STOCKS
The US-China trade tussle seems to be getting worse. The latest development in it yesterday has been that China confirming the suspension of the purchase of the US agricultural products and the US declaring China a currency manipulator. As a result, the equity markets were beaten down badly with the Dow Jones tumbling over 750 points. The Asian are bleeding following the sell-off in the US equities overnight. India’s Sensex and Nifty are in danger of breaking below their crucial supports which had held very well over the last few days.
Dow (25717.74, -767.27, -2.90%) has tumbled much beyond our expected level of 26000. Inability to bounce above the 25750-26000 resistance zone can keep it pressured to test 25000 on the downside.
As expected DAX (11658.51, -213.93, -1.80%) has declined sharply and is heading towards 11600. If DAX manages to bounce from 11600, a relief rally to 11700-11800 is possible. But a break below 11600 will see the current fall extending to 11350 and 11300 in the coming days. .
Nikkei (20300.14, -420.15, -2.03%) has declined as expected and is heading towards 20250. A further break below 20250 will see the fall extending to 20000-19900 in the near term.
Shanghai (2763.45, -58.05, -2.06%) has fallen sharply breaking below the key level of 2800. While below 2800, Shanghai can now test 2650-2600 on the downside in the coming days.
Sensex (36699.84, -418.38, -1.13%) is holding above the key support level of 36500 but is in a danger of breaking below it as a result of the strong sell-off being witnessed in the global equities. Such a break can take it to 36000 – a strong support which may halt the fall and trigger a bounce to 38000.
Similarly, Nifty (10862.60, -134.75 -1.23%) is holding above 10800 but can break below it today and fall to 10700-10600 or even lower.
COMMODITIES
Gold continues to rally towards immediate resistances at 1483 and higher at 1500 while Silver is stuck near 16.45. Copper has met crucial support and while that holds, it could start rising now. Near term is bullish for Copper. Crude prices are stable, they could test supports below current levels in the near term before starting to move up.
Gold (1477.60) continues to move up and is close to testing immediate resistance near 1483 which if holds could push the price back to 1450/40; else a sharp rally towards 1500 is on the cards from where a fall could be expected. Immediate resistances at 1483 and higher at 1500 are important.
Silver (16.45) is stuck near current levels. We could possibly see a ranged movement within 16.60-16.00 for a few sessions before the price breaks on either side.
Copper (2.5570) has moved up slightly after making a low near 2.53. Note that 2.53 can prove to be a crucial support just now which could be strong enough to force the price higher towards 2.60/62 levels in the near term.
Brent (60.30) has dipped from levels above 61 seen yesterday. As mentioned earlier we may look for a test of immediate support at 59 which is likely to hold in the near term.
Nymex WTI (55.08) could have scope of testing 52 while below 56.50. Near term looks bearish for WTI towards 52 from where a bounce looks likely.
FOREX
The escalating tensions between US and China continue to keep the currency markets volatile. The RBA is likely to keep the rates unchanged today. Currency pairs like EURJPY, AUDUSD, GBPUSD have hit near term supports that could hold and produce a corrective rise in the near term while USDCNY, USDINR could fall in the near term as immediate resistances above current levels could lead to a near term sell off. RBI policy meet is due tomorrow where some analysts expect a 25bps rate cut.
USDCNY (7.0502) could get some rejection from 7.06 producing a short corrective dip before the weakness in Yuan continues. While medium term rally towards 7.15/17 seems to be on the cards, we could see an immediate dip from 7.06
Dollar Index (97.38) is almost stable but has scope of testing lower levels of 96.50-96.00 in the near term.
Euro (1.1225) is back above 1.12 and while the Dollar Index continues to trade lower, we may expect a test of 1.1250-1.1300 in the near term.
Dollar-Yen (106.17) is also up from support at 105.50 on the weekly candles and while that holds, there could be some scope of a bounce in the near term.
Euro-Yen (119.19) has bounced back from 117.67, the channel support on the daily candles and has room on the upside towards resistance zone of 119-120 in the near term.
While RBA may keep rates unchanged, the weakening Yuan would continue to have downward pressure on the Aussie. Aussie (0.6783) needs to hold above 0.67 and try to rise back in the next few sessions else the weakness in Yuan could continue to have pressure on the currency having potential to push Aussie down towards 0.64 in the medium term. Watch price action near 0.67.
Pound (1.2164) is trading near immediate support at 1.21. If that holds, we could see a decent rise in the near term towards 1.24 although it would be difficult to state if it can hold on to levels above 1.21 in the longer run. Technical chart reading suggests 1.20 could prove as a medium term support and is likely to hold well.
USDINR (70.75) rallied after a sharp gap up opening to close at the day’s high. After a sharp rally seen yesterday, we could expect a corrective dip towards 70.30/20 in the next couple of sessions as 70.75 could be a near term resistance as seen on the Daily line chart. On the upside the rally is likely to be capped at 70.75-71.00. RBI policy meet is due tomorrow where some analysts expect a 25bps rate cut.
INTEREST RATES
Markets continue to remain risk averse as the US-China trade war seems to be getting worse with China retaliating for new tariffs levied by the US last week. As a result, money is flowing out from risky assets like the equities and moving into safe assets like bonds and the yields continue to tumble. The US Treasury yields have tumbled further but have an intermediate support near current levels which needs to be seen if it can hold and give a breather. The German yields have dipped further and keeps our bearish view intact. The 10Yr GoI can inch higher while it remains above 6.30%
The US 2Yr (1.59%), 5Yr (1.53%), 10Yr (1.72%) and 30Yr (2.27%) Treasury yields have tumbled more than 10bps each breaking below the intermediate supports mentioned yesterday. The 5Yr and 30Yr yields have support near current levels and can bounce to 1.70% and 2.40% respectively while these supports holds. The 2Yr has room dip towards the support at 1.53% after which a bounce is possible if this support holds.
The German 2Yr (-0.82%), 5Yr (-0.76%), 10Yr (-0.52%) and 30Yr (-0.01%) have dipped across tenors. The bearish view is intact. The 30Yr has entered into the negative territory as mentioned yesterday and can dip further towards -0.1% in the coming days. The 10Yr can target -0.60% in the short term.
The 10Yr GoI (6.3906%) has inched higher yesterday. While above 6.30%, the 10Yr GoI can rise to 6.50%-6.55% in the near term. A strong break above 6.40 will trigger this upmove.
