STOCKS
Trump’s tweet yesterday criticizing China for not buying the US agricultural products has raised concerns and reduced the hopes for a positive outcome of the US-China trade talk that is set to resume this week. On the other hand, the market is waiting to see the outcome of the US Federal Reserve meeting tonight which will set the trend for the equities going forward. Dow is continuing to consolidate while the DAX is close to a key support. Nikkei and Shanghai look mixed and can remain sideways in the near term. Sensex and Nifty are also coming closer to their key supports which can halt the current fall and trigger a reversal.
Dow (27198.02, -23.33, -0.09%) dipped within the expected 27000-27350 range. We prefer the Dow to break below 27000 and fall to 26600 while it remains below the key resistance level of 27500.
As expected, the DAX (12147.24, -270.23, -2.18%) has tumbled towards our target of 12100. A bounce from current levels can take the index higher to 12400 again. But a break below 12100 can drag the DAX lower to 12000 and 11900.
Nikkei (21489.39, -219.92, -1.01%) has come-off sharply failing to breach 21750 once again. The near-term outlook is mixed. Nikkei can remain range-bounce between 21250 and 21750 for some time.
Shanghai (2930.12, -22.22, -0.75%) has come-off failing to sustain the break above 2950. Support is at 2920, a break below which will reduce the possibility of a rise past 2950 and will drag the Shanghai lower to 2900 and 2880 again.
Nifty (11,085.40, -103.80, -0.93%) has declined further and is heading towards 11000 as expected. Strong support is in the 11000-10900 region which can halt the current fall and trigger a bounce to 11200-11300 in the short term.
Similarly, Sensex (37397.24, -289.13, -0.77%) is heading towards 37000 as expected. It has supports at 37000 and 36500 and a bounce to 37500-38000 can be seen from either of these supports.
COMMODITIES
Commodities are trading higher ahead of the FOMC policy statement today. Crude prices have moved up after the API inventory data release while Silver and Gold move up as the possible rate cut by the FED seems to be priced in. Copper has fallen and looks bearish for the near term.
The American Petroleum Institute (API) reported a crude oil inventory draw of 6.024 million barrels for the week ending July 25, higher than the analyst expectations of 1.818 mln barrel draw. The inventory draw this week has fallen from last week’s draw of 10.961 million barrels, the largest inventory draw this year, according to the API.
Brent (65.15) and Nymex WTI (58.42) have risen sharply and could head towards immediate resistance near 66 and 60 respectively before falling from there. Very near term looks bullish with a possible fall in the medium term.
Gold (1440.70) and Silver (16.52) are trading higher and could continue to rise a bit more. Gold could come off from current levels or attempt to test 1460 on the upside before falling from there while Silver could head towards 16.60.
Copper (2.6810) could not sustain the rise above 2.70 and fell sharply. Our earlier mentioned test of 2.68/66 holds for now. In the longer term charts, crucial support zone is seen near 2.65/64 levels.
FOREX
Currency pairs remain mixed. Dollar Index could test crucial resistance while Euro-Yen, Dollar-Yen and Aussie could have some more room on the downside. Pound is likely to rise from current levels. Rupee could trade within 68.75-68.95 broadly before deciding on further direction. Markets seem to be awaiting FED statement today to bring in some volatility. The US-China trade talks seems to be re-surfacing again and we would be on the lookout for news from that front.
Dollar Index (98.06) could face stiff rejection from 98.50-99.00 region from where a decline is possible towards 98.0-97.5. Today’s FOMC would be crucial.
Euro (1.1152) has moved up a bit and is likely to remain below 1.1180. While 1.11 holds, e could probably see some ranged movement within the narrow 1.110-1.1180 region. Only on a break above 1.1180, we would look for a rise towards 1.12 or higher in the coming week.
Dollar-Yen (108.54) has held below resistance at 109 and if it proves to be strong, we could see a fall towards 108.0-107.5 in the near term. Failure to break below 108.5 just now could indicate that the bulls are trying to take over and could soon lead to a sharp move on the upside.
Euro-Yen (121.05) has immediate resistance near 121.50 and if that holds, we could see a dip from there back towards 120.5. Unless a sustained break above 121.5 is seen it would be difficult for the pair to rise towards 123 just now. We would wait to watch price action near 121.50.
Aussie (0.6884) has fallen as expected and could test 0.6850-0.6800 in the near term that could act as a decent support in the near term from where a bounce looks possible.
Pound (1.2153) continues to trade lower but has immediate support near 1.21 which may hold just now and produce a bounce back towards 1.23/24 in the near term. A corrective upmove looks likely in the next few sessions.
USDCNY (6.8857) has dipped a bit and while below 6.90, the pair could come off towards 6.85.
USDINR (68.87) bounced back from 68.66 fairly in line with our expectation and could test key resistance near 68.95-69.10 which is likely to keep the upside capped just now. An eventual fall towards 68.50/40 remains on the cards for the medium term.
INTEREST RATES
The much awaited US Federal Reserve’s monetary policy decision will be out tonight. The outcome of this meet will set the tone for the bond market. As we have been mentioning over the last few days, while a 25bps rate cut is already factored in the market, what the Fed hints about the future rate cut path is going to be very important which could influence the yield movement.
The US Treasury yields have dipped slightly. The 2Yr (1.84%), 5Yr (1.84%) and 10Yr (2.05%) yields were down 1 bps each while the 30Yr (2.58%) remained stable. Our view remains the same. While above 1.80%, the 2Yr and the 5Yr are bullish for a rise to 1.93%-1.95% in the coming weeks. The 10Yr can rise to 2.20% while it remains above 2.0% and also manages to break above 2.10% decisively.
The German yields have dipped across tenors. The 2Yr (-0.78%) was down 2bps. The 5Yr (-0.69%). 10Yr (-0.40%) and 30Yr (0.17%) were down 1 bps each. The 30Yr has dipped below its key support level of 0.20% and is bearish for a fall to 0.10% in the coming weeks. Similarly, the 10Yr can fall to -0.50% on a break below -0.40%.
The 10Yr GoI (6.3902%) has dipped below 6.40% and looks vulnerable to test 6.35% and 6.30% on the downside.
