STOCKS
Sell-off continues in equities. The increased tensions and concerns on the US-China trade war is likely to keep the market highly risk averse. This in turn will continue to keep the equities under pressure. The major indices, Dow, DAX, Nikkei and Shanghai look bearish and are likely to extend their down move in the coming days. Sensex and Nifty are managing to hold above their key support as of now. It will have to be seen if they can continue to sustain above those supports and avoid further fall.
Though Dow (26485.01, -98.41, -0.37%) has bounced from the low of 26249 on Friday, the outlook remains bearish to test 26000 on the downside. Resistance is in the 26750-26800 region which can cap the upside.
DAX (11872.44, -380.71, -3.11%) has tumbled breaking below the key support level of 12100 which was holding well last week. The outlook is bearish to test 11600 on the downside. An intermediate bounce to 12000-12100 cannot be ruled out before we see the above mentioned fall.
Nikkei (20650.15, -437.01, -2.07%) has declined further as expected and has moved lower much beyond our expected level of 20750. The outlook is bearish. While below 20750, Nikkei can test 20250 and even 20000 on the downside in the coming days.
Shanghai (2859.30, -8.54, -0.30%) remains bearish to test 2800-2700 on the downside. A break below 2850 can accelerate the fall. Resistances are at 2880 and 2900.
Nifty (10997.35, +17.35, +0.16%) is managing to hold above 10800. While above 10800, it can remain range bound between 10800 and 11200 for some time. But in case of a break below 10800 (less preferred), the current fall can extend to 10500 or even lower going forward.
Similarly, Sensex (37118.22, +99.90, +0.27%) is holding well above 36500 and can oscillate between 36500 and 37500 for some time within its overall downtrend.
COMMODITIES
Commodities are all mixed. Gold and Silver have moved up on Dollar weakness and on Yen strength while Copper and Crude prices continue to trade lower.
Gold (1466.60) has moved up sharply on Dollar and USDJPY weakness. While these pairs trade lower, Gold could continue to rise towards 1483-1500 in the near term. View is bullish while above 1460.
Silver (16.45) has moved up and could test 16.60 on the upside. Near term looks bullish.
Copper (2.5565) has broken below immediate support near 2.6 and while the price trades below 2.60, we could see a fall towards 2.40/30 in the coming sessions.
Brent (61.23) and Nymex WTI (55.13) are trading low. Brent could test support near 59 in the near term while WTI could hold above 52. We could see some ranged movement just now before the crude prices rise from support levels.
FOREX
Tensions between US and China seem to be escalating as China is removed as the top trading partner with US and the impact on the currency would be a weaker Yuan in the near term. On the other hand, mounting conflict between South Korea and Japan also seems to be weighing on the Japanese Yen. Dollar looks weak for the very near term and could target support near 96 before bouncing back. EUR/JPY and USDINR looks weak in the near term while Aussie, Pound and Euro could possibly hold on to near term supports.
USDCNY (7.0279) has risen sharply above 7 and could continue to move up in the near term while the ongoing trade tensions exist. Near term looks weak for the Yuan.
Dollar Index (97.44) having fallen from 98.93 last week is trading low breaking our expected 97.75 and looks bearish towards support in the 96.50-96.00 zone in the near term.
Euro (1.1128) has moved up. 1.10 is likely to hold in the medium term and eventually push Euro towards 1.1150-1.1200 while Dollar Index moves towards 96 on the downside.
Dollar-Yen (105.90) has fallen sharply breaking below our expected support near 106. We need to watch if the fall halts immediately to reverse its movement; else a further drop in USDJPY towards 105.0-104.50 could be tested on the downside in the near term.
Euro-Yen (117.79) is trading below 118 and while the pair trades lower, 115-114 or even lower could be seen in the near term.
Aussie (0.6780) has immediate support near 0.6750 but we have to watch if the support holds to push back the currency to higher levels just now. While the global currencies trade weak, Aussie could also trade weak in the near term. We would wait for confirmation on a break or bounce from 0.6750.
Pound (1.2149) is also holding stable and needs to remain above 1.21 to eventually move higher. 1.20-1.21 is important support zone that is needed to hold just now to produce a bounce in the medium term towards 1.24.
USDINR (69.59) could open with a gap up as major currencies trade weak. A test of 70.00/25 looks likely.
INTEREST RATES
The concerns of the US-China trade war is continuing to weigh on the bonds. High risk aversion in the market has taken the yields sharply lower last week. The US Treasury yields have tumbled to multi-year lows. However, key supports are coming up near current levels which may produce a corrective bounce in the near term. German yields have tumbled across tenors especially (more deep) at the far end. The German yields have room to dip further and the 30Yr is on the verge of entering the negative territory. The 10Yr GoI looks mixed and can remain in a broad sideways range.
The US 2Yr (1.67%), 5Yr (1.62%), 10Yr (1.80%) and 30Yr (2.34%) Treasury yields have declined sharply across tenors. While the 2Yr has room to test 1.60%-1.55%, the 5Yr, 10Yr and 30Yr have supports near current levels at 1.59%, 1.78% and 2.32% respectively which may halt the fall and produce a bounce in the near term.
The German 2Yr (-0.80%), 5Yr (-0.74%), 10Yr (-0.50%) and 30Yr (0.01%) were down across tenors. The 2Yr and 5Yr have room to test -0.83% and -0.77% on the downside after which a bounce is possible. The 10Yr is at a near-term support which if holds well can trigger a bounce to -0.42%. The 30Yr is on the verge of entering the negative territory.
The 10Yr GoI (6.3514%) looks mixed and can trade in a broad sideways range of 6.25% and 6.55% for some time. A breakout on either side of this range will is needed to get a clear indication on the next trend.
