STOCKS
The trade tensions between the US and China continue to weigh on the equities. Though the Dow has bounced sharply from the day’s low yesterday, it is still vulnerable to fall further. The other indices like the DAX, Nikkei and Shanghai also have key resistances in the near-term which can cap the upside and keep them pressured on the downside. Sensex and Nifty can consolidate in the near-term with a bullish bias to see a corrective rally going forward.
Dow (26007.07, -22.45, -0.09%) has recovered sharply from the low of 25440.39. As mentioned yesterday, Dow has to rise past 26500 to turn the sentiment positive. While below 26500, a fall to 25000 cannot be ruled out.
DAX (11650.15, +82.19, 0.71%) has been consolidating between 11550 and 11750 over the last couple of days within its overall downtrend. While below 11800, the outlook remains bearish to test 11350-11300 on the downside.
Nikkei (20634.91, +118.35, +0.58%) has bounced and can see a corrective rally to 20900-20950 while it sustains above 20500.
Shanghai (2787.51, +18.83, +0.68%) can test 2800 in the near-term. As mentioned yesterday, it has to surpass 2800 to negate the possibilities of further fall. While below 2800, Shanghai is bearish over the medium-term to test 2650-2600 on the downside.
Sensex (36690.50, -286.35, -0.77%) has declined with the expected 36500-37500 range. While above 36500 our bias is positive to see a corrective rally to 37750-38000 in the near term.
Nifty (10855.50, -92.75, -0.85%) on the other hand can consolidate between 10800 and 11000 with a bullish bias to test 11100 and 11200 on the upside while it sustains above 10800.
COMMODITIES
Crude prices continue to sink lower but could have immediate support below current levels. The EIA reported a 2.4 mln barrel build in stock inventories for the week ended 2nd Aug against expectations of a 3.13 mln draw. This could boost prices for 1-2 sessions and could push prices slightly higher. But in the longer run crude prices looks weak.
Brent (57.75) has support near 57 which could hold and produce a short term corrective upmove possibly targeting 60-61 before the prices again decline lower towards 55 in the longer run.
Nymex WTI (52.60) also has immediate support near 52 which if holds could produce a bounce towards 54.50-55.00 before prices resume its fall.
Gold (1512.60) has broken our expected crucial resistance at 1500 and such a sharp rise is attributed to the investors turning towards safe haven assets. However, the sustenance beyond 1500 looks temporary as 1518-1521 zone could push prices back to 1500 or lower in the near term. If 1521 breaks contrary to our expectation, Gold could rise sharply towards 1550; but for now we would prefer a fall from 1521.
Silver (17.16) has also rise to trade within our mentioned range of 17.00-17.25. We may expect a fall from 17.25 in the next 2-3 sessions.
Copper (2.5890) has scope to rise towards 2.65 as mentioned yesterday before falling sharply from there.
FOREX
Most currency pairs look stable now and could trade sideways for sometime before deciding on further direction. Aussie, Pound and Yuan looks ranged while Euro, Euro-Yen, Dollar-Yen has some scope of falling towards support. USDINR looks weak.
PBOC set USDCNY reference rate for the day at 7.0039 which could probably pull down USDCNY (7.0459) on the onshore markets. Overall trade within 7.00-7.05 is likely in the next 3-4 sessions.
Dollar Index (97.53) has bounced from 97.21 and while the immediate support holds, the index could trade within 98-97.2 just now. It would be crucial to watch if the index breaks below 97.2 to head lower. For now broadly ranged movement looks possible over the next 2-3 sessions.
Euro (1.1210) faced stiff resistance at 1.1250 in the last 2-sessions and while Euro remains below 1.1250, we could see some trade in the 1.1150-1.1250 region before an attempt to break on either side.
Dollar-Yen (106.14) looks bearish with a possibility of re-testing 105.50 on the downside while below 107.
Euro-Yen (119.03) has moved up but while below 120, we would consider some chances of testing 117. Near term trade could be seen within 120 and 117. Only if EUR/JPY breaks above 120-121 zone and sustains higher, we may negate a fall back to current levels and possibly look for reversal signal.
Aussie (0.6773) is ranged. 0.68 seems to be acting as a decent resistance in the very near term and while that holds strong, Aussie could fall down towards 0.6650 by next week. Only a break above 0.68, if seen could lead to some corrective bounce towards 0.69 or higher.
Pound (1.2168) is stable and is in a sideways consolidation phase from where a sharp break on either side could be seen. Our preference would be for a bounce towards 1.23/24 in the near term.
USDINR (70.89) bounced from the day’s low of 79.6150 yesterday. There is scope of a sharp break above 71 over today and tomorrow as the currency pair could target fresh highs of 71.30 within the current upmove. Near term looks bullish.
INTEREST RATES
Yields continue to tumble as the markets remain highly risk averse and equities are getting sold-off. The US Treasury yields and the German have tumbled further. Both have room to extend the downtrend further. The 10Yr GoI can rise to 6.50%-6.55% while it sustains above 6.27%..
The US 2Yr (1.61%), 5Yr (1.55%), 10Yr (1.73%) and 30Yr (2.25%) are on a strong downtrend. The 2Yr and 5Yr might get some support in the 1.50%-1.45% region from where a relief rally is possible. But given the current pace of fall, the 2Yr and 5Yr has room to test 1.25% and 1.30% respectively which are strong supports that can halt the current fall. Similarly, the 10Yr and 30Yr has deeper supports at 1.3% and 1.9% respectively which can stop the current downmove..
The German 2Yr (-0.87%), 5Yr (-0.82%), 10Yr (-0.59%) and 30Yr (-0.10%) yields has declined sharply as expected. The 2Yr can now test -0.95% and the 10Yr can tumble to -0.70% in the coming days.
The India 10Yr GoI (6.3689%) has support at 6.27%. While it holds, a rise to 6.50%-6.55% is possible in the coming days. A break above 6.40% will trigger this rise.
