STOCKS
Bloodbath in the equities market on early trades today following Trump’s tweet to increase the tariff on Chinese imports from 10% to 25% and news about China planning to cancel the trade talks with the US. The Indian equities which have been holding on to their range so far is in a threat to break their range on the downside and fall.
Dow (26504.95, +197.16, +0.75%) can fall back breaking below 26250 and test 26000 following the sell-off in global equities. The Dow futures are down over 400 points in early trades today.
DAX (12412.75, +67.33, +0.55%) can seem some profit booking after a strong rally for two months. A test of 12300-12200 is possible in the near term.
Shanghai (2920.15, -158.19, -5.14%) has tumbled over 5%. The next support is at 2872 (21MA on the weekly chart) which can be tested in the coming sessions. A bounce from there can see a relief rally to 2950.
Sensex (38963.26, -18.17, -0.05%) and Nifty (11712.25, -12.50, -0.11%) may break its respective ranges, 38500-39500 and 11550-11800 on the downside. As mentioned earlier, such a fall in the indices will form a head and shoulder reversal pattern. In that case, Sensex can fall to 38000-37600 and Nifty can test 11300 in the coming days.
Japanese markets are closed today on account of a public holiday.
COMMODITIES
The pull-back in the dollar on Friday has helped gold, silver and copper to bounce back. Further uptick is possible in these commodities before the overall downtrend resumes. Oil has declined further but has key support near current levels. A near-term bounce is possible in oil if this support holds.
As expected Gold (1284.5) has bounced and can test the upper end of the 1266-1292 sideways range. The broder downtrend is intact. But we should allow for a correcitve rally to 1300 before we see a fresh fall 1260-1255.
Silver (14.90) has held well. While the bearish outlook is intact, a corrective rally to 2.85 is possible before we see a fresh fall to 2.72-2.70.
WTI (60.66) has declined below 61 and keeps the bearish outlook is intact. {Support is at 59.95 (21-MA on the day chart).#wti-lines-3-Day”>The support at 2.75 in Copper (2.78) While it holds, a corrective bounce to 60 can be seen.
Brent (68.66) has support near current levels at 68.41, which if holds can trigger a bounce to 69-70. But the broader picture is bearish to test 66-65 in the short term.
FOREX
Dollar Index and Euro looks ranged while Yen could strengthen in the near term. Yuan and Aussie looks weak against the US Dollar.
Dollar index (97.56) has immediate daily support at 97.25. Although the index saw a sharp fall from 98.10, it would be important to see if it breaks below immediate support at 97.25. Overall 97.50-97.00 is an important near term support region which if holds could keep the index ranged above 97 for the medium term if not lead to a sharp bounce above 98.50. View is ranged while the index trades above 97.
Euro (1.1188) is also stuck in the 1.11-1.12 range and could continue to remain so in the near term.
Euro-Yen (123.67) has fallen below the lower limit of our mentioned support near 123.80-124.00. Current levels provide support on the daily candles which if fails to hold would make the pair vulnerable to a fall towards 122.50 or lower in the medium term turning the sentiment to bearish. For now watch important support at 123.60.
Dollar Yen (110.56) has broken below immediate support at 111 indicating a clear downward direction for the near term. The Mar’19 low of 109.70 is the next support on the downside which is likely to be tested while the pair trades below 111. Looking at strong correlation of Gold with Yen, while Gold moves up to test immediate resistance at 1290, Yen could strengthen towards 109.70 too in the near term. 3-day candles show scope of falling towards 109. This break in Dollar-Yen below 111 has now turned the sentiment bearish for the coming sessions.
Aussie (0.6974) has also broken below crucial 0.70, indicating a fall towards 0.6950-0.6900 in the near term. Note that 0.70 has been holding since Oct’18 (leaving out the flash crash seen in Jan’19) and a sustained break below 0.70 has now turned Aussie bearish for the medium term.
Trump, yesterday announced an increase in tariff on $200 bln Chinese goods to 25%. This has come in ahead of the meet scheduled with Chinese delegation on Wednesday to end the trade war and lead to a deal to end the conflict.
His tweet stated “For 10 months, China has been paying tariffs to the USA of 25% on 50 billion dollars of High Tech, and 10% on 200 billion dollars of other goods. These payments are partially responsible for our great economic results. The 10% will go up to 25% on Friday. 325 Billions of Dollars of additional goods sent to us by China remain untaxed, but will be shortly at a rate of 25%”
USDCNY (6.7877) shot up shortly after the news of tariff rise came in. The pair shot up from 6.7345 to 7.7877 currently. A test of 7.80/81 looks possible on the upside before pausing.
Although Dollar-Rupee (69.2250) has scope of testing 69 on the downside, we could see a gap up opening today taking the pair towards 69.50/60. It would be important to see if Rupee manages to weaken beyond 69.60 today.
INTEREST RATES
The US Yields also have little room to rise on the upside before facing resistance. The 30Yr (2.92%) could face rejection from 2.95% while the 10Yr (2.52%) could face rejection from 2.55%. the 5Yr (2.34%) could rise to 2.35/36% before falling from there.
The UK Gilts have risen slightly but face immediate resistance just above current levels. The 5Yr (0.90%), 10YR (1.22%) and 20Yr (1.66%) have risen from previous levels of 0.87%, 1.19% and 1.63% respectively but could soon see a fall in the near term. View is bearish for the coming sessions.
The US-JGB 10Yr (2.57%) has been stuck at resistance level since last week and indicates a fall towards 2.50-2.45% for the near term. The spread if falls could pull down Dollar Yen also to lower levels (Refer Forex section above)
