STOCKS
Overall stocks are in a short term corrective mode and could dip a bit in the next few sessions before resuming the upmove.
Dow (26492.21, -0.26%) closed slightly at lower levels. Overall there is support at 26250 which could produce a bounce in the Dow in the near term. For the next 2-3 sessions we will have to allow for a dip to 26250.
Dax (12374.66, +0.19%) is trading just below important resistance on the daily candle chart. While the resistance holds, Dax could see a dip by the end of the week. Although in the longer term, the index looks bullish, we could see a resumption of the uptrend after a short dip towards 12300-12250 levels.
Nikkei (23906.61, -0.14%) is stable for now. The index could face some rejection from 24000-24200 levels in the near term. In the next 3-4 sessions, the index could inch up towards 24200.
Shanghai (2812.13, +1.11%) could see a short term dip while the other indices see a corrective dip globally. But it is likely to remain above 2750to eventually take the index towards 2900 in the medium term.
Nifty (11067.45, +0.91%) saw a decent bounce yesterday. While above 10800, chances of a pickup in rally towards 11200 is on the cards. A break above 11200 is required to negate another possible dip towards 10800.
COMMODITIES
Crude prices move higher after Trump said that the Us will put more sanctions on Iran following the oil sanctions in November. The potential supply shortfall after the Iran sanctions come into effect from 4th November has already been priced into the rising prices.
Brent (81.90) has moved up higher while WTI (72.18) is comparatively stable. Brent has enough room to rise on the upside toward 85 which could be achieved in the near term with some interim dips. WTI also has room on the upside and could test 74-76 levels soon. Overall Crude prices look bullish in the near to medium term with some interim corrective dips.
Gold (1205.90) continues to trade in the small sideways 1220-1190 region. A break on either side could be expected soon preferably on the upside above 1220.
Copper (2.8275) has moved up again today and could spend some time in the 2.75-2.85 region before moving up again. For now some sessions of ranged movement is possible.
FOREX
Unless the Fed appears too hawkish, Dollar Index should break below 93.80 and Euro above 1.180-1.185. An interim dip in USDINR could happen today.
Dollar Index (94.19): Some movement could be expected after the FOMC policy decision today. If it breaks below 93.80, then a near term fall to 93.20 and a fall towards 92 in Oct could be on the cards. Alternatively, a rise above 94.5 would be a bullish indicator, negating the above ‘bearish towards 92’ view.
Euro (1.1758): From the long term charts, bullishness beyond 1.185 is looking likely in the near term. This would be valid till Euro stays above immediate support near 1.1725-1.1700. Watch out for the FOMC today – the Fed’s tone could be the decider on whether the above view turns out to be correct or not.
Dollar Yen (112.95): Chances of medium term bullishness towards 115 are high. On the upside, the first target would be the July ’18 high of 113.18 – after that, there could be some resistance in the 113.18-113.75 zone – which if breached, could lead to 115 ultimately. Only a break below 111.5 would negate the above view.
Euro Yen (132.82) hasn’t yet been able to break above 133.15. However given our bullish preference on EURUSD and USDJPY, and also looking at the 3 day and weekly line charts of Euro Yen, our current preference would be for bullishness towards 134-135 in Oct.
Pound (1.3173) continues to stay above 1.305, thereby increasing chances of bullishness towards 1.34. A week close above the 21 and 89 weeks MAs near 1.313-1.318 would be required for further bullishness. Next 1-2 sessions could see some rise towards 1.32.
Aussie (0.7271) rose again after testing a low near 0.7237 yesterday – it has immediate resistance near 0.728 and higher resistance near 0.735-0.738, which could be tested by next week. A breach above 0.738, if it happens in the next 1-2 weeks, could be very bullish.
Dollar Rupee (72.695) Chances of near-term dip towards 72.40, maybe even 72.20 tomorrow.
INTEREST RATES
The Japanese 30 Year yield ( 0.91%), after its breach of resistance near 0.85% on long term chart, is continuing to rise. The Japanese 30-10 spread (0.78%) could have some resistance near 0.80% – for the resistance to hold, either the 30 year’s upside could be restricted till 0.93%, or else, the 10 year yield might break the 0.13% resistance.
The Fed meet later today is set to see a hike the federal funds rate by 25 bps – this hike has already been factored in by traders. It will be crucial to see what the Fed indicates regarding future rate hike decisions in Dec ’18 and in 2019. Also, any negative comment about trade wars affecting the US economy could also have a dovish effect – yields could again move down.
US 10 Year yield (3.09%) continues to stay below 3.10%. Important upside levels continue to be: 3.10%, 3.125% and 3.16%. Our current preference is for the yield to not breach 3.16% (800 weeks MA).
The 10 Year German-US spread (-2.55%) is currently at resistance on medium term chart. If the resistance holds, it might do so via a rise in the US 10 Year towards 3.16% while the German 10 Year rises to 0.6%.
The German 10 year yield (0.54%), as expected, is rising towards possible resistance near 0.6% – where it might pause for a bit. On the long term chart, there is room for a rise till 0.75% in the coming months.
Hence, a hold of resistance on the German-US spread chart suggests that the US 10 Year might go higher than 3.10% towards 3.16%. After that, there are chances of 3.16% holding – at least in the near term.
