STOCKS
Lack of fresh news about any further developments on the US-China trade war front keeps the sentiment uncertain. As such the global equities continue to remain subdued and also vulnerable for a fresh fall. The outcome of the election polls will drive the Indian equities today. Early lead numbers favors a positive open for the indices. But, we have to see how the Sensex and Nifty settles down for the week after the results.
Dow (25,776.61, -100.72, -0.39%) seems to lack momentum. This indicates that the downtrend is intact and a fall to 25000 is likely. Key resistances are at 26000 and 26250.
DAX (12,168.74 +25.27 (+0.21%) looks unclear. It has equal chances for either a rise to 12300 or fall to 12000 from current levels. However, while it trades above 12000 the broader picture is bullish to test 12400. A break below 12000 will prove our view wrong.
Nikkei (21105.48, -177.89, -0.84%) has failed to sustain above 21250. The outlook is bearish to test 21000 and 20850
Contrary to our expectation for a rise to 2950, Shanghai (2859.50, -32.10, -1.11%) has come down sharply. It looks vulnerable to break 2840 and fall to 2800.
Sensex (39110.21, +140.41, +0.36%) and Nifty (11737.90, +28.80, +0.25%) could remain volatile. We expect a broad range of 11600-11900 (Nifty) and 38500-39500 (Sensex). We would like to remain on the sidelines to see how the market closes after the poll results.
COMMODITIES
Gold and Silver remains stable within their overall downtrend. Sell-off in Copper has intensified leaving room for more fall. Oil is bearish and has declined sharply after the US reported a sharp rise in the inventories by 4.7 billion barrels.
Gold (1273) remains stable above 1270. But, while below 1280 the outlook is bearish to test 1265.
Silver (14.41) continues to consolidate around 14.40 within its overall downtrend. As we have been mentioning over the last few days, a corrective bounce to 14.6 is possible before we see a fresh fall to 14.
Copper (2.66) has tumbled much beyond our expected level of 2.68. The outlook is bearish to target 2.60 now. However, an intermediate bounce 2.70 either from current levels or from 2.65-2.64 region cannot be ruled out before we see 2.60 on the downside.
Brent (70.58) has declined below 71.60. The key resistance at 74 has held well and keeps the broader bearish view intact. A break below 70 will accelerate the fall 68 and 66.
WTI (61.06) is bearish and can test 60 and 58.
FOREX
Dollar trades strong while Yuan, Pound and Euro could fall. Aussie and Dollar Yen are to test important support levels from where a short bounce could be expected. Rupee could strengthen today aided by fall in Brent crude and if the election results turn in favor of the ruling party in line with the current market sentiment.
Dollar Index (98.12) is trading higher as expected and could move up to test immediate resistance at 98.50. Note that 98.50 and higher at 99 are crucial resistance levels that could eventually push the index back towards 97.
Euro (1.1150) is also slowly inching towards 1.11. While our longer term view is bearish for a fall towards 1.10, it would be important to see if there is an interim bounce from support at 1.11.
Euro-Yen (122.94) has dipped from levels above 123 contrary to our expectation of a rise towards 124 or higher. The currency pair could trade above 122 for some time before eventually rising higher. Our medium term view remains bullish towards 124+ levels while 122 holds.
Dollar Yen (110.27) has been falling since the last 2-sessions after testing 110.68 on the upside. The fall could be limited to 110.0 on the downside before again moving up towards 110.50-111.00. While above 110.50, there could be scope of rising towards 112 in the longer run.
Aussie (0.6875) is trading just above immediate support levels as seen on the 3-day candles. Downside could be limited to 0.6850 which if breaks could make Aussie vulnerable to a further fall towards 0.67. For now, we may look for 0.6850 to hold and produce a decent bounce back towards 0.6950 and higher. It would be important to see if Copper manages to bounce from immediate support at 2.66 that could help Aussie also to rise a bit from current levels. (refer commodities section for Copper)
Pound (1.2647) is headed to fall towards support at 1.25 in the near term. Trend remains bearish.
USDCNY (6.9131) has risen slightly and while above 6.91, there is scope of further rise towards 6.95 n the near term. View is bullish while above 6.90/91. As mentioned yesterday we could see a range trade between 6.91-6.95 for 3-4 sessions.
USDINR (69.67) could possibly open with a gap down today aided by the sharp fall in Brent crude prices (Refer commodities section for Brent view). The Election results are due today and could keep the markets on the move through the session. Our expected resistance near 69.80 is holding well for now and could keep the pair within 69.80-69.40/30 during the day. A break below 69.40/30 would increase the pace of fall towards 69.25/00, our preferred view for the medium term (would gain more weightage if the ruling party leads).
INTEREST RATES
The US yields are also down sharply post the FED minutes of the 1-2nd May released yesterday. The 30Yr (2.80%), 10Yr (2.38%), 5Yr (2.18%) and 2Yr (2.22%) have fallen sharply from yesterday’s levels of 2.85%, 2.40%, 2.23% and 2.26% respectively instead of testing higher levels mentioned in the yesterday’s edition. While the long term downtrend remains intact, we could see some interim corrective upmoves in the next 3-4 sessions.
The Indian 10Yr GOI (7.3945%) fell below 7.40% contrary to our expectation of a rise while above 7.40%. Note that below 7.40%, there is important support at 7.30% which could produce a bounce and push the yield back towards 7.40%. Below 7.40%, we may look for a fall towards support at 7.30%.
The UK yields have fallen sharply as Pound moved below 1.26 reinforcing the near term downtrend. The 5Yr (0.74%), 10Yr (1.01%) and 20Yr (1.48%) are sharply down from 0.80%, 1.090% and 1.54% respectively contrary to our expectation of a rise mentioned yesterday. Near term looks bearish with some more room on the downside for the next 2-3 sessions before the yields start bouncing back.
The German 10Yr (-0.085%) has fallen slightly. Trade within 0% to -0.2% looks likely for the next 3-4 sessions at least.
