STOCKS
Overall the indices are in an uptrend but could face some consolidation or correction in the coming sessions.
Dow (22296.09, -0.24%) moved back from levels near 22200 yesterday but could again try to test 22200-22100 levels in the near term.
Dax (12594.81, +0.02%) has faced rejection in the last 2-sessions from 12650 and while the resistance near 12675-12650 levels holds, Dax could be headed lower towards 12500 in the coming sessions.
Nikkei (20382.53, -0.07%) is trying to rise from levels near 20300 and the index would try to attempt to break above 20500. As mentioned earlier, 20800-20700 would be the upside limit for Nikkei in the medium term. For now, sideways consolidation within 20200-20500 region is possible.
Shanghai (3340.91, -0.02%) could test 3300 in the next couple of sessions before pausing. Only on a break below 3300, do we look at 3250-3200 levels; else a bounce from 3300 could also be expected.
Nifty (9872.60, -0.92%) has 21-week MA support near 9770 and while that holds, a slight bounce in the index is possible in the next few days. But in case the index breaks below 9770, the fall could extend to much lower levels of 9700-9600 in the near term.
COMMODITIES
Market expects extension of output cuts by crude oil producers which could fuel in improvement in demand in the near term. Some expectations of continuation of the bear market seem to be negated just now while there could be more room on the upside for the oi prices to rise. News states a fall in the global inventory levels and a possibility of a potential squeeze in oil supply if the Kurdish crude flows are disrupted after the regions independence vote.
Brent (59.33) and WTI (52.24) have both shot up in the last 2-sessions breaking above our expected levels of 57.50 and 51.00 respectively. While the upside momentum continues, Brent could move up towards 62 while WTI may rise towards 52.75 or even higher in the near term.
Brent-WTI spread (7.12) could test decent resistance near 8 and could come off slightly from there.
Gold (1310.54) and Silver (17.19) are also up sharply and while the US Dollar continues to remain below 92.70, Gold could rise towards 1320 in the next few sessions.
Copper (2.9545) could trade within the broad 3.05-2.90 region for the coming sessions. While an attempt towards 3.00 is possible, a fall to 2.90 or lower is also possible in the near term.
FOREX
Fresh tensions between North Korea and USA is threatening to break the uptrend in the Euro (1.1860) and the downtrend in the Dollar Index (92.575). It has also pushed Dollar-Yen (111.64) lower.
The support at 1.1890 mentioned yesterday on the Euro has already been broken and further dip to 1.1800 is imminent. Deeper decline towards 1.1750-10 would be triggered if 1.1800 is broken. The Dollar Index can rise further towards 93, but may not break above that easily.
Contrary to expectation of rise towards 113.50, Dollar-Yen (111.64) has fallen breaking below 112.00. Looks indeterminate now and may range sideways between 110.50-113.00 for some days. The Euro-Yen (132.35) may now dip towards 131, negating an immediate rise towards the 136 target mentioned yesterday.
Dollar strength has weakened the Pound (1.3481) a bit, bringing the projected rally to 1.38 into question. Beware of further decline if immediate Supports at 1.3430-00 breaks.
Suspicion is increasing regarding the Aussie’s (0.7943) strength. But, we will give it the benefit of doubt while the mentioned Support at 0.79 holds. Let us see how it fares this week. Perhaps the uptick in Gold (1310) may help it a bit.
Dollar-Yuan (6.6209) has risen well past 6.61 and may move up to 6.65 also over time. Dollar-Rupee (65.1050) bounced well from above 64.70 yesterday and is likely to see 65.25, possibly higher, today.
INTEREST RATES
Good dip in US yields overnight, probably as reaction to the fresh North Korea/ USA tensions, as money seeks "safe havens". The US 5Yr (1.83%), 10Yr (2.22%) and 30yr (2.76%) are all down 3-4 bp and further rise this week is unlikely as the Resistances mentioned yesterday are likely to hold. The Yield Curve has steepened a bit with the 30-5 (0.93%) and 30-10 (0.55%) moving up from 0.89% and 0.50% respectively yesterday.
German 10yr (0.40%) and UK 10Yr (1.33%) have also dipped as the market turns a little risk averse.
The German-US 10yr Spread (-1.82%) had dipped below -1.85% also yesterday. It has bounced a little bit today but we note emerging weakness in the German-US 2Yr Spread (-2.14%) which could be breaking horizontal Support near current levels. This would undermine the Euro further.
