STOCKS
Equities are higher as the hopes to see some positive outcome from the on-going US-China trade talk have increase after Trump’s tweet indicated that he will meet the Chinese Vice Premier on Friday. Dow and DAX have risen but has to surpass their key resistances in order to turn really bullish. Nikkei is showing signs of bullishness. Shanghai continues to remain more bullish than others with the formation (early stage) of a bullish pattern on the charts. Sensex and Nifty look mixed and can remain range bound in the near term.
Though the Dow (26496.67, +150.66, +0.57%) has moved up further, it is not convincingly looking positive. A sustained break above 26500 and a strong follow-through rally above 26850 will be needed to turn the outlook positive and negate the fall to 26000 and 25800 which we have been mentioning over the last few days.
DAX (12094.26, +124.06, +1.04%) on the other has to breach the 12200-12225 resistance region to move further higher. A strong rise past 12225 will pave way for 12450-12500 and will negate our bearish view of seeing 11800-11600 on the downside.
Nikkei (21759.58, +207.60, +0.96%) has risen sharply above 21500. The index has found strong support around 21300 and is likely to test 22000 in the near term. A strong rise past 22000 will pave way for 22500-22700.
As expected Shanghai (2951.68, +3.96, +0.13%) has risen towards 2950 and keeps the bullish view intact A rise to 3000-3050 looks possible now. Such a move will form a bullish inverted head and shoulder on the chart. The pattern will get confirmed on a subsequent break above 3050 which will then pave way for a rise to 3150 and 3200 over the medium term.
Both the Sensex (37880.40, -297.55, -0.78%) and Nifty (11234.55, -78.75, -0.70%) failed to see a follow-through rally yesterday. The near-term outlook is mixed for the indices. Nifty might remain mixed and range-bound between 11100 and 11400 for some time. Sensex on the other hand can trade in the range of 37500-38500.
COMMODITIES
Crude oil and Copper trade higher while Gold and Silver have come down as immediate resistances seem to be holding well. OPEC secretary general yesterday said that a deeper cut in oil supplies would be among the options for OPEC and its allies to discuss in the December meeting scheduled on 5th and 6th as forecasts pointed out slower growth and possibly a lower demand for oil next year.
Brent (59.24) and WTI (53.68) have risen to the upper end of our expected range of 60-56 and 51-54 respectively. It would be crucial to watch if Brent and WTI manage to break above 60 and 54 respectively as that would be bullish for oil prices in the medium term. While resistances hold, sideways consolidation could remain intact.
Gold (1500.30) and Silver (17.59) have come down from levels seen yesterday. Gold is holding well below resistance near 1525/20 and while that holds, a further fall towards 1480-1460 is on the cards for the early sessions next week. Silver too has resistance near 18 and while that holds, the price could fall towards 17 in the near term.
Copper (2.6115) has risen in line with our expectations and could test initial resistance near 2.6250. Either a fall from 2.6250 is possible or we could see a test of higher resistance at 2.65 before a fall is seen in the medium term.
FOREX
Currency pairs have crucial resistances coming up and while they hold a fall looks likely in the near term. Dollar Index has fallen and looks bearish opening up chances of a possible rise in Euro towards 1.1075-1.110. Dollar Yen has crucial resistance at 108 but could rise past it if Nikkei moves up sharply. EURJPY is trading just below resistance at 119 and could soon face rejection. Aussie and Pound could head towards respective resistances while Dollar-Rupee could trade sideways. Yuan could strengthen a bit in the near term.
After testing resistance at 99.25 on 8th October, Dollar Index (98.65) has come down and looks bearish for the near term. It would be important to see if the index bounces from decent support at 98.50 or falls further down to target 98 on the downside. A fall towards 98 is more preferred just now as we negate a rise towards 99.60/75 which was considered while the index remained above 98.75.
Euro (1.1017) has broken above 1.10, contrary to our expectation of seeing a rejection from there. The current break above 1.10 needs to sustain to take Euro higher towards 1.1075-1.1100 in the near term. View is bullish for Euro while above 1.10.
Dollar-Yen (107.95) is trading near resistance at 108 and if that holds, we could see a fall towards 107 again in the near term. Falling Dollar Index could eventually drag down Dollar Yen in the near term but note that if Nikkei rises sharply past 22000, Dollar Yen could continue to trade higher. We would watch price movement in Nikkei closely. Only on a break above 108, we would look for fresh target on the upside.
EUR-JPY (118.94) has also risen sharply only to test daily candle resistance at 119. A rejection from here could pull down EURJPY towards 117 next week. View is bearish while 119 hold.
Aussie (0.6777) and Pound (1.2437) have both risen sharply from respective supports at 0.67 and 1.22. Aussie needs to rise above 0.68 to keep the rising momentum intact while Pound could test 1.26 on the upside. Very near term is bullish. Watch resistances near 0.68 and 1.26 respectively.
The USDCNY (7.099) is trading below 7.10 and while that sustains, a fall towards 7.05 or even lower can be considered for the near term. View is bearish towards 7.05.
Dollar-Rupee (71.08) is trading below important near term resistance at 71.25 and while that holds, we continue to look at ranged trade between 71.25 and 70.95. Preference is for an eventual break below 70.95 to test 70.73/65 in the medium term.
INTEREST RATES
Increased risk aversion in the market on hopes to see some positive outcome from the US-China trade talk has taken the yields sharply higher. Both the US Treasury and the German yields have surged across tenors yesterday and have room to rise further in the near term. The 10Yr GoI (07.26 GS 2029) remains stable and need to see if it can rise past 6.70% to negate the expected fall or not.
The US 2Yr (1.54%), 5Yr (1.48%) and 10Yr (1.66%) were up 8 bps each while the 30Yr (2.16%) rose by 7 bps. Both the 10Yr and 30Yr have risen beyond their respective near-term resistances at 1.63% and 2.10% mentioned yesterday. Both the 10Yr and 30Yr can move further higher towards 1.75% and 2.25% respectively in the short term.
The German 2Yr (-0.73%), 5Yr (-0.70%), 10Yr (-0.47%) and 30Yr (0.04%) have surged across tenors. The 30Yr has a key resistance near current levels at 0.06% while the 10Yr has room to test -0.40% on the upside. It will have to be seen if these resistances hold and drag the yields lower or not.
The 10Yr GOI (6.6860%, 07.26 GS 2029) looks mixed in the near-term and has been stuck in between 6.65% and 6.70% over the last couple of days. A strong break above 6.70% will turn the outlook bullish for a rise to 6.75% and 6.80% which in turn will negate our bearish view of seeing a fall to 6.55%-6.53% and 6.50%. We will have to wait and watch.
The Indian 10Yr (06.45 GS 2029) GoI has closed at 6.4636% yesterday.
