STOCKS
Asians are trading mixed after the Dow witnessed some short-covering bounce overnight. It has to be seen if the Dow can sustain higher or not. But broadly the sentiment remains weak and the Dow may resume its fall may be after a corrective bounce or a consolidation. The other major indices like the DAX, Nikkei and Shanghai remains bearish and have room to fall further. Sensex and Nifty are continuing to hold above their key supports and may see a bounce in the near term.
Dow (26029.52, +311.78, +1.21%) has bounced yesterday but need to see if it can sustain higher. Dow may need a strong rise past 26500 to ease the downside pressure and reduce the chances of falling to 25000.
As expected DAX (11567.96, -90.55, -0.78%) had declined breaking below the key support level of 11600. While below 11600, the DAX can fall further to 11350 and 11300 in the near term.
Nikkei (20452.04, -133.27, -0.65%) continues to trade under pressure although it managed to bounce sharply from the day’s low of 20110 yesterday. The view remains bearish to see a test of 20000-19900 in the coming days.
Shanghai (2780.10, +2.55, +0.09%) has bounced sharply from the low of 2734 yesterday. However, it has to surpass 2800 to negate the possibilities of further fall. As mentioned yesterday, while below 2800, Shanghai is bearish to test 2650-2600 on the downside in the coming weeks.
Sensex (36976.85, +277.01, +0.75%) continues to hold above the key support level of 36500. It can consolidate between 36500 and 37500 for some time. Also, while above 36500, the possibility is high for the Sensex to rise to 38000 and 38200 in the coming weeks.
Similarly, Nifty (10948.25, +85.65, +0.79%) is holding well above 10800 and can consolidate between 10800 and 11000 in the near term. The bias is bullish to see a rise to 11100-11200 in the coming days while the Nifty sustains above 10800.
COMMODITIES
The American Petroleum Institute reported a Crude inventory draw of 3.4 mln barrels for the week ending 2nd Aug against analyst expectations of a draw of 2.848 mln barrels. The reduction in the draw compared to last week’s 6.02 mln barrels, could keep Crude prices low in the near term. Crude prices are influenced more by the global factors now and the falling inventory levels do not seem to be able to pull up Crude prices. Gold and Silver see rally as investors might be preferring safe-haven assets like Gold admist the volatile and riskier assets due to uncertainties coming in from the US-China conflicts.
Brent (58.96) has come down sharply breaking below our immediate support at 59. While it continues to decline, we may expect a fall towards 57-55 in the near term from where a bounce is likely.
Nymex WTI (53.54) is also trading low today after breaking immediate support at 54 and could fall towards 52-50 in the near term before bouncing back from there. View is bearish for the coming sessions.
Gold (1497) has shot up to test our upper limit of 1500 and it would be crucial to watch if it faces stiff rejection from current levels or manages to continue it’s rally above 1500. Our preference would be a fall from 1500 forming a near term top.
Silver (16.76) has also broken above 16.60 to move higher. There is room on the upside towards 17.00-17.25 from where a rejection could be expected.
Copper (2.5580) is holding above 2.53 just now and could possibly move up towards 2.65 before falling back from there. Immediate view is bullish for the near term.
FOREX
Currencies are mixed. Dollar Index rose slightly but is unsure if it can manage to move up sharply from here. Euro could trade below 1.1250 just now. Euro-Yen, Dollar-Yen, Aussie could fall slightly from current levels before bouncing back. USDINR could test 71 on the upside. RBI policy meet today could trigger some more movement in the Indian Rupee. Yuan is stable for now.
USDCNY (7.0464) is ranged for now and could trade in the 7.0-7.05 region unless any more news from the US-China front emerges.
Dollar Index (97.52) has moved up a bit but it would be important to see if the index manages to rise above 98 in the near term. For now, we may expect some ranged movement within 97-98 region.
Euro (1.1207) fell from 1.1250 and while that holds as an immediate resistance, Euro could 1.1175 on the downside.
Dollar-Yen (106.04) is trading low but while above 105.50, there could be some ranged movement in the near term before the currency pair attempts to move up again.
Euro-Yen (118.94) moved up to test 119.21 but could not sustain higher levels. While below 120 there could be some chances of testing 117-116 in the near term.
Aussie (0.6725) dipped slightly but is overall trading above 0.67. While above 0.67, there could be scope of moving back towards 0.68. Else we may see a sharp decline in Aussie towards 0.64 if 0.67 breaks on the downside. For now we may expect some sideways and narrow movement.
Pound (1.2166) is almost stable. While above support near 1.21, we could expect a rise towards 1.23/24 in the near term.
RBI monetary policy is due today and the markets expect a 25bps rate cut in today’s statement. USDINR (70.82) closed above 70.75 and could have scope of testing 71.00-71.30 on the upside before falling to lower levels. We do not look for a rise above 71.30 within the current move.
INTEREST RATES
Trade tensions and high risk aversion in the market continue to weigh on the yields. The US Treasury yields have tumbled further and are not giving any room for even a corrective bounce. The German yields have dipped further and keeps our bearish view intact. The Indian 10Yr GoI was stable ahead of the Reserve Bank of India’s (RBI) monetary policy decision today. The outcome of this meeting will be a key trigger to set the next direction of move for the 10Yr GoI. Market expects a 25 bps rate cut from the RBI.
The US 2Yr (1.57%), 5Yr (1.50%), 10Yr (1.69%) and 30Yr (2.22%) Treasury yields have tumbled further across tenors. The 2Yr can test 1.50% on the downside in the near term. The 10Yr has dipped below a key level of 1.70%. Inability to bounce above 1.70% again can keep it pressured on the downside to test 1.50% over the medium-term. The level of 1.75% will now act as a strong resistance for the 10Yr Treasury yield.
The German 2Yr (-0.83%), 5Yr (-0.78%), 10Yr (-0.54%) and 30Yr (-0.04%) yields continue to move down in line with our expectation. While the 10Yr and 30Yr have room to test -0.60% and -0.1% on the downside , the yields on the near end (2Yr and 5Yr) are at a key support levels. A bounce in the coming days can take the 2Yr higher to -0.80% or -0.78% and the 5Yr to -0.7%.
The 10Yr GoI (6.3376%) remained stable yesterday as the market waits for the RBI’s monetary policy today. The outcome of the RBI meeting can trigger a breakout on either side of 6.30% or 6.40% and set the direction of move going forward. We prefer the 10Yr GoI to break above 6.40% and rise to 6.50%-6.55%.
