STOCKS
While there is no further noise on the US-China trade negotiation front, the focus is now turning on to the tariffs on automobile imports. The tariffs which were supposed to be decided by this Saturday is now expected to be delayed. This has given breather to the US and European equities yesterday. But the Asians seems to remain cautious and are trading in red in early trades today.
Dow (25648.02, +115.97, +0.45%) is holding above 25250 and can rise to 25950-26000 in the near term after which a fresh fall is possible. While the Dow remains below 26250 we retain our bearish view for it to test 25000 or even lower levels in the coming weeks.
The support at 11850 on the DAX (12099.57, +107.95, +0.90%) is continuing to hold well but has resistance near current levels and at 12250 which has to be surpassed to bring back the bullish sentiment. While these resistances hold, a pull-back to 11900 is possible again.
Nikkei (21058.00, -130.56, -0.62%) has a key support at 21000. While it holds a bounce to 21400-21500 is still possible. But a break below 21000 can drag it to 20750.
Shanghai (2944.50, +5.82, +0.20%) is trading near the upper end of its 2850-2950 sideways range. A break above 2950 can take it to 3000. But while 2950 holds, the sideways range will remain intact.
Sensex (37114.88, -203.65, -0.55%) and Nifty (11157.00, -65.05, -0.58%) are consolidating within their downtrend. Sensex is range-bound between 36950 and 37600 while the Nifty is stuck in between 11100 and 11300. The outlook remains bearish and the indices can break their respective range on the downside and fall to 36500-36000 (Sensex) and 11000-10800 (Nifty)
COMMODITIES
The bounce in equities limits the strength in gold. Copper can see a near-term corrective bounce before the overall downtrend resume. Oil holds higher in spite of the higher than expected inventories reported by the US. Oil is getting getting support from the supply disruption fears following the attacks in Saudi Arabia which can push the prices higher in the near term.
Gold (1296) can dip to 1290 as it is not gaining strength. Whether it holds above 1290 or not will decide on the next move. But, as mentioned yesterday, while 1290 holds a rise 1310-1320 is still possible.
Silver (14.77) is stuck around 14.80 and looks vulnerable to test 14.60 again.
Copper (2.74) is holding well above 2.72. A bounce to 2.77-2.78 looks likely after which the downtrend can resume targeting 2.70-2.68.
As expected, Brent (72.20) has moved higher and can test 74 in the near term. What happens after 74 will be crucial to watch. While 74 holds, a pull-back to 72-70 is possible again. But a break above 74 can open doors for 76 or even higher levels in which case our expectation for a fall to 66 will get negated.
WTI (62.45) on the other hand has to surpass its resistance at 63 to rise further to 64 and 65. While 63 holds, a pull-back to 61-60.5 can be seen.
FOREX
Currencies are stable overall. Dollar Index, Euro and Euro –Yen looks stable just now while Aussie and Yuan looks weak against the US Dollar. Immediate direction n Dollar-Rupee is unclear just now.
Dollar Index (97.54) and Euro (1.1207) are almost stable. Euro could test 1.1180 on the downside before again bouncing back from there towards 1.1250. Overall near term looks stable for Dollar index while above 97.00/25 and Euro may trade within the broad 1.1250-1.1150 region for the near term. However, a break below 1.1150 would take it down to lower support near 1.11.
Euro-Yen (122.67) has dipped slightly and could test support near 122 from where we could see a bounce back towards 123 or higher.
Dollar Yen (109.46) has broken below 109.50 and could be headed towards lower support near 109. Note that 109 is a crucial levels from where a bounce could lead to medium term bullishness else the pair could be vulnerable to a sharp fall going forwards. It would be important to see if Nikkei bounces from crucial support at 21000, as such a bounce could pull up Dollar-Yen too in the near term.
Aussie (0.6911) has come closer to testing our mentioned levels of 0.69. If Aussie sustains below 0.69, it could turn bearish for the coming week towards 0.68 or even lower.
USDCNY (6.8765) has not been able to see a corrective dip and while the bullish momentum remains intact we look for a test of 6.90/91 on the upside. Near term is bullish.
Dollar Rupee (70.3450) held well below 70.60 contrary to our expectation of a rise back towards 70.60 or higher mentioned yesterday. For now 70.20 is an immediate support which if breaks could pull down the pair towards 70.00-69.90. On the other hand if 70.20 holds, we could see trade between 70.20 and 70.60 in the coming sessions. The outlook is unclear on the direction that USDINR will take.
INTEREST RATES
The US yields are down in line with our expectation and look further bearish for the coming sessions. The 30Yr (2.81%), 10Yr (2.37%) and 5Yr (2.14%) have all fallen sharply and may trade lower this week before seeing a small corrective bounce by mid-next week. Long term view is still bearish.
The German-JGB 10Yr (-0.04%) is testing support near current levels and a bounce from here looks possible which could pull up Euro-Yen in the near term. A break in the spread below current levels could be very bearish towards -0.1% but that looks less likely just now.
The US-JGB 10Yr (2.42%) has fallen further as expected and could test lower levels of 2.40-2.35% in the medium term before bouncing back from there. This could be in line with supports at 109 on Dollar-Yen and 21000 on Nikkei.
The Indian 10Yr GOI (7.4766%) has bounced well from 7.40%. Immediate resistance is at 7.48% which if holds could push the yield back towards 7.40%. It would be crucial to see if the yield rises further from here towards 7.50/555 or falls back to test 7.40%. Direction is unclear.
