STOCKS
Overall global stocks are in a temporary downward correction phase and could test lower levels in the near term before resuming the upward rally later on.
Dow (20606.93, -1.78%) has risen from levels just below 20600. Overall broad trade within 21170-20410 may continue for the coming sessions, keeping the index in a sideways consolidation in the near term.
Dax (12590.06, -0.33%) is in a short term correction phase and could come off towards 12400-12300 in the near term before bouncing back later. That could create some more room on the upside for the long term.
Shanghai (3090.26) is almost stable and could bounce back from levels near 3070-3050. We may expect a trade within 3050-3170 in the near term.
Nikkei (19523.27, -0.16%) is trading lower as expected and could fall further towards 19296-19200 in the near term before bouncing back towards 19600. But looking at the rise in Dollar Yen, the fall in Nikkei could be limited.
Nifty (9429.45, -1.01%) came off from levels near 9530 and could see a small dip today also towards 9300 before bouncing back from there again. There is scope of falling towards 9300-9265 in the coming sessions before resuming the upward rally.
COMMODITIES
We were doubtful about the sustainability of gold beyond 1260 levels and the same was correct. Gold (1249) could not hold its ground and fell towards its crucial support of 1249, which could be a level where the price action has to be checked to assess the chances of further bounce to 1260-80 regions. A failure to hold 1249 could keep the price range-bound in the 1220-1250 regions.
Similar kind of trading pattern has been seen in silver (16.63) also. The recent trading range could be 15.80-16.90 and we will remain bearish while it is trading below 17.50 levels.
Copper (2.53) has found support at 2.46 levels and trading within the narrow range of 2.45-2.55 levels. Only above 2.55, higher resistances of 2.65-72 can come into consideration. In the medium term 2.44 are going to be a strong support now but a close below that could open up 2.40-35 levels as well.
Brent(52.89) and WTI (49.71) are holding their respective supports of 52.70 and 49.22 which imply strength in in extreme short term time frame. We are not yet fully convinced with this upward rally due to overbought condition thus the bulls will be assured of strength of Brent and WTI only when a firm and sustainable closing above 53.50 and 51.20 are made by both Brent and WTI respectively.
FOREX
Along with the uncertainty over the US politics, the latest Brazilian corruption scandal with the possibility of an impeachment of the President has spooked the markets but better than expected jobless claims and regional manufacturing data in the US have helped Dollar to take a breather.
Dollar Index (97.83) has taken a pause after the sharp fall in the last few sessions. Immediate resistance comes near 98.15-25 and then 98.60 with the trend remaining firmly down in all the time frames. Hence a sudden decline may emerge despite the pause.
Euro (1.1107) is taking a similar pause but the high of 1.1174 may be crossed next week after this brief consolidation ends. Immediate support comes at 1.1070-50. The higher target of 1.1200-1.1300 remains unchanged.
Dollar Yen (111.16) has made a minor bottom at 110.21, just in the middle of our support zone of 110.50-00 as expected and now a consolidation can be expected in 110-112 for 1-3 sessions as discussed yesterday.
Pound (1.2954) has failed to capitalize so far on the breakout above the resistance of 1.3000 as it returned in the range of 1.2850-1.3000 but as long as the rising support of 1.2870 holds, the trend remains up with the possibility of 1.3200 still open.
Aussie (0.7423) has been rejected from the higher levels as expected as it tried to test the major resistance of 0.7500. Now the high of 0.7467 registered yesterday becomes the immediate resistance but it will take some heavy buying before a breakout can be expected. Repeat – only a successful break above 0.7470-0.7500 may negate the possibility of seeing the downside targets of 0.7300-0.7290 and bring bullish options on the table.
Contrary to expectations of the bounce being limited to 64.45-55, leading to a sideways consolidation in 64.00-70, Dollar Rupee (64.84) has surged above the resistance of 64.70. It may rise further to 65.00-10 very soon. The price action near 65.10-20 may decide the next course of action. Immediate support comes at 64.70.
INTEREST RATES
The US yields have risen slightly. There could be some near term upmove within an overall long term bearish outlook.
The US-Japan 10Yr (2.19%) is bouncing from support levels and while it moves up, Dollar-Yen could move up too, impacting a higher move on Dollar-Index too. The yield spread could rise towards 2.25-2.30% in the near term.
The UK-US 10Yr (-1.18%) came off from previous levels and is finding difficulty in sustaining at higher levels just now. In case there is an upmove left just now, it would be slow taking more time than expected.
The German-US 10Yr (-1.88%) came off slightly and could test -1.90% before again trying to move up.
