STOCKS
Dow (23580.78, +0.10%) looks positive to test 23750-23800 levels. Movement is narrow and almost stable so the rise may take a few sessions to materialize before again coming off towards 23500 or lower. Near term looks stable to bullish.
Dax (13000.20, -0.46%) is stuck in the 13200-12900 region as expected and the range is likely to hold in the near term. A re-test of 12900 is possible over the next couple of sessions before again rising back towards 13100.
Nikkei (22527.97, +0.14%) is also stuck in the narrow 22750-22250 region and a sharp fall towards 22190-22000 and lower would be needed to confirm an upcoming downtrend. While 22000 holds, there could be chances of moving up again in the longer run.
Shanghai (3312.71, -0.29%) is probably giving first signs of a sharp fall coming in the near term. While the index sustains below 3325, a fall towards 3280-3250 is on its way in the coming sessions.
Nifty (10399.55, +0.09%) could re-test 10500 over today and tomorrow but we are doubtful if a sharp fall would follow in the coming sessions. A 2-3 sessions corrective dip to 10200 is possible but the index could remain stable in the near term. a rise above 10500, if seen could open up higher levels keeping the index bullish for some more time.
COMMODITIES
Gold (1294.15) is trying to rise towards 1300 and there is enough room on the upside for the coming sessions towards 1320 and higher. Also note that the price could possibly see another down leg from 1300 before making a final rise towards 1315-1320 and higher.
Silver (17.02) is almost stable and could trade within 17.00-17.25 region for a while. Contraction in the near term is likely to be seen.
Brent (63.68) is trading above support near 63. While the price looks bullish towards 65-66 levels, WTI (57.76) is respecting the resistance near 59 and looks bearish for the near term. If the prices follow the mentioned view the Brent-WTI (5.91) spread could widen in the coming sessions.
Copper (3.1140) is testing support near 3.10 and while that holds, a rise back to levels near 3.20-3.25 is possible. Also note that 3.20/25 is a medium term resistance and may not allow a rise above 3.25 just now. A rejection from 3.25 back to 3.00 looks probable in the medium term.
FOREX
Dollar Index (92.908) saw a low of 92.49 yesterday, but has stayed above support near 92.70 and is currently trading around 92.90, indicating possibility of some sideways movement between 92.80 to 93.00 in the next couple of sessions, before it moves up towards the end of the week.
Euro (1.1900) is testing resistance near 1.19 on the weekly line charts. It has fallen slightly compared to yesterday’s levels around 1.192 but it is yet to be seen if this resistance will hold. With a weakening of German 10 yr Yields and bullishness in crude prices expected to boost dollar strength, the resistance should hold; however if it doesn’t, hen Euro could rise beyond 1.22 quickly.
Dollar-Yen (111.23) has moved down further with a strengthening of Japanese 10 yr yields (see Interest Rates below) and could be expected to test levels near 110 by next week. However, there are signs of dollar strength resurfacing, which could thereby lead to a quick reversal in trend from levels near 110.50.
Pound (1.3322) continues to trade just below resistance levels at 1.335 and looks like a slight corrective dip is in process of occurring, starting off another phase of range wise movement between 1.33 and 1.335.
Dollar Rupee (64.51) is likely to test 64.40 while below 64.60. Downside chances have increased just now as support near 64.60 has broken.
INTEREST RATES
Slight bounce in the 30-5Yr US yield Spread, from 0.69% yesterday to 0.72%, in line with expectation. A rise above 0.75% will reduce the market’s fear of further curve-flattening and the conjoined fear of recession.
We see Supports near current levels on the 5Yr (2.06%), 10yr (2.33%) and 30yr (2.77%). US yields have been softening as the market’s expectations of future inflation is muted, with 2018 inflation projected at 2.05% as compared to a projection of 2.10% for 2017. We could be wrong, but perhaps the market is not factoring in enough of a possible rise in Brent towards 67-68 in the coming weeks.
It will be interesting to see if the US Q3 GDP will come in near/ higher/ lower than the market expectation of 3.30% tomorrow.
The German 2Yr (-0.696%) has come down a bit from its Resistance near -0.69% mentioned yesterday. However, the Japanese 10Yr (0.039%) has moved up a bit more from 0.036% yesterday. Resultantly, the Germany-Japan 10yr Spread (0.31%) seems to be breaking the uptrend from -0.06% (Sep 2016). A break below 0.30% (if seen) will confirm.
The 10yr GOI yield (7.0563%) has moved up further. Market consensus seems to be veering towards higher rates now. It will be interesting to see if the SBI Treasurer’s contrarion view is borne out or not. Some consolidation between 7.10% and 6.90% is certainly possible.
