STOCKS
Most Equity indices, which saw a good short-covering rally for most of last week, could run into profit-taking/ resistance early this week. At the same time, they do not look bearish either.
The Dow (25270.83, -109.91) has already seen some profit-taking on Friday (contrary to our earlier expectation of a rise towards 25750-26000) as the strong US employment data (see Interest Rates below) led to an increase in US Yields. A small dip towards 25000, or even 24500, could be seen, but that while above 24000 things will not be bearish either.
The DAX (11519) may have immediate Resistance at 11553 (21-day MA) and 11690 (Friday’s high). Expect the DAX to range sideways between 11200-600 this week.
In Asia, the Shanghai (2669, -0.41%) already trades a little lower. Strong medium-term Resistance is seen at 2700-2750. Immediate Support also seen at 2600-2550. How the Shanghai shapes up in the coming days is going to be very interesting.
The Nikkei (21985, -1.16%) is down sharply compared to Friday. It has good Resistance at 22300-500 and could become bearish in case of a fall below 21200.
The Nifty (10553, +172.55) saw a good rally on Friday, but is reported to be trading lower near 10545 in Singapore. A dip towards 10400-200 is possible over this week and the next. The Sensex (35011.65, +1.68%) too may dip towards 34250 this week after the strong rally seen last week.
COMMODITIES
Brent (72.41)could dip even lower towards support near 71.5 on daily line chart before rising from there. The 55 weeks MA at 71.69 could provide crucial support in the weeks ahead.
WTI (62.68) broke below the 55 weeks MA near 65 last week and could now move even lower towards support near 60 on 3 day line chart. There is immediate resistance near 64 on daily candles which would need to be broken for us to start looking at the upside again.
Gold (1233.50) could move up higher towards resistance near 1250 over the next couple of weeks. Immediate support near 1225-1230 should keep the downside restricted.
Copper (2.787): If Copper breaches 2.80 again in the next 1-2 sessions, the chances of a rise towards 2.85 over the next couple of weeks increases.
FOREX
While below 1.1425, 1.31 and 0.725 respectively, Euro, Pound and Aussie could fall gradually over the next 1-2 weeks. Consequently, USDINR’s downside might just be restricted near 72.45-00 in the near term.
Euro (1.1388) came off from resistance near 1.1456 on Friday and could move lower towards 1.135 in today’s session while it stays below resistance near 1.1425 . A gradual fall to 1.13 looks likely over this week/by next week.
Dollar Index (96.48) – While above 96.30-40, Dollar Index could continue rising towards 96.70 in today’s session and ultimately target resistance near 97.20-25 over this week/by next week.
Dollar Yen (113.16) has immediate support at 113 and lower supports at 112.5 and 111.5. While above 113, the preference is for a rise towards 114.0-114.5 by next week. A break below 112.5 (if seen) would greatly reduce chances of another rise to 114 and beyond.
Euro-Yen (128.88) : As Dollar Yen rises towards 114.0-114.5 while Euro stays below 1.1425, the upside for Euro Yen in the next couple of weeks should be capped below 130-131. Resistance is seen near 131 on 3 day line chart – so, a rise towards 130-131 in this week could take place, after which it could come off from there.
Pound (1.2987) has crucial resistance on weekly candles at 1.31 and support near 1.28. While below 1.31, the preference would be for an ultimate break below 1.28 – which if happens, would be very bearish for the Pound. However, a break above 1.31 would make us start looking at the possibility of an interim near term rise towards 1.33-34 before the broader downtrend is then resumed.
Aussie (0.7185) came off from a high near 0.7258 on Friday and is now again trading below resistance near 0.72 on weekly candles. It would be crucial to see whether it dips back below 0.7180-70 in the next couple of sessions- if it does, we might again see a fall towards 0.710-0.705 over the next 1-2 weeks. Only a week close above the 21 weeks MA (0.7267) would the bias on Aussie shift to the upside.
Dollar Rupee (72.79) – With Euro and Aussie coming off from 1.145 and 0.726 on Friday, USDINR has had a gap up opening near 72.90. USDINR’s downside might just be restricted near 72.45-00 in the near term.
INTEREST RATES
US Employment data came in very strong on Friday. Of particular interest is that the Average Hourly Earnings has accelerated to 3.14% Y/y growth, suggesting increased tightness in the US labour market. This makes a rate hike in December a near-certainty and even raises chances of hike in the forthcoming FOMC meeting on 8th Nov. This has led to an increase in US yields.
The US 10Yr has moved up to 3.21% contrary to our expectation of a fall to 3.10%. It may now move up some more towards important Resistance in the 3.25-3.30% region.
The German 10Yr (0.43%) and the Japanese 10Yr (0.13%) also look like they can move up a bit towards 0.53% and 0.16% respectively.
However, the German-US 10Yr Spread (-2.78%) is at a crucial Support within an overall strong downtrend. We need to see if there is a bit of a bounce from here, or whether the Support is broken. If the Support is broken, it could limit the recent strength in the Euro (1.1440). In contrast, there is Resistance near current level on the US-Japan 10Yr Spread (3.08%). Maybe that could limit the recent strength in Dollar-Yen (112.80) as well. We have to see that.
