STOCKS
Dow (24415.84, -1.02%) gave back all gains seen yesterday. Unless a break above 25000 is seen, it would be difficult to project bullishness for the Dow for the medium term. While 25000 resistance holds, Dow could be pushed down towards 24000 again and again. Failure to move up immediately and break above 25000 could turn to be consolidative for the Dow next week.
Dax (12604.89, -1.40%) has come down sharply and has scope of testing 12470/60 in the near term. From there we could see a bounce back towards 12600 or higher.
Nikkei (22281.54, +0.36%) has bounced back from 22000 levels seen a couple of days ago. While the rise continues, it could test 22500 in the coming sessions. Near term looks bullish which could pull up Dollar Yen (109.18) also towards 110..
Shanghai (3100.31, +0.16%) continues to trade at higher levels. It could again move up towards 3150 before coming off from there. Overall some more movement in the 3050-3150 region could be possible in the near to medium term.
Nifty (10736.15, +1.15%) moved up sharply yesterday and indicates that the bears are not strong just now, reducing possibility of a sharp fall just now. Some ranged movement within 10850-10400 is possible for some more time before the index decides on further movement. For now, there could be some dip seen today followed by a pickup in the upward rally again by next week. Immediate upside is likely to be limited at 10850-10900 region.
COMMODITIES
Brent (77.51) is slightly up from levels seen yesterday while WTI (66.94) has come off sharply from 68.10 seen in yesterday’s edition. WTI has immediate support near 66 which if holds could push the prices upwards while Brent is stable just now and could see some ranged movement in the 77-79 region for some time.
Gold (1298.32) seems to have bounced a bit from the long term support on the 3-day charts. While that holds, Gold may move up eventually towards 1310-1315 in the coming sessions limiting the downside at 1280.
Copper (3.0616) is almost stable near current levels. While above 3.02, Copper could rise towards 3.20 in the medium term.
FOREX
Dollar index (94.031) tested the 13 day moving average near 93.7-93.8 yesterday and could move lower next week to test the 21 days MA near 93.50. If it breaks 93.5, the Dollar Index might turn bearish for the medium term. However, while above 93.5, it could again rise to test levels near 95. On the 3 day line chart, 96 is seen as a possible resistance level, which might be the maximum upside the Dollar Index sees in the medium term.
Euro (1.1693): As per our expectation, Euro tested the 13 days MA by seeing a high near 1.1724 and has dipped slightly from there. Next week, we could see Euro rising towards the 21 days MA near 1.178, which would be a crucial resistance level. Repeating yesterday’s comment: A rise past 1.182 could make Euro bullish for the medium term. While below 1.179-1.182, Euro could again dip to test levels near 1.15. On the 3 day line chart, 1.135-1.140 is seen as possible support, which could be the maximum medium term downside that the Euro could see. A break of 1.135-1.140 (less preferred currently) would open up possibility of 1.12.
Dollar Yen (109.08) : has stayed above the 21 weeks MA near 108.16 like we have been expecting and seems to be rising for a possible retest of levels near 110-111 next week. However, at the same time, we have to be mindful that the Bank of Japan has announced some tapering of asset purchases, which could well prove to be the trigger that strengthens the Yen in the days to come. On the downside, a break of 107.8 would confirm medium term bearishness for Dollar Yen and could result in a quick downmove to 106-105 (seen as crucial support on weekly candles).
Euro Yen (127.53) : As per expectation, Euro Yen is trading at levels near 127.6 and is thereby respecting support trendline in the downward channel on weekly candles. Although the Dollar Yen looks like it could rise towards 110 next week, the Bank of Japan’s tapering of asset purchases could bring in Yen strength quickly, in which case, we could see Euro Yen moving down towards support on weekly candles once again (near 124). A retest of 1.16 by the Euro and a fall to 107 on the Dollar Yen will make the Euro Yen test levels near 124.
Pound (1.3277): Pound has continued to trade near levels seen yesterday ie around 1.33. Thereby, it is no more respecting resistance in the downward channel on daily candles. However, it still does look bearish towards 1.32 in the near term. We have been expecting it to gradually move lower over the next 1-2 weeks with the next downside target being near 1.30 (support on weekly candles). A break of 1.30 could imply continued bearishness in the medium term.
Dollar Rupee (67.40) : Dollar Rupee is likely to test 67.90 today. But overall broad sideways movement could continue.
INTEREST RATES
Our May ’18 US Treasury report ( available on demand ) forecasts a near term dip in US yields towards medium term supports near 2.55% (10 Year), 2.9% (30 Year) and 2.2% (5 Year). It would have to be seen if the trigger for such a dip could be some dovishness from the US Fed in its June meeting.
Current yields: US 10 Year (2.873%), 30 Year (3.03%), 5 Year (2.71%), 2 Year (2.435%) – US Yields are trading near levels seen yesterday. Repeating yesterday’s comment on the 10 Year yield:
The US 10 year yield might have some horizontal support near 2.75% which is holding for the time being. However, given the earlier break of crucial support trendline near 2.85%, we could see a gradual downmove towards medium term support near 2.55%. Another dip in Brent towards 73-71 might be the trigger for this fall to 2.55%. If that doesn’t happen, the break of 2.85% would have been a false break.
The Bank of Japan has cut the size of its asset purchase programme by 20bn yen, which has led to a rise in Japanese yields. Whether this translates into a rise in yields of other countries is yet to be seen. The Japanese 10 Year bond yield has moved up from 0.03% to 0.046%. It could now move even higher to 0.06% (previous high seen in May).
