STOCKS
While acknowledging chances of near-term dip over the last couple of days, we have been reluctant to be long-term bearish yet. As it turns out, most Indices have respected the Supports we mentioned yesterday. We see hints of bullishness in India, but China, Germany and USA may have to do some more hard work to put the Bears to rest. Else, one more decline to either re-test old lows or establish new lows (in Shanghai) may have to be kept in mind
The Nikkei (21864, +0.25%) trades higher today after it bounced from an intra-day low of 21484.65 yesterday, just a tad below our Support at 21500. Now that the Support has held, there is increased chance of a rise past 21900-22000, which could be bullish.
There is a lot of market concern about slow-down in China. Although the Shanghai (2642, -0.49%) did well to move up to 2666 yesterday, it trades a little lower again today. It needs to break above 2700 in order to acquire proper bullishness else it might be vulnerable to a fresh decline towards 2500 (if not lower) in the medium/long term. Staying above 2600 in the near-term will help the Bullish-possibility.
As hoped, the Nifty (10582.50, +100.30, +0.96%) found Buyers above 10400 yesterday. Should it now manage to rise past 10650 over the course of this week (chances are decently good while above 10400) it may well move up to 10900-11000 over the next couple of weeks. Beware important Resistance at that level, though.
While the DAX (11472, +1.30%) did well yesterday to remain well above the mentioned Support at 11300 and even move up 1.30%, it needs to be rise past 11500-600 to beat back the Bears. Else, while below 11500, it may remain vulnerable to a near-term decline towards 11051.
The Dow (25286, -0.40%) dipped to a low of 25194 yesterday. We still need to see whether the Support at 25250-000 holds or not. we prefer a bounce, but let us see.
COMMODITIES
News that Trump urged OPEC and Saudi Arabia to maintain their current policy of gradually increasing output and the OPEC’s monthly report stating a lower demand growth forecast for 2019 pulled down crude prices further yesterday.
While the crude prices are clearly in the bear zone, Brent (65.10) is almost at the 65 level, mentioned yesterday. Further fall from here looks less likely just now. Below 65, downside could be capped at 62. Preference is for a bounce from support levels near 65.0-64.5 back towards 70 in the medium term.
WTI (55.33) has broken below support at 60. Only a bounce in Brent could pull up WTI back to higher levels; else a fall towards 52-50 could be possible.
Gold (1204.30) is almost stable and trading near levels seen yesterday. Immediate support near 1200 is likely to hold and produce a bounce back towards 1225 or higher in the medium term. While above 1200, view is bullish.
Copper (2.6810) has moved up a bit. While above support at 2.65, the price is likely to move up towards 2.75-80 as mentioned yesterday. A break below 2.65, if seen could take the price down to lower support at 2.60. In the next few sessions copper may trade sideways above 2.65.
FOREX
Decline in Dollar Index has lead to some recovery in most of the currencies. Also the Emerging currencies could see some strength against the US Dollar today, boosted by the sharp decline in the crude prices.
Dollar Index (97.07) has come off from daily resistance as expected. There is scope for a fall towards 96.5-96.0 in the near term. View is bearish for the next few sessions.
Euro (1.1298) moved up from levels near 1.12 itself without attempting to test 1.11. While correction in Dollar Index is seen in the near term, we could possibly see some recovery in Euro too with a slight bounce towards 1.1350. In that case, a possible fall towards 1.11 could be delayed.
USD/JPY (113.88) is stuck in the 113.5-114.3 region and could see some ranged trade within this zone for a couple of sessions more. It has recovered by rising back to levels above 113.75, negating a fall towards 113 just now.
Aussie (0.7218) has also bounced from support near 0.7175-0.7150 mentioned yesterday and could move up towards 0.73 again in the near term. But note the 21-Week MA on the weekly line chart which needs to break on the upside to initiate further upmove in the medium term.
Pound (1.3004) is trading in the middle of the broad 1.2700-1.3150 range; both being important support and resistances for the near term. A break above 1.3050 could take it higher towards 1.3150; else a fall from 1.3050 could push back the pair towards 1.28-1.27 in the coming week.
EUR/JPY (128.70) is also stuck within the 129.50-127.50 region both being immediate resistance and support level. The current bounce could take it higher towards 129.50 which is a decent resistance and could push back the prices towards support at 127.5.
Fall in Dollar Index and a sharp decline in Brent could lead to a gap down opening for USDINR (72.6750) pushing the pair down towards 72.30/20. A break below 72.20, if seen could open up further downside chances of testing 71.80. Watch price action if a break below 72.20 is seen.
INTEREST RATES
US Yields were stable/ up by 1bp across the Curve yesterday. Although we talked about a dip to 3.10% on the 10Yr (currently 3.15%) yesterday, we also see good Supports at 2.86% on the 2Yr (currently 2.90%), at 3.10-05% on the 10Yr and at 3.30% on the 30Yr (currently 3.36%). These are likely to hold on first testing and can produce a bounce that lasts up to the FOMC meeting in December, possibly along with a bounce in Brent towards 70 in the near term.
In India, the 10Yr GOI (7.76%) could be on the verge of breaking below 7.75% or might see a near-term rise towards 7.90% before it comes down again. The longer term picture may call for 7.60% while below 7.90%.
