STOCKS
Dow (21812.09, -0.40%) dipped yesterday after threat from Trump to let the US government shut down over funding for a border wall. The Dow index slipped 87 points yesterday and if it remains below 21900, chances of testing 21670-21600 comes into the focus again. A medium term top seems to have been made near 22179 earlier this month and while that holds, we would have to remain cautious for seeing some more dips on the downside.
Dax (12174.30, -0.45%) is trading above weekly support levels of 11980 which could take the index to higher levels in the coming sessions. A break below 11980, if seen could extend the fall from levels near 13000 to lower levels of 11700-11600 in the coming weeks. Watch price action near crucial support at 11980 just now.
Asia-Pac likely to remain bearish in the near term. The stock indices are all set on extending the downside correction before attempting on any recovery just now. Nikkei (19408.80, -0.13%) trades below 19650 and while it remains below 19650, the fall that started near 20000 could continue towards 19000 levels in the near term. This could also lead to a fall in the Dollar Yen (109.16) in the coming sessions.
Shanghai (3283.58, -0.13%) could start off its corrective mode while resistance at 3300 holds. A fall towards 3260/50 looks likely just now. Unless a break above 3300 is seen, we expect a short corrective fall in the coming sessions.
Nifty (9852.50, +0.89%) closed above 9850 yesterday but is likely to remain range-bound within 9700-9900 region for a few more sessions. Immediate support and resistance levels are visible at 9700-9680 and 9900 levels respectively. We would suggest to remain cautious as the downside vulnerability is still intact while below 9900.
COMMODITIES
Gold (1289) was unable to move beyond its key physiological resistance of 1300. Thus it could remain in a sideways channel of 1275-1298 regions for rest of this week. Silver (16.93) is also trading within the range of 16.50-17.05 regions. Only a daily close above 17.05 could open up 17.50 levels.
Copper (2.98) moved up but still within the narrow range of 2.85-98. Only above 2.98, higher resistances of 3.05 and 3.12 can come into consideration. We will remain bullish on copper while it is trading above 2.85 regions.
This is the 9th consecutive week of shortage in U.S. oil inventory and as a result Brent (52.55) moved up but still within the range of 47-54,narrowed from 45-55 last month.Only a close above 54 could open higher levels of 56 and 59 respectively . WTI (48.37) has also moved up along with Brent. We will remain bullish on Brent and WTI while they are trading above 47 and 46 regions respectively.
FOREX
Overall weakness in the Dollar and Pound continues. Dollar-Yen suggests Risk is still in the air.
The Euro-Yen (128.85) is largely stable as both the Euro (1.1805) and the Yen (USDJPY 109.17) have gained simultaneously against the Dollar. The Dollar Index (93.28) continues to consolidate sideways between 92.50-94.25, but may resume the overall downtrend while the Resistance at 94.00-25 continues to hold.
The mentioned Support at -1.81% on the German-US 10Yr Spread (-1.79%) has held well enough, lending a bit of a bounce to the Euro (1.1805). We need to see if the Spread will now move up further towards -1.75% or not, for which the market will be looking forward to Jackson Hole tomorrow.
Dollar-Yen (109.17) found Resistance near 109.80 itself early yesterday morning and is therefore likely to remain ranged between 108.60-109.80 for a few more days. In the longer term, the chances of an eventual break below 108.60 are higher. Keep an eye on this, as it suggests lurking danger. Maybe USA – North Korea?
The Pound (1.2800) hasn’t broken below 1.2787 as yet but remains bearish while below 1.2845-50. It looks particularly bearish against the Yen (GBPJPY = 139.60) but may have Resistance against the Euro near the current level (EURGBP = 0.9230). This last is a cautionary note against our expressed bullishness on the EURGBP over the last few days.
The Aussie (0.7903) has managed to avoid a fall, bouyed by the rise in the Euro. It appears ranged between 0.7830-7950 for the next few days, within the still intact overall uptrend.
As expected, the Chinese Yuan (USDCNY = 6.6588) has strengthened a bit more since yesterday. We target 6.6150 on the downside. Dollar-Rupee quotes 64.05/10 on the NDF, after having closing near 64.11 yesterday.
INTEREST RATES
The US yields are hovering around their crucial areas of supports as investors are focusing on the Jackson Hole conference this week, specially Fed Chair Yellen’s speech on Friday 9.30 PM IST to get insights on the outlook for monetary policy.
Euro moved up in line with our expectation. the German-US 2Yr Spread (-2.02%) and the German-US 10Yr Spread (-1.80%) are looking stable at current levels and rise towards -1.98% and -1.76% respectively, which could be beneficial for Eur as well. Besides market is waiting for ECB President Draghi’s speech on this Saturday at 12.30 AM IST.
The Japan 5Yr (-0.10%) and the 10Yr (0.03%) are also stable at this moment. The Japan 30Yr (0.82%) might find support at current levels and could move upward towards 0.90%.
Muted price action had been seen in the UK yields . The 10YR (1.06%) and the 20YR (1.61%) both have scope of testing 1% and1.50% on the downside.
