STOCKS
Stocks look bearish globally except Dax which could bounce from support below current levels. Nifty and Nikkei has some more room on the downside. Shanghai could trade sideways this week with some bearish possibilities.
Dow (25952.48, -0.048%) could see a short dip towards 25500 before again bouncing back to higher levels. Overall the long term trend looks bullish. A bounce from 25500 would open up chances of attempting levels near 26250-26500 in the medium to long term.
Dax (12210.21, -1.10%) came off sharply to test support near 12200 as expected. A bounce from here is possible in the rest of week targeting 12400-12600 again. In case Dax breaks below 12200, it could be vulnerable to a sharp fall towards 12000-11800 levels in the next 1-2 weeks.
Nikkei (22627.10, -0.31%) has been falling and is on its way to test support near 22400-22300 levels which could be the downside limit for the near term. Thereafter, the index could rise back towards current levels again within the next 1-2 weeks.
Shanghai (2743.17, -0.27%) looks weak in the near to medium term. While below 2800-2750 levels, there could be chances of a fall towards 2700-2650. Only on a break above 2800, we may negate the downside possibility.
Nifty (11520.30, -0.54%) has chances of testing 11400-11300 levels on the downside. A break below 11500 would keep it bearish to stable for the medium term.
COMMODITIES
Brent (78.03) tested 79.72 yesterday before coming off sharply to close at 78.17. The current resistance is expected to hold dragging the prices to lower levels of 76 in the near term. Downside view may be negated only on a sustained rise above 78.50-79.00 in the near term. If Brent falls from here, it could pull down Nymex WTI (69.48) also with itself and bring it towards 68. However, looking at the WTI charts, there is enough room on the upside if it breaks above 70-71.
Gold (1199.70) is trading below 1200 and could possibly come off to re-test 1190 also as mentioned in our earlier editions. Broad sideways trade in the 1230-1190 region could hold for now.
Copper (2.6025) has come off in line with our expectation and while below 2.55, we may well consider a possible test of 2.50-2.45 on the downside as seen on the weekly charts.
FOREX
Keep a watch on Dollar Yuan (6.8373) : a break above 6.847 could be crucial – bringing in more weakness for Indian Rupee. We prefer some correction from 71.70-80 on USDINR. A break below 1.155 necessary for bearishness in the Euro.
Euro (1.1597): As per expectation, Euro did break below support near 1.16 yesterday, but then rose again from lower support near 1.155. It now has resistance near 1.165 which should again push it down towards 1.155. On weekly candles, it looks particularly bearish in the weeks ahead. A test of 1.15 might happen sometime next week.
Dollar Index (95.33) could not move above the 95.5-95.7 resistance level and could now attempt another test of support near 95 on daily candles before moving back up. On weekly candles, earlier support line is providing resistance near 95.5-96.0 which needs to break for bullishness in the weeks ahead.
Dollar Yen (111.52): Instead of our expected dip to 110.5, Dollar Yen has moved up to test resistance near 111.5 on daily candles – a breaks above this resistance could lead to a test of 112 in this week and then, a test of 113 in the next 1-2 weeks.
Euro Yen (129.34) looks like it could attempt another test of resistance on daily line chart near 130 before moving down towards 127 in the next 1-2 weeks. An upmove towards 1.165 for Euro and towards 112 for Dollar Yen could make Euro Yen test 130.0-130.5.
Pound (1.2861): Pound is trading below resistance near 1.287 on daily candles. It also has some interim support near 1.28, which it needs to break to test lower levels. We prefer bearishness towards 1.27-1.26 in the near term.
Dollar-Yuan (6.8373) moved above crucial trendline resistance near 6.837 yesterday and is now facing resistance near 6.847. If it goes above 6.847, it might become bullish towards 6.90 again.
Dollar Rupee (71.585):
We prefer some correction from 71.70-80. However a straight rise past 71.70-80 could be very bullish. If EURUSD breaks below 1.155 and USDCNY above 6.847, it could add to Rupee weakness.
INTEREST RATES
As expected, the Indian 10 year GOI (8.065%) has risen more after breaking above crucial resistance near 7.95% couple of sessions back – the upside could extend till 8.15%-8.20% in the current move.
Improvement in US manufacturing data has led to a moderate rise in US yields. However, the long term yields continue to stay below crucial resistances and might continue to remain sluggish in the near term. USA and Canada’s inability to reach a trade deal, coupled with the impending possibility of $200 bn worth of tariifs by USA on China are major factors which could pull down US yields once again.
Note that the May high of 3.125% for the US 10 year yield might have been the year’s top.
US 10 Year Yield (2.90%) is testing the crucial 2.9% resistance level. A breach above 2.9% could lead to another test of the psychological barrier of 3%. A break above 3% is not preferred. Infact, the preference still remains tilted for a downmove towards 2.82%-2.75%.
As mentioned yesterday, the German-US 10 Year spread (-2.54%) is continuing its dip from resistance near -2.45% and could test -2.6% in the next couple of weeks. The German-US 2 Year spread (-3.24%) has also dipped from resistance near -3.20% and looks bearish towards -3.3% in the near term.
