside to 67.00-20 in the near term. Avoidance of the upside will need a fall/ break below 66.50 at least. For the time being, the trend still points upwards.
INTEREST RATES
The Fed maintained status quo in its May meeting last week but expressed positivity regarding rising inflation. This hawkish component had taken the US 10 year yield towards 2.99% but the yield has continued to stay below 3% after that. The yields could start rising again as the June Fed meeting comes closer (where a rate hike is widely expected).
The medium term targets for US yields in our Apr ’18 US Treasury report (available on demand) are as follows: 3.2%-3.3% (10 Year), 3.4%-3.5% (30 Year), 3.15% (5 Year) and 2.75% (2 Year). A breach of the 3% level by the 10 year yield would be vital for these targets to be achieved by June. A rate hike is expected in the June Fed meeting, which might start getting factored later this month and could henceforth lead to a rally in yields towards these medium term targets. We also expect some more yield curve flattening in the next month followed by steepening after that, as yields bounce from long term supports.
US 10 Yr Yield (2.95%), 30 Yr (3.12%), 5 Yr (2.79%), 2 Yr (2.49%):
The US 30 year yield (3.12%) could dip more towards support on short term chart near 3.08% before rising again.
The 10 Year yield (2.95%) is near support on the short term chart. We are expecting this support to hold, in which case, it should again start moving up towards 3%. As mentioned above, a rise back above 3% could happen later this month as the June Fed rate hike starts getting factored by traders.
