STOCKS
Global equities have bounced over the last few days on increasing hopes for the US Federal Reserve to cut rates. Will the Fed change its stance and hint for any rate cuts in its meeting this month on June 19? We will have to wait and watch. There is room for the recent bounce-back move in equities to extend in the near term. However, the major indices like the Dow, Nikkei and DAX have key resistances coming up which has to be broken to strengthen the current bounce-back move and negate the bearish view.
Contrary to our expectation for fall, Dow (25539.57, +207.39, +0.82%) has risen sharply above 25250 over the last couple of days. A strong break above 25735 (21-week moving average, a crucial level for now) will negate our bearish view and turn the outlook positive to test 26500-26700.
DAX (11980.81, +9.64, +0.08%) has resistance at 12100 which is holding well as of now. While below 12100, the broader bearish view will remain intact and DAX can fall back to 11800 and 11600 levels again.
Nikkei (20821.37, +45.27, +0.22%) is on a corrective rally. It has resistance in the 21000-21100 region which can cap the upside and trigger a fresh leg of downmove towards our preferred targets of 20000 and 19500
Shanghai (2854.71, -6.71, -0.23%) is inching down towards 2835 – the lower end of the 2835-2950 sideways range. Though the index has remained stable amid a strong sell-off in other global equity markets, a descending triangle pattern on the chart increases the possibility of the index breaking the range below 2835 and target 2800-2780 in the coming days. We will have to wait and watch.
Sensex (40083.54, -184.08, -0.46%) remains bullish, but might move up at a slow pace and target 40500 and 40700 in the short term. We would remain cautious for a sharp correction from the 40700-41000 region.
Nifty (12021.65, -66.90, -0.55%) is bullish to break above 12100 and rally to 12300-12350 in the short term while it remains above 11900.
COMMODITIES
Recovery in the US dollar has pulled down gold and silver sharply from their highs. We see the chances of the recent upmove in gold and silver losing steam and a dip in the near term is possible. Copper keeps our bearish view intact. Oil has declined further after the data release showed a surge in crude inventories. Oil looks vulnerable to break below the key Fibonacci retracement support and extend its downtrend in line with our expectation.
Gold (1329) has come-off sharply after testing the resistance near 1345. The pace of rally seems to be slowing down. While below 1345, a pull-back move to 1310 or even 1300 low looks likely. A break below 1320 can trigger this fall. 1360 is very crucial level which has to be broken in order to turn the outlook completely bullish.
Silver (14.79) can dip to 14.70 and 14.60 while it remains below 14.85. A strong break above 15 is needed for silver to confirm the trend reversal and turn the outlook bullish.
The resistance at 2.67 as held well and Copper (2.62) has come-off sharply as expected after testing it. This keeps our bearish outlook intact for copper to test 2.60. A break below 2.60 will pave way for 2.58 and even 2.55 on the downside.
Brent (60.66) is struggling to breach 62 and remains vulnerable to break 59.74 (the 61.8% Fibonacci retracement support). The bearish outlook is intact to test our long-term target level of 55.
WTI (51.74) looks weaker than Brent. It is hovering just above 51.72 (61.8% Fibonacci retracement support) which is likely to be broken to target initially 49-48 and then 45 eventually over the long term.
FOREX
ECB monetary policy statement due today could bring in volatility in the markets today. Euro (1.1226) tested 1.13068 yesterday much in line with our expectation of testing 1.1290-1.1325 mentioned on Tuesday. Although Euro has fallen a bit from the highs, the commentary by Draghi today would be important. While Euro holds below 1.1325, view is bearish.
Dollar Index (97.31) also tested 96.75 as expected before bouncing back from there. There is scope of rising towards 98.00-98.50 in the near term while above 97.
Euro-Yen (121.53) is almost stable and is likely to trade within 121-122.50 region in the near term.
Dollar-Yen (108.26) bounced back well from 107.80. Unless a rise above 109 is seen, we may continue to remain bearish on Dollar-Yen towards 107.50. Note that 107.50 and 107.80 are immediate supports and may hold, gradually pushing up dollar Yen towards 109+ levels.
RBA cut rates by 25bps yesterday to 1.25%. Aussie (0.6970) tested 0.70 but has now come off from there. While immediate resistance at 0.70 holds, Aussie could fall a bit towards 0.6950-0.69 in the next 3-4 sessions. An attempt to break above 0.70 (less likely this week) would make Aussie bullish towards 0.72.
Pound (1.2686) is down from 1.2743 and may fall towards 1.26 in the near term.
USDCNY (6.9123) has risen and is trading near the upper limit of the sideways range. A break above 6.92, if seen would make it bullish towards 6.95. For now watch price action near resistance at 6.92.
USDINR (69.2650) could fall a bit today as RBI is expected to cut rate by 25bps. Immediate support at 69 may continue to hold. Bearish view would remain intact while Dollar-Rupee trades below 69.60/65. If, a break above 69.65 is seen, the currency pair could shift its trade zone higher for the coming week.
INTEREST RATES
ECB and RBI policy rates are expected today. While ECB is likely to keep rates unchanged, RBI is expected to cut rate by 25bps.
The US 30Yr (2.64%) has risen sharply while the 10Yr (2.13%) has risen slightly and the 5Yr (1.86%) has dipped. The yields could trade hgher for a few sessions before again falling back. Longer term bearish view remains intact.
The US-Japan 10YR (2.24%) has risen along with the rise in Dollar-Yen and Nikkei but if the spread falls again towards 2.20%, the rise in Dollar Yen and Nikkei could be limited on the upside.
The sharp dip in the German-US 10Yr (-2.35%) has been in line with the dip in Euro. Looking at the spread, it is bearish towards -2.43% indicating a further fall in Euro in the near term.
The Indian 10Yr GOI (7.1907%) has risen from 7.09% but looks bearish towards 7% in the medium term.
