STOCKS
Asian markets are in green taking cues from the rally in the US markets overnight. The US markets have closed at record highs yesterday. Positive sentiment is driving the global equities. While the US market has been driven by the hopes of a rate cut from the Fed this month, European markets are getting a push after the nomination of the IMF Chief Christine Lagarde as the new ECB President. Will the positive sentiment in the global equities help India’s Sensex and Nifty which have been struggling for a strong rally, gain momentum today? We will have to wait and see.
As expected, Dow (26966.00, +179.32 +0.67%) has risen to test 27000 and keeps our bullish view intact. A further break above 27000 will pave way for the next targets of 27200 and 27500. The US markets are closed today on account of a public holiday.
DAX (12616.24, +89.52, +0.71%) has held well above 12450 and has risen sharply. The outlook remains bullish to test 12800 and 13000 in the coming weeks.
Nikkei (21706.72, +68.56, +0.32%) has bounced back and can revisit its resistance at 21750. A decisive rise past 21750 is needed to gain fresh momentum and target 22250 on the upside. Inability to breach 21750 can drag it to 21500 and 21350 in the coming days.
Shanghai (3017.86, +2.60, +0.09%) is holding above 3000. As mentioned yesterday, a sideways move between 3000 and 3050 is possible in the near-term. Thereafter the broader uptrend can resume targeting 3080 and 3100.
Sensex (39839.25, +22.77, +0.06%) and Nifty (11916.75, +6.45, +0.05%) managed to sustain above their support levels of 39750 and 11900 respectively. The view remains bullish for Sensex and the Nifty to test 40500 and 12150 respectively on the upside. But at the moment it looks like both the indices need some trigger to accelerate the pace of the upmove. We have to wait and see whether the Union Budget tomorrow can provide that trigger or will the indices gain momentum taking cues from the global markets today itself.
COMMODITIES
The EIA reported a draw of only 1.1mln barrels for the week ended 28th June after the huge draw of 12.8mln barrels the previous week. This could help stabilize or even lower Crude prices over the next few sessions. Gold and Silver could trade sideways for some sessions within the longer term bullish view. Copper is expected to rise while above 2.65.
Brent (63.37) and Nymex WTI (56.95) are trading slightly higher today. Upside is likely to be capped at 67 and 60 for the near term while a fall towards 60 and 54 respectively could be on the cards.
Gold (1422.70) tested 1440 on the upside before falling to current levels. Some consolidation in the 1400-1450 region is possible in the near term. Overall medium term is bullish for Gold towards 1500.
Silver (15.35) is almost stable but while below resistance near 15.60 we could see a test of 15 on the downside. Overall sideways trade within 15.0-15.60 looks likely.
Copper (2.6820) has risen slightly and while above immediate support near 2.65, the metal could re-attempt to move towards 2.70 or higher in the near term.
FOREX
Dollar Index (96.74) is stuck below 97 for the last 2-sessions. Note that 97.25 is an important resistance and while that holds, the index could fall towards 96.25 in the near term. A fall from levels below 97 itself is more preferred for now. Near term view is bearish for Dollar Index.
Euro (1.1283) is likely to hold above support near 1.1250-1.1275 and move back towards 1.13+ levels in the near term.
Dollar-Yen (107.75) could re-test 107 on the downside or even lower levels of 106 before bouncing back sharply towards 108.50-109.00 and higher in the longer run. For now the near term view is bearish for Dollar-Yen.
Euro-Yen (121.59) is likely to trade stable for some time before rising back towards 123. Note that 121 is an important support which is likely to hold in the coming week.
Aussie (0.7034) has moved up from levels below 0.70. While the rise sustains it could test resistance near 0.71 before coming off from there again in the medium term.
Pound (1.2581) is trading above support near 1.25 and while that holds, the currency could move higher towards 1.27 again in the near term. Below 1.25, there is scope for falling towards 1.24 on the longer term charts. Watch price action near 1.255-1.250.
USDCNY (6.8715) could trade sideways within 6.83-6.90 region. No major movement is expected over the coming week.
USDINR (68.92) is likely to range within 68.80-69.00 just now with a possibility of falling towards 68.60/50 eventually. Markets wait for the Union Budget on Friday to see if that brings in further volatility. Overall today the currency is likely to remain stable.
INTEREST RATES
Yields have dipped further as the increased hopes for a rate cut from the Fed is weighing on it. A private job data release yesterday missed to meet the market expectation and is strengthening the case for a rate cut. If Friday’s job data from the government also comes out weak then the yields can come under more pressure. The US markets are closed today on account of a public holiday.
The US Treasury yields continues to trade lower and keeps the bearish view intact. The yields were down across tenors. The 2Yr (1.76%) and 5Yr (1.73%) were down 1bps and 4bps respectively while the 10Yr (1.95%) and 30Yr (2.47%) were down sharply by 6bps and 7bps respectively. As mentioned yesterday, the 10Yr has support at 1.93% from where a bounce to 2% is possible. But the broader view is negative for it to fall eventually to 1.85% or even lower. The 30Yr can test 2.45%-2.43% on the downside.
The German yields have dipped further. The 2Yr (-0.77%), 10Yr (-0.39%) and 30Yr (0.20%) have dipped while the 5Yr (-0.65%) has bounced slightly. The outlook remains negative. The 5Yr can test -0.73% and the 10Yr can dip to -0.42% in the coming days.
The 10Yr GOI (6.9710%) dipped below 6.95% yesterday as expected but failed to sustain lower. The near-term outlook continues to remain mixed and the 10Yr GOI can remain sideways between 6.90% and 7.10% in the near-term. However, the broader view remains bearish for the 10Yr GOI to break below 6.90% and fall to 6.80%-6.75% in the coming weeks.
