STOCKS
Indices look bearish for this week and could see lower levels in the next few sessions.
Dow (25313.14, -0.77%) seems to be holding well below the resistance on the 3-day candles and looks bearish in the near term. Unless an immediate rise is seen that takes the index beyond the resistance, Dow could come off towards 25000 or even lower in the medium to long term.
Dax (12424.35, -1.99%) came off sharply and may test 12300 in the next 2-3 sessions before moving up again towards 12500-12600. Note decent support near 12300-12200 region which may hold this week.
Nikkei (21944.35, -1.59%) has finally broken below support at 22400, coming out of the narrow sideways range of 22850-22400. While Nikkei may head towards 22000, it could pull down Dollar Yen also in the near term. The 3-day and weekly charts show more room on the downside for the medium term.
Shanghai (2757.50, -1.35%) is trading lower. Range trade within 2850-2700 is likely to continue for the next 2-3 sessions.
Nifty (11429.50, -0.36%) closed below 11500 on Friday but unless a sharp fall is seen from here, the index could have equal chances of moving on either side of 11500 in the near term.
COMMODITIES
All major commodities look stable for now. Crude prices have immediate supports near current levels while precious metals are likely to remain stable this week.
Nymex WTI (67.65) could trade in the 68.50-6.00 region in the near term. Long term support on the 3-day candles are visible which if holds, is bullish for WTI in the medium term towards 70+ levels.
Brent (72.66) is also likely to see some range trade in the 71-73 region. Brent is trading along the long term support and only an immediate bounce from here could take it higher in the longer run. Failure to hold above current support levels could make it vulnerable to further fall in the longer run.
Gold (1216.10) could be limited to 1200-1210 on the downside. We could see some more of trade below 1225 before the price shows any bullish signs.
Copper (2.7320) is likely to remain in the 2.70-2.85 region. While support on the weekly candles hold, upside scope remains intact. A break below 2.70, if seen would turn bearish for Copper towards 2.60.
FOREX
The Turkish Lira (6.9891) crashed by almost 20% on Friday as Trump’s announcement of tariffs on metal exports from Turkey aggravated the already delicate situation in the Turkish economy. This crash has weakened most majors (except the Yen) against the Dollar.
Euro (1.1377): The Turkish lira’s crash on Friday weakened the Euro towards the 200 weeks MA (1.135) much faster than we had expected. Euro could weaken more to test crucial trendline support on weekly line chart near 1.13 in this week. The EU GDP release tomorrow and EU CPI release on Friday could be important factors.
Dollar Index (96.41): Dollar Index saw some dramatic strengthening on Friday as the Turkish Lira’s crash might have led investors towards safe haven assets like US bonds. As we had written on Friday morning, the Dollar Index is now looking bullish towards levels near 97-98 – Euro’s test of 1.13 could correspond to the Dollar Index’s test of 97. A breach beyond 98, if it happens, would be very bullish for the medium term.
Dollar Yen (110.20): Dollar Yen has broken below support near 110.50 on daily and weekly candles. We need to watch out for the 21 weeks MA near 109.76 on weekly line chart, which could provide some support. If that is broken as well, we could see Dollar Yen decline more in the weeks ahead.
Euro Yen (125.38): Euro Yen has also seen a steep fall, breaking below the crucial horizontal support near 127 on weekly line chart on Friday. It now looks bearish towards its May end low near 124.62, which it could test in this week itself. On weekly candles, there could possibly be some support near 124.0-123.5.
Pound (1.2751): Pound has broken support in the downward channel on daily candles near 1.28 and is now looking bearish towards support on weekly candles near 1.25 in this month. A further downmove towards 1.270-1.265 in this week seems likely.
Dollar Rupee (68.83): Chances of fall to 68.30-20-10 stand reduced. But break above 69.10 needed for further upside to open up. May range between 69.10-68.70 this week. Need to stay conscious of chances of a rise past 69.10 in the medium term.
INTEREST RATES
Although US Core CPI exceeded expectations on Friday by registering a 2.4% y-o-y growth as against the expected 2.3%, US yields still saw a drastic fall as the Turkish crisis overpowered the strong US inflation numbers. The US-China trade tensions seem to have already made investors risk averse – add to that, the crisis in Turkey is now feared to impact European banks due to their exposure in Turkey. This could further enhance the ‘risk off’ sentiment.
US 10 year yield (2.85%), 30 Year (3.01%), 5 Year (2.72%), 2 Year (2.59%):
As we have been saying, there is crucial support near 2.82-85% for the US 10 year yield, which it wasn’t able to break below in Jun-Jul ’18 and which might again restrict its downmove. The next few sessions would be important – any delay in breaking below 2.82% could imply that the support is still strong and that, another rise beyond 2.9% could commence anytime soon.
German 10 year bond yield (0.32%) also fell as investors might have rushed towards safe haven assets on Friday. It is currently testing support near 0.3% on medium term chart. A break below 0.3% could make it bearish towards lower support near 0.18%-0.19%.
