STOCKS
Equities are continuing to trade subdued as the renewed threats on the US-China trade war front are weighing on the market. The Asians are trading in red following the negative close in the US and European markets overnight. The near-term view has turned weak and the global indices can dip further, may be for the rest of the week.
Dow (27219.85, -115.78, -0.42%) has turned around as expected towards 27200. However, the pull-back has happened little earlier from just below the expected resistance level of 27500. We remain bearish in the near-term for the Dow to test 27000. We also remain cautious as a break below 27000 will see the fall accelerating towards 26500 or even lower thereafter.
DAX (12341.03, -89.94, -0.72%) has come-off failing to rise past 12450. A test of 12300-12250 is possible now. A close below 12250 will turn the near-term outlook negative to test 12000 on the downside which will then delay our expected rise beyond 12450.
Nikkei (21142.31, -326.87, -1.52%) has tumbled much beyond our expected level of 21300. The near-term view is negative to test 20900 and 20750. Resistance is at 21350.
Shanghai (2908.71, -22.99, -0.78%) has dipped towards the lower end of our preferred 2900-2950 range. We expect this range to remain intact and a bounce to 2950 is possible. But in case of a decisive break below 2900 we will have to allow for a fresh fall to 2850.
Sensex (39215.64, +84.60, +0.22%) has inched slightly higher but seems to lack strength. It has to sustain above 39000 to test 39500 and negate the bearish view. But a dip below 39000 can drag it lower to 38750 and 38500 which will bring back our bearish view into the picture.
Similarly, Nifty (11687.50, +24.90, +0.21%) has to sustain above 11650 to keep the near-term view bullish and test 11700 initially and then 11800 or even higher levels eventually.
COMMODITIES
Metals are trading strong with Silver outperforming just now. Copper looks bearish. Crude prices dipped after a modest inventory draw of 3.1mln barrels was reported for the week ended 12th July’19.
Gold (1424) could fall towards 1400-1380 in the near term while 1440 holds. Overall range of 1380-1440 is holding well for now. A break on the upside could be seen after the ranged move ends possibly by next week.
Silver (16.15) has risen sharply outperforming Gold in the near term. It would be important to see if 16.25/50 can produce a rejection just now and lead to a short corrective dip in Silver price towards 15.50.
Copper (2.7060) could hold below 2.75 and target lower levels of 2.60 in the near term.
Brent (63.81) and WTI (56.91) are trading low today. A test of 62-60 and 56-54 looks likely on the downside in the medium term.
FOREX
Dollar Index (97.36) tested an intra-day high of 97.44 yesterday before coming off from there. The fall has been in line with our expected view of resistance at 97.50 holding in the near term. While the fall sustains, a test of 96.75 is possible in the next 1-2 sessions.
Euro (1.12) has bounced from support near 1.12 and while that holds Euro could move up towards 1.13 again in the next 2-3 sessions. Immediate view is bullish above 1.12.
Dollar-Yen (107.74) has also not been able to break above 108.50. Immediate trade within 108.5-107.5 is likely to continue for some more time unless a sharp break on either side is seen. On the downside, a break below 107.50 could extend the fall towards 107.
Euro-Yen (121.07) has dipped slightly and is trading near crucial support levels just now. We would closely watch price action near 121. A break below 121 could be indicative of further bearishness in the medium term.
Aussie (0.7028) has immediate resistance above current levels. The currency looks bearish for the medium term, initially targeting 0.6950 in the coming sessions.
Pound (1.2438) has fallen well from resistance at 1.26 and while that holds, Pound could target 1.22 in the near term.
USDCNY (6.8760) is trading in a very narrow range and could see a sharp movement on either side of current levels to target 6.90 or 6.86/84 in the near term. Equal chances of moving on either side looks possible.
USDINR (68.82) closed about 10paise higher than the close seen on Tuesday. There is scope for rise towards 69.0-69.25 in the near term before the pair comes off room there. Near term looks bullish for Dollar-Rupee.
INTEREST RATES
The US Treasury yields have dipped sharply across tenors yesterday as the weak housing data and the renewed trade war concerns weighed on the bond market. The US 2Yr (1.81%), 5Yr (1.81%), 10Yr (2.04%) and 30Yr (2.56%) were down between 4 bps to 6 bps. The sharp fall has reduced the chances of further rise that we have been expecting. The 30Yr can dip to 2.50% while the 10Yr is in a danger of declining below 2% again.
The German yields have also declined sharply and the resistances mentioned yesterday seem to be holding well. The 5Yr (-0.64%), and 10Yr (-0.29%) yields were down 4 bps each while 30Yr (0.28%) was down 5 bps. The 2Yr (-0.76%) remained stable. The yields can dip further in the near term. The 10Yr can test -0.40% while the 30 Yr can dip to 0.20%.
The 10Yr GoI (6.3446% dipped to 6.25% as expected and has bounced from there. We expect it to sustain above 6.25% and bounce to 6.5% in the coming days.
