STOCKS
Not much cheer in the Equity segment as the Fed just met the market expectation by keeping the rates unchanged and hinting rate cuts in the future which has been factored in the market already. However, the broader picture remains positive for the equities. Dow and DAX might see intermediate dips before resuming their uptrend. Nikkei is bullish for further rise. Shanghai retains its sideways range but may break the range on the upside if it sustains above 2900. Sensex and Nifty continue to remain weak and keeps the bearish view intact for further fall.
Dow (26504, +38.46, +0.15%) remains higher but the pace of rise seems to be slowing down. The broader picture is bullish to test 27200-27500 over the medium term. However, an intermediate dip to 26250 is possible from 26600 before we see a fresh rally to the above mentioned targets.
DAX (12308.53, -23.22, -0.19%) was stuck in a narrow range yesterday. The resistance at 12350 is holding well as of now. However, the support at 12200 can limit the downside and will keep the bullish view intact for a rise to 12430-12450.
Nikkei (21432.09, +98.22, +0.46%) has risen further higher. Out bullish view remains intact for a rise to 21750 while the index remains above its support level of 21250.
Shanghai (2929.18, +11.37, +0.39%) tested 2950 -the upper end of its 2835-2950 sideways range as expected and has come-off slightly from there. As mentioned yesterday, the bias is positive to see a break above 2950 and a rise to 3000 in the coming days.
The resistance at 39500 on the Sensex (39112.74, +66.40, +0.17) and 11800 on the Nifty (11691.45, -0.05, 0.00%) are holding well. The upside is likely to be capped at 39750 (Sensex) and 11850 (Nifty). The bias remains bearish for the Sensex to test 38500-38000 and Nifty to fall to 11600 in the coming days.
COMMODITIES
The US Federal Reserve left the rates unchanged and has hinted for rate cuts in the coming months as expected by the market. Gold and Silver have surged above their key resistances as against our expectation for a fall after the Fed meeting. They are now looking bullish for further rise. Copper has come-off slightly but has support which is likely to hold and push it higher again. Oil remains stable and can consolidate sideways for some time before resuming its downtrend.
Contrary to our expectation, Gold (1378) and Silver (15.22) have surged breaking above their key resistances at 1360 and 15.10 respectively thereby proving our bearish view wrong. The outlook has turned bullish. While above 1360 gold can test 1400. Silver can target 15.50 while it trades above 15.
Copper (2.67) has support at 2.66 (21-day moving average) which can limit the downside and trigger a bounce again to 2.70-2.71. As mentioned yesterday, a strong rise past 2.72 is needed to pave way for a fresh rally to 2.75-2.77.
Brent (62.54) remains stable within its broad 59.5-64 sideways range. As mentioned yesterday, a rise within this range to 64 is possible on a break above 62.8. However, our broader bearish view is intact and we expect Brent to eventually break below 59.5 and fall to 57-55.
WTI (54.69) has risen and is heading as expected towards 55 – the upper end of the 50.5-55 sideways range. We expect this sideways range to remain intact and a pull-back to 53-52 can be seen in the coming days.
FOREX
Dollar Index (96.90) is trading lower after the FED statement yesterday. While the FOMC is prepared for a rate cut and has dropped the word “patient” from the policy statement, at least one rate cut within this year is favoured. Note that the central bank predicts one or two rate cuts in its set of economic predictions, but not until 2020. But the markets still seem to be betting that the Fed rate cuts would be seen as soon as July. We would watch if immediate support at 96.75 holds and manages to push back the index towards 97.50 in the near term.
Euro (1.1265) is up on Dollar weakness but while below crucial resistances near 1.1350-1.1300, the currency still has room for bearishness in the medium term. If support at 96.75 holds on Dollar Index, Euro may start coming off after a short bounce for a couple of sessions.
Dollar-Yen (107.60) has fallen below our expected level of 108. Now near term important supports are visible at 107.50 and 107.00 which is likely to hold and produce a near term bounce towards 108.50-109.00.
Euro-Yen (121.22) has crucial support at 121 and lower near 120. These could hold on for the medium term eventually pushing back Euro-Yen towards 122.50 in the near term and higher towards 124 in the longer run.
Aussie (0.6892) has scope to rise towards immediate resistance at 0.695 from a where a fall back towards 0.685 is possible. Overall trade within 0.695 and 0.985 is possible in the near term.
Pound (1.2685) seems to be breaking above immediate resistance near 1.2665 and while it manages to move higher, we could see a rally towards 1.28 in the near term.
USDINR (69.69) could trade within broad 69.50-69.90 today. Break above 69.90 could take it higher towards 70.00-70.10.
INTEREST RATES
FED kept interest rates unchanged but expressed concerns over the slowing global growth. Although rate cut is on the cards, the FED would wait to see more economic developments in the near term. Some officials expect a rate cut by the end of the year.
The US yields have fallen sharply after the FED statement yesterday. the 2YR (1.72%), 5Yr (1.73%), 10Yr (1.98%) and the 30Yr (2.49%) are down from 1.89%, 1.85%, 2.08% and 2.56% seen a day before. The 5Yr may have support coming up in the 1.6-1.7% region while the 10Yr and 30YR could see some more fall towards 1.90% and 2.30% before bouncing back from there.
The US-Japan 10Yr (2.13%) is testing immediate channel support near current levels and could see a bounce in the near term indicating a possible bounce in dollar Yen too. We would keep a close watch on this in the next few sessions.
The 10Yr GOI (6.9745%) could pause near 6.95% just now and see a short corrective bounce towards 7% or higher in the near term. A break below 6.95% if seen would make it vulnerable for a fall towards support near 6.80%.
