STOCKS
The US-China trade war has been heated up further after China announced to impose tariffs on US good which will come into effect from June 1. This has triggered further sell-off in the equity segment and continues to keep the outlook bearish. Further developments on the this trade negotiation front will need a close watch in the coming days.
Dow (25324.99, -617.38, -2.38%) has tumbled over 2% yesterday and keeps our bearish view intact. Some support is near current levels at 25200 which is vulnerable to break given the current scenario. Dow can fall to 25000 and 24800 in the coming sessions.
DAX (11876.65, -183.18, -1.52%) is closer to a key support level of 11800. While this support holds, a corrective bounce to 12000-12100 is possible. But a break below it can drag DAX to 11700-11600.
Though Nikkei (21025.71, -165.57, -0.78%) has bounced from its low of 20751.45 today, the outlook remains bearish for a fall to 20500
Shanghai (2902.29, -1.42, -0.05%) seems to be consolidating within its overall downtrend between 2850 and 2950. While below 2950, the downtrend is likely to remain intact for a test of 2800.
Sensex (37090.82, -372.17, -0.99%) and Nifty (11148.20, -130.70, -1.16%) can test their crucial intermediate supports at 36800 and 11000 respectively. It will have to be seen if these supports can hold and trigger a corrective rally to 11200-11300 on the Nifty and 37500 on Sensex before a fresh fall happens.
COMMODITIES
Gold has gained safe haven after China’s retaliation with a tariff on US goods. It can move further higher in the near term. Silver may remain range bound. Copper continues to trade weak and can fall further. Oil could not sustain the intermediate upmove seen yesterday and looks vulnerable for a fresh fall.
Contrary to our expectation for a fall, Gold (1299.5) has broken the 1266-1292 range above 1292. While above 1290 now, a further rise to 1320 is possible.
Silver (14.79) fell to 14.60 as expected but has bounced sharply from there. It is range bound between 14.6 and 15 and can rise to 15 – the upper end of this range in the near term.
Copper (2.735) remains weak. It has resistance at 2.75 which can cap the upside and keep the downtrend intact for a test of 2.70-2.68.
WTI (61.29) has come-off sharply from 63.50 and looks vulnerable to break its support at 60.8 and fall to 60 and 58 in the coming days.
Brent (69.4) spiked to 71.63 and has come-off from there. It can test the key support in the 68.5-68.2 region, a break below which can take it to 66.
FOREX
The announcement of increasing tariffs on $60 bln worth of American goods by China would be the trigger for the market which was already showing weakness admist the US-China trade tensions. This week and the next is likely to see volatile movement before a pause comes into the picture. However, the impact of the trade war could be relatively more on the equities and commodities than that we may see on the currencies.
USDCNY (6.8737) has moved up further and may continue to rally towards 6.90/91. A break above 6.91, if seen would take it towards higher resistance at 6.95 from where a fall could be seen. Very important levels to watch would be 6.90/91 and 6.95.
Dollar Index (97.36) initially dipped below 97 yesterday but bounced back soon after. Our earlier view of a rise towards 98-99 remains intact for the medium term while 97 holds.
Euro (1.1231) has immediate resistance near 1.1265 and higher near 1.13. We could see some range trade within 1.12-1.13 in the near term. A sharp rise towards 98 or higher if seen could possibly lead to a break below 1.12 on the Euro.
Euro-Yen (123.06) has bounced back from 122.5 and while the bounce sustains, it could move higher towards 123.30/50 again. Movement within 124-122 looks likely for the near term.
Dollar Yen (109.56) is trading above crucial support near 109 and while that holds, there could be some hope of rising back again towards 110+ which could indicate that the Dollar Index could remain above 97. We would keep a close watch on price action near crucial support of 109.
JPYINR(0.6429) is down from levels near 0.6465 seen yesterday. Note that 0.6475/80 is an important resistance on the near term charts and while the pair trades low, the extent of Rupee weakness could be curbed. EURINR (79.1475) is also slightly lower than 79.52. We would watch the above levels closely in the very near term.
Dollar Rupee (70.54) is likely to breach the crucial level of 70.60 that we have been mentioning in our previous editions. For the near term we keep open chances of testing 70.80/90 on the upside. While Yuan weakens, Rupee could also continue to remain weak.
Aussie (0.6953) has scope to fall towards 0.69 in the near term on a sustained break below 0.6950. Near term looks bearish.
INTEREST RATES
Overall global bond yields are trading low and look bearish for the near term. US yields slid after the China announced of tariffs yesterday. Near term is bearish for the yields for the rest of the sessions this week.
The US yields have fallen and look weak for the near term. The 30Yr (2.85%), 10Yr (2.42%) and 5Yr (2.20%) have fallen and could continue to move down towards 2.80% (30Yr), 2.40% (10YR) and 2.17% (5Yr) respectively. Our mentioned 2.20% has been tested on the 5Yr and while the 10Yr and 30Yr falls, 5YR could come down further towards 2.17/15% in the near term.
The German-JGB 10Yr (-0.02%) is in a channel downtrend and could fall towards -0.05% in the near term before bouncing back. This could indicate that euro-Yen could possibly be limited to 122 on the downside.
The US-JGB 10Yr (2.47%) is down by 2bps and has enough room to fall just now. It could test 2.45% in the near term, before bouncing back from there.
The Indian 10Yr GOI (7.48%) is holding above immediate support near 7.45/46% and while that holds, we could see some range trade within 7.45-7.55% for the next couple of sessions
