STOCKS
Dow (24024.13, -1.74%) has fallen sharply from levels near 24448 seen yesterday contrary to our expectation of moving up from immediate support near 24300. A fall towards 23500-23200 is possible in the next 3-4 sessions. Near term looks bearish.
Dax (12550.82, -0.17%) is down slightly while the resistance near 12650 seems to be holding well for now. Note that the Dax is stuck near important levels. A break above 12650, if seen could take it higher in the medium term towards 12800, else a fall to 12400 and lower looks poasible. 12650 is a strong medium term resistance which would be difficult to break on the upside just now.
Nikkei (22134.17, -0.65%) has dipped a bit too and while the resistance Near 22600 holds on the 3 day candles chart, a fall towards 21400 seems to be a possibility. While below 22600, the index remains bearish.
Although Shanghai (3115.70, -0.42%) has come off a bit, the 3 day candle chart shows huge buying pressure at levels near 3050, looking at the last 2 candles. And while 3150 holds strong, Shanghai could spend sometime in the 3050-3150 region trading sideways in the next few sessions. Near term is likely to be in a consolidating mode.
Nifty (10614.35, +0.28%) closed above 10600 again yesterday but may not sustain these levels for long. We stick to our bearish view towards 10450-10400.
COMMODITIES
Resistance near 76 seems to be holding on Brent (73.87) as seen on the 3-day candle charts. If that holds, the price could be pushed down to test 72-71 on the downside.
Nymex WTI (67.67) tested the resistance as visible on the daily candles and while that holds, either the price comes off towards 66 or remains stuck in the 67-70 region for some time.
The near term upside could be capped at 1340/50 for Gold (1330.80) with chances of a fall towards 1320-1300 in the coming weeks. A break above 1350 looks less likely for the near term.
Copper (3.1375) is trading above 3.1250. On the weekly candles, resistance near 3.20 seems to be holding well and while that holds, a fall towards 3.10-3.05 looks more likely in the medium term. There is some scope that the price moves up towards 3.17-3.20 but thereafter the direction is on the downside.
FOREX
Dollar index (90.845) has dipped from levels near 91 but continues to trade above crucial resistances on 3 day candles and daily line chart near 90.50-90.75. It could still struggle to breach the 90.5-91.0 zone and turn bearish in the near term from here. The recent upmove in US yields, if it continues, (see Interest Rates below) could possibly be Dollar positive and take the Dollar Index past 91.
In our Apr ’18 Euro report, we had preferred Dollar bearishness till May/Jun, after which it could turn bullish. The downmove from 103 since Dec ’16 should end some time in this quarter.
Euro (1.2225): Euro continues to stay within the crucial 1.225-1.215 zone and a decisive break below 1.215 might be difficult in the near term. If the Euro rises past 1.226, our near term preference for bullishness would come out to be correct and it could again target levels near 1.24. The ECB meeting tomorrow could be a market mover for the Euro and needs to be watched closely.
In our Apr ’18 Euro report our preference was for bullishness in the Euro till May/Jun. The upmove from 1.045 since Dec ’16 could start seeing a significant correction sometime in this quarter.
Dollar Yen (108.90) : Dollar Yen might be getting some resistance around the 21 WMA (108.93) and could dip from current levels. As mentioned yesterday, upside could be restricted by 110 in the short term, after which it should turn bearish.
Euro Yen (133.14) has risen above 133 thereby breaching resistances on daily and 3 day candles. It could still end the week below 133 if it stays below the 21 weeks moving average near 132.95. Looking at the Euro and Dollar Yen – Euro could turn bullish towards 1.225 and Dollar Yen could dip towards 108.5, giving us a target of 132.91 on Euro Yen.
Pound (1.3981) is pausing in its downmove towards crucial long term support level near 1.385 on weekly line chart. However, we expect it to test this level by next week possibly. If this support also breaks, Pound could turn very bearish in the medium term. However, our preference is for it to hold, in which case, we could see a rally towards long term resistance level of 1.46 in the weeks ahead.
Dollar Rupee (66.48): Overbought at current levels. Possible Resistance at 66.30-50. Might dip to 66.30 or maximum 66.00.
INTEREST RATES
The US 10 Year Yield has hit the the psychologically important 3% level. Whether it comes off from here again or continues its rise could be very important for bond markets. The ECB meeting tomorrow could be very important for the course of US yields. Any hint of hawkishness from Draghi could further raise US yields. We repeat that the recent upmove in US yields has happened on back of positive sentiment around the US economy’s growth (reflected in data releases of the last 2 weeks: Industrial Production, Capacity Utilization, US Retail Sales data, unemployment claims data and the Fed minutes). In addition, Crude’s rise towards 75 is continuing to increase inflation expectations and fuelling the rise in yields. The US treasury is also auctioning almost 370 billion dollars worth of notes and short term bonds this week – which could be another factor for bullishness in yields in the near term.
US 10 Yr Yield (3%), 30 Yr (3.179%), 5 Yr (2.8278%), 2 Yr (2.4878%):
The US 2 year yield (2.4878) could move further towards 2.50% and then see a dip towards 2.40%-2.35% soon.
The 10 Year yield (3%) could still come off from this important level and move back towards 2.95%-2.90%. If it rises higher towards 3.05%, then it could quickly move towards 3.20% after that.
The 30 yr yield has continued to stay below crucial resistance near 3.2%. We have been saying that a decisive breach of 3% on the 10 year yield could correspond with a breach of 3.2% by the 30 year yield. Since the 30 Year yield is still respecting this resistance, the 10 Year yield might also pause around 3%.
