STOCKS
Near-term outlook looks mixed for equities. The outcome of the US Federal Reserve meeting on Wednesday and the developments on the US-China trade talk which is set to resume this week are likely to be key triggers to set the trend for equities. Until then the global equities are likely to consolidate sideways.
Dow (27192.45, +51.47, +0.19%) can consolidate between 27000 and 27350 ahead of the Fed meeting on Wednesday. A breakout on either side of this range will determine the next move. Our bias remains bearish on the Dow to break 27000 and decline towards 26600 while it remains below the key resistance level of 27500.
DAX (12419.90, +57.80, +0.47%) has to surpass 12450 decisively to turn the sentiment positive and rise to 12600 levels again. Inability to breach 12450 can keep it pressured to test 12200-12100 on the downside.
Nikkei (21559.35, -98.8, -0.46%) has dipped below its support at 21600 and looks vulnerable for a fall to 21400 and even 21250. Resistance is at 21750.
Shanghai (2938.22, -6.32, -0.21%) has to breach 2950 decisively to gain fresh momentum and rally to 3000. While below 2950, it can consolidate sideways between 2880 and 2950 for some more time.
Nifty (11284.30, +32.15, +0.29%) can see an intermediate corrective bounce to 11400 if it manages to sustain above 11200. But the broader picture is bearish for it to break 11200 eventually and fall to 11100-11000.
Sensex (37882.79, +51.81, +0.14%) is getting support at 37700 and while it holds, a relief rally to 38250 and 38400 is possible. But the broader picture remains bearish to see a fall to 37500 and 37000 in the coming weeks.
COMMODITIES
Commodities may remain stable with some chances of falling in the near term. Gold could test 1400, Silver may fall to 16.20 while Copper may test 2.68/66. Crude prices may also trade sideways over the next 2-3 sessions before bouncing back in the longer run.
Brent (63.24) and Nymex WTI (56.08) have dipped a bit from levels seen on Friday. Supports near 62 and 54 is holding intact for now. A bounce over the next 2-3 sessions look likely.
Gold (1421.60) and Silver (16.42) are trading stable without any major movement. Gold is trading towards the lower end of the broad 1460-1400 region and may test 1400 before rising back towards 1430 while Silver could test 16.20 before bouncing back from there. Note that 1430/40 could be important levels for Gold just now.
Copper (2.69) has come off below 2.70 and could be headed towards 2.68/66, our earlier mentioned levels last week. Near term looks weak.
FOREX
Almost all currency pairs are headed towards important supports or resistances. It would be important to see if Euro breaks below 1.11; Dollar-Yen holds below 109; Euro-Yen and Pound get support near 120 and 1.23 and whether the Indian Rupee will hold below 69 today. Markets could be softer ahead of the FOMC due on 31st July.
Dollar Index (97.96) has come off from just below 98.25. Resistance is visible near 98.50 which is likely to be tested in the next 3-6 sessions before the index falls back towards 97 again. However, in the very near term a short dip could be seen towards 97.50.
Euro (1.1131) is almost down to test 1.11 again. It would be important to see if the support near 1.11 breaks or holds as that would indicate further direction for the currency in the near to medium term. For now we may expect 1.11 to hold and produce a decent bounce.
Dollar-Yen (108.50) rose to test 108.83 on Friday but is trading lower just now. While below 109, we could expect some sideways trade between 109-107.50 region. In the longer term, say on the weekly candles, Dollar-Yen looks bullish.
Euro-Yen (120.76) has fallen below 121 again but while it remains above 120-118.82, longer term view remains bullish. We may consider a test of 118.82 if a break below 120 is seen.
Aussie (0.6907) has fallen breaking below our expected 0.6950. On the downside there is support near 0.69 and lower near 0.68 which could be tested in the near term. A bounce from 0.68 looks probable.
Pound (1.2372) has fallen in line with expectation. While below important near term resistance at 1.25, the Pound looks weak towards 1.23 in the near term. According to news sources, Brexiteers have voiced loudly that the EU must change their negotiating stance otherwise the UK will leave without a deal on October 31.
USDCNY (6.8833) has risen slightly but may remain below 6.90 in the near term. A rejection from 6.90 would take it back towards 6.88/85 or even lower in the medium term.
USDINR (68.9075) came down to test levels below 68.90 on Friday possibly indicating that a near term top has been made. While below 69, the currency pair may test 68.75 in the near term reducing chances of rising towards 69.25. Immediate view is bearish for Dollar-Rupee.
INTEREST RATES
Bond market is waiting keenly to see the outcome of the US Federal Reserve meeting on Wednesday (July 31). Market expects a 25 bps rate cut which is broadly priced in the market. So, it will be more important to see for any hints on the pace of future rate cuts which will be key in setting the trend for the market. We will have to wait and see.
The US Treasury yields have risen across tenor on Friday. The 2Yr (1.85%) and 10Yr (2.07%) were up 4 bps each and the 5Yr (1.85%) was up 5 bps. The 30Yr (2.59%) was up 2 bps. The near-term look positive. As mentioned earlier, the 2Yr and 10Yr are getting strong support near 1.80%. While this supports holds, the yields (2Yr and 5Yr) can rise to 1.93% -1.95% in the near term.
The German Yields are managing to hold above their key supports. The 2Yr (-0.77%), 5Yr (-0.67%), 10Yr (-0.38%) and 30Yr (0.20%) are stable. The 10Yr has support at -0.40% and the 30Yr at 0.19%. While these supports hold, the 10Yr can bounce to -0.30% and the 30Yr can rise to 0.30% in the coming weeks.
The 10Yr GoI (6.5254%) is holding above 6.50% but has to rise past 6.55% to gain momentum and target 6.60% and 6.65% on the upside. A dip below 6.50% can drag the 10Yr GoI lower to the key support level of 6.40%.
