STOCKS
Mild profit-taking/ consolidation being seen in most markets. Some may have more room on the upside nexxt week (maybe Nikkei, Sensex, Nifty, Dow) while others (DAX and KOSPI) have Resistances overhead.
As expected, the Dow (26807.77, -142.22, -0.53%) tested 26700 on the downside (low was 26704.96) and that has held as Support for now.There seem to be equal chances now of a fresh rally towards 27500 or a dip towards 26300. Perhaps the new Trump-impeachment talk could increase downward pressure?
Likewise, the DAX (12307.15, -35.18, -0.29%) dipped as expected yesterday, to a low of 12307.15. Although initial Support at 12200 has held, longer-term Resistance at 12500 is also expected to hold and eventually push the DAX below 12200.
It seems that the dip in the Nikkei (21988, -110.56 -0.50%) that we’d been looking for could be underway now, with a test of 21750-500 still being possible.
The Shanghai (2969.20, -16.14, -0.54%) is testing crucial Support at 2960, a break below which could turn out to be bearish towards 2925, maybe lower.
The KOSPI (2089.25, -11.79, -0.56%) is dipping to test trendline Support near 2075 on the Daily Candles, which can hold and push it up towards longer term Resistance at 2125. Expect more meaningful profit-taking from there.
Lastly, the Nifty (11588.20) and Sensex (39097.14) are likely to be consolidative between 11500-700 and 38570-38950 over the rest of the week. If so, look for a fresh rally towards 11800 and 40000 respectively next week.
COMMODITIES
Gold has risen above a key resistance and is now bullish to see further rise. Silver is struggling to breach a key resistance and might consolidate sideways for some time. Copper lacks strength and looks vulnerable for a fall in the near term. Oil has declined sharply and can dip further. The US inventory data release today will be key in determining whether the fall seen yesterday can deepen further.
Gold (1530) has risen breaking above 1520 and is now bullish to test 1555 in the near term. However, an intermediate dip to 1525-1520 cannot be ruled out before we see the above mentioned rise.
Silver (18.53) is not being able to breach 18.75 yet and a test of 18.25 looks likely now. Silver can consolidate between 18.25 and 18.75 for some time. A strong rise past 18.75 is needed for it to gain strength and target 19.5 and even higher levels.
The resistance at 2.63 on Copper (2.60) is holding well and needs to be seen if it can sustain above 2.59 or not. The bias is negative and we expect copper to break 2.59 and fall to 2.55-2.53 in the coming days. As mentioned yesterday, 2.63-2.64 and 2.65-2.66 are key resistance zones which can cap the upside in the short term.
As expected, Brent (62.64) has tumbled towards 62.50. A test of 61.50-61 looks likely now while it remains below the resistances at 61.10 and 61.30. The level of 61 is a very important support to watch and while it holds, a bounce to 63 again can be seen.
WTI (56.90) has broken its 57.50-59.50 range on the downside and can now test 56 in the near term. A bounce from 56 can take it to 57-58 again. But a break below 56 can drag WTI further lower to 55 in the coming sessions.
FOREX
Dollar index is back into its sideways range and remains mixed. Euro has bounced but has to breach a key resistance to ease the downside pressure and avoid a fall again. The Dollar-Yen has dipped and needs to hold above 107 to avoid further fall. Aussie has bounced but has a key resistance ahead which is likely to hold and keep the downtrend intact. Pound can consolidate before moving further higher. The USDCNY remains bullish. The Dollar-Rupee has bounced yesterday and can move further higher if it sustains above 70.90.
Dollar Index (98.49) has declined below 98.55 indicating that the 98.00-98.75 sideways range still remains intact and also has negated the chances of an immediate rise to 99-99.25. We will have to wait for a decisive breakout on either side of 98 or 98.75 to get a clear cue on the next direction of move.
Euro (1.1005) bounced above 1.10 but has come-off from the high of 1.1024. A strong rise past 1.1030 is needed to ease the downside pressure and target 1.1060 on the upside. Such a break will also negate the chances of seeing 1.0940-1.0925 on the downside again that we had mentioned yesterday.
As expected, Dollar-Yen (107.28) fell again yesterday, indeed much beyond the expected level of 107.15. The pair tested 107 and has bounced slightly. It will have to be seen if it can sustain above 107 or not. A strong break above 107.6 will now be needed to avoid seeing a break below 107 and a fall to 106.75.
The EUR-JPY (118.04) is getting support near 117.70 over the last couple of days. While it holds, a rise to 119 looks likely in the near term. As mentioned yesterday, 117.50 is a important support to watch which needs to hold to prevent the Cross revisiting 116 levels on the downside.
As expected, Aussie (0.6793) saw a corrective rally towards 0.6800. Resistance is at 0.6810. A strong rise past it will take the pair higher to 0.6830-0.6840. It will also then negate the bearish view of seeing 0.6735-0.6720 on the downside.
Pound (1.2470) is holding well above 1.24 and has moved higher in line with our expectation. A break above 1.25 can take it further higher to 1.2550-1.2600. While below 1.25, the pair can remain stuck in a narrow range of 1.2400-1.2500.
USDCNY (7.1144) remains higher but is struggling to breach 7.12. While above 7.10, the bullish view will remain intact to test 7.14 and 7.15 on the upside. A strong break above 7.12 will accelerate the upmove.
Dollar-Rupee (71.01) bounced sharply from the low of 70.72 and can move further higher towards 71.20-71.22 while it remains above 70.90 today. The broader view remains bearish to test 70.55-70.50 and 70.34 in the short term and we expect the upside to be capped.
INTEREST RATES
The US Treasury yields have declined sharply on the back of weak consumer confidence data and on the announcement of impeachment inquiry on the US President Donald Trump. The Treasury yields remains bearish and can fall further in the coming days. The German yields are moving down in line with our expectation and keeps the bearish view intact. The 10Yr GoI has moved up and can rise further if it sustains above 6.75%.
The US 2Yr (1.61%), 5Yr (1.52%), 10Yr (1.64%) and 30Yr (2.09%) have declined sharply across tenors. Our broader bearish view remains intact. The 30Yr is heading towards 2.0% and the 10Yr can test 1.57% on the downside in line with our expectation.
The German yields 2Yr (-0.75%), 5Yr (-0.77%), 10Yr (-0.60%) and 30Yr (-0.13%) have dipped further as expected. The 30Yr has breached our first target of -0.10% and is now headed towards our second target of -0.20%. The 10Yr can now move down further towards -0.68%.
Contrary to our expectation, the 10Yr GoI (6.7811%) has risen yesterday. While it sustains above 6.75%, a break and rise above 6.80% targeting 6.85% is possible in the near term.
