STOCKS
Overall equities could see a bounce in the next week. Major supports and resistances are seen near current levels and could hold in the near term.
The difficulty to rise above 25750 just now could a concern in the near term because unless the Dow (25509.23, -0.29%) rises sharply from here, it could be vulnerable to come back to the earlier sideways zone of 25500-24000. Immediate support is seen near 25500 which needs to hold and push the index back to higher levels in the early sessions of next week.
Dax (12676.11, +0.34%) is testing support near current levels on the daily candles and has lower supports near 12300-12500 on the weekly chart. While these hold, a bounce in the next 2-3 sessions is possible back towards 12800-12900. Near term looks bullish.
Nikkei (22494.33, -0.46%) has support at 22400 which could bring in a bounce in the early sessions next week. But overall the index could be stuck in the 22400-22900 region for a few more sessions. Sideways trade to continue just now.
Shanghai (2797.80, +0.12%) is trying to move up towards 2800-2850 again. While below 2850, the index is bearish for the medium term and could see a fall back to 2700 or lower in the coming week.
Nifty (11470.70, +0.18%) closed below 11500 yesterday and started showing initial signs of an upside break. However, we wait for a confirmed break above 11500 for further clarity on the directional upside. Else a corrective dip from 11500 is possible before resumption of the longer term uptrend.
COMMODITIES
Nymex WTI (66.83) is almost stable below 68 and while the resistance holds, the price has scope of coming down further towards 64-63 levels.
Brent (72.14) has support near 71 which has been holding well. A test of 71 is possible in the near term from where a bounce back towards 73 is expected.
Gold (1219.90) has been trading in a very narrow range and could come off towards 1210 in the near term.
Silver (15.43) looks bearish towards 15.25.
It would be important to watch if the weekly support near 2.70 holds or the 3-day resistance near 2.85 for Copper (2.7725). There could be movement on either side of this range. Copper is likely to remain stable just now.
FOREX
Euro (1.1532): The dip towards 1.155 which we had forecasted for the coming week happened yesterday itself with Euro touching lows near 1.152. The ECB’s monthly bulletin highlighting global growth risks due to trade protectionism might have been the trigger for this downmove. A close below 1.1508 today would be bearish and could take Euro towards lower support near 1.145 on daily line chart early next week, and then, ultimately to the 200 weeks MA near 1.136. However 1.1510-1.1508 is an important support – if US CPI (releasing later today) doesn’t surpass expectations, the support could hold for Euro, triggering another rise towards 1.165 next week.
Dollar Index (95.586): Dollar Index is moving closer to its previous highs near 95.6-95.7. On weekly line chart, the breach of 95 itself makes the index look bullish in the near term. If US CPI comes out strong today, we might well see a breach above previous highs towards 96. Maybe this upmove could extend till 97-98 in the coming weeks.
Dollar Yen (110.92): Dollar Yen has support near 110.60-110.50 from where it could rise in the next week towards 112. A break below 110.50 could be bearish and might reduce the chances of our foretasted rise towards the 113-115 resistance zone in the coming weeks.
Euro Yen (127.90): As mentioned yesterday as well, Euro Yen looks bearish towards support zone of 127.5-127.0 (seen on daily line chart and 3 day candles) in the next week. Euro Dollar moving lower to 1.145 and Dollar Yen staying near 111 is consistent with Euro Yen testing 127. Note that horizontal support on weekly line chart near 127 is a crucial long term support, whose break could be quite bearish.
Pound (1.2832): Yesterday we had written that an immediate break below 1.285 may negate the possibility of an upward correction towards 1.30. However, an upmove to 1.290-1.295 could still be possible while Pound stays above 1.28. An immediate break below 1.28 could however take it quickly towards 1.26.
Dollar Rupee (68.68): Offshore NDF trading near 68.87 – hence it could open gap up near 68.80-85. Watch Resistance at 68.80 and 68.90 today. If these are broken, we may see a rise to 69.10-30-50. Also watch Support at 68.55. A Close below that today would suggest chances of fall towards 68.30-20-10.
INTEREST RATES
The US CPI data release today could be crucial for whether the US 10 year yield breaks below 2.90% or moves back into the 2.95%-3.00% zone. Core CPI year on year growth is expected to stay stable at 2.3% while June’s headline CPI growth of 2.9% y-o-y is expected to rise to 3% (the month on month percentage change is expected to rise from 0.1% to 0.2%). Even if the headline CPI comes out near 2.9%, it could prove to be bullish for the 10 year yield.
As mentioned yesterday, trade tensions are continuing to rise as China will be retaliating with tariffs on $16 bn worth of imports from USA (tariffs on an equal volume of imports from China would be coming into effect in USA from 23rd August). This development could just enhance the ‘risk off’ sentiment amongst investors.
US 10 year yield (2.93%), 30 Year (3.07%), 5 Year (2.81%), 2 Year (2.65%):
Right now, US yields are facing opposing forces :
a bullish force due to improving US economy growth and higher inflation
a bearish force due to the risk off sentiment triggered by trade wars
While the above 2 forces continue to act, the movement in German and Japanese bond yields might just prove to be the decider on whether the US 10 year yield rises above 3% or not. If German and Japanese yields continue their recent rise, then a breach above 3% would be likely for the US counterpart.
Previous high near 0.13% is a crucial level to watch out for the Japanese 10 year yield (0.11%).
For the German 10 year yield (0.38%), a decisive rise past 0.40%-0.45% could be bullish.
