STOCKS
Weak US jobs data release on Friday is strengthening the case for the Fed to cut rates – a positive for the equities. Also, the US deciding to suspend the planned tariffs on Mexico could give additional breather to the equities. As such, an extension of last week’s rally is more likely to be seen this week in Dow. Nikkei has key resistance at current levels which has to be breached to extend the upmove. Sensex and Nifty could remain in a broad sideways range. DAX and Shanghai are closed today on account of a public holiday.
Dow (25983.94, +263.28, +1.02%) has turned bullish and has negated our bearish view for a fall to 24500-24000. It can breach the near-term resistance level of 26250 and rally to 26500-26600 in the coming days. Support is at 25750.
Nikkei (21119.72, +235.01, +1.13%) is trading in the 21100-21200 resistance region which may cap the upside and pull it lower 20750-20500 again thereby keeping the downtrend intact. A break above 21200 will prove our bearish view wrong and can test 21500-21750.
Nifty (11870.65, +26.90, +0.23%) can remain range bound between 11800 and 12100. A break above 11900 can take it to the upper end of this range (12100) in the near term. The bias is bullish to see a break and rise above 12100 to 12350 after which a sharp correction is possible.
Sensex (39615.90, +86.18, +0.22%) might be range bound between 39300 and 40300 before targeting 40500 and 40700 in the short term. However, We would remain cautious to see a sharp correction from the 40700-41000 region.
COMMODITIES
Gold and silver has come-off after Trump’s decision to withdraw the plans of levying tariff on Mexico. Gold and Silver may come-down further this week. Copper may consolidate before resuming its downtrend. Oil is coming closer to a key resistance which halt the current bounce-back and trigger a fall again.
Gold (1330) is struggling to breach 1345 and has come-off sharply. While below 1340, a fall to 1320 and 1310 is possible. As being reiterated here 1345 and 1360 are crucial resistance that can cap the upside. A strong rise past 1360 (less preferred) is needed for gold to gain bullish momentum.
Silver (14.80) has failed to breach the psychological level of 15 which keeps the broader downtrend intact. It looks vulnerable to test 14.6 in the near term.
Copper (2.63) remains bearish. However, as mentioned earlier, it may consolidate between 2.61 and 2.68 for some time before resuming its downtrend towards 2.58 and 2.55.
Brent (63.48) has risen as expected to test the resistance at 64. A turn-around is likely from the 64-65 resistance region which can target 62 and 61 again. We keep our broader bearish view intact for a test of 55.
WTI (54.24) can reverse lower from the 55-56 resistance region and test 52-51 again and then eventually fall to 45 in line with our broader bearish view.
FOREX
Euro and Aussie are closed today. It would be important to see if Dollar Index manages to bounce from important support below current level. Euro-Yen is bullish in the longer run. Yuan has weakened to 6.9330 posing concerns of Rupee weakness in the near term.
The US backed off from a trade conflict with Mexico on Friday after signing a deal. This is positive news for the markets. Dollar Index (96.76) fell sharply after the lower than expected NFP data on Friday that triggered a sell off. Immediate support is seen near 96.50 on the 3-day candles, which if holds could manage to push the Dollar Index higher towards 97.10 and higher in the near term.
Euro (1.1314) is trading higher just now with bullish momentum looking strong just now. Although the currency looks bullish towards 1.14, considering the support on Dollar Index at 96.50, we could either see a fall in Euro from current levels or a rise in Euro towards 1.14 could pull down Dollar Index towards 95.70 in the near term. We would like to wait and watch for today’s movement.
Euro-Yen (122.74) has immediate resistance near 123.0-123.50 which if holds could keep the pair sideways in the 123.50-120.00 region for some more sessions. Overall on the weekly chart, Euro Yen looks bullish towards 124-126 in the longer run.
Dollar-Yen (108.49) could be expected to trade within 107-109 unless a sharp break above 109 is seen in the near term. A bounce in dollar Index from 96.50 could possibly pull up Dollar Yen too in the near to medium term.
Aussie (0.6979) is closed today.
Pound (1.2725) could face some rejection near 1.28-1.2850 which could see a short corrective dip. But overall, medium term view is bullish.
USDCNY (6.9330) has risen contrary to our expectation of a fall from 6.92. While the pair trades higher, it could test 6.95/96 on the upside soon. View is bullish for the near term.
USDINR (69.4750) has immediate resistance near 69.55/60 which is likely to hold just now. But the rise in Chinese Yuan above 6.92 would be a concern and if it rises further towards 6.95/96, Dollar Rupee could be pulled up towards 69.70/80 in the near term. We would be cautious for a break above 69.60.
INTEREST RATES
The US Libor curve has inverted with the 1mnth trading at 2.412%, 3mnth at 2.45%, 6mnth at 2.37% and 1Yr at 2.346%.
The US 10r (2.114%) is trading lower and could possibly bounce from 2.10% or lower at 2% in the medium term. The 30yr (2.595%) is attempting to rise and could test 2.60% in the next 1-2 sessions. A short corrective rise is possible in the US yields within the longer term down trend.
The Japan yields have risen from immediate trend supports and look bullish for the near term, indicating a rise in Dollar Yen in the near term.
