STOCKS
Dow (24099.05, -0.27%) faces strong buying near 23750 and while that continues, the index could be pushed up towards 24750-25000 levels. Overall near term looks sideways to bullish while above 23750.
Dax (12612.11, +0.25%) moved up from levels near 12300 as expected and is now heading to re-test important resistance near 12650. Watch price action here; if a break above 12650 is seen, Dax could turn bullish for the coming sessions targeting 12800 on the upside; else a rejection from 12650 would bring it back towards 12300-12200 levels.
Nikkei (22436.46, -0.32%) has dipped from immediate resistance at 22600 and while that holds, a fall is possible towards 22200-22000 in the near term. If the index manages a break above 22600, it could test 23000 on the upside in the medium term. A fall from here could be in line with a fall from 110 on Dollar Yen.
Shanghai (3073.72, -0.28%) continues to accumulate some buying near 3050 and while that holds, 3050 could produce bounce towards 3125-3150 levels. Broad trade within 3150-3050 levels is possible in the near term. A break on either side of the 3050-3150 range would indicate further market direction in the longer run.
No immediate resistance is visible on the Nifty (10739.35, +0.44%). Looking at the slow and gradual rise in the past few sessions, if the index breaks above 10800, it could move up towards 11000 in the medium term.
COMMODITIES
Geo-political tensions about the Trump sanctions to Iran are in the air and increasing US supplies are expected to cap market gains. Brent (73.22) and Nymex WTI (67.50) are trading lower just now. Brent could get some support near 72.15 and while tat holds, another up leg in the prices is likely. A break below 72.15-72.00 would indicate an immediate top formation leading to some more dips in the medium term. WTI on the other hand has scope of testing 66 on the downside but could soon move up towards 68 in the medium term.
Gold (1310) has been coming off as expected. A fall towards 1300 is on its way in the next few sessions.
Copper (3.0770) looks bearish while below 3.08 and could move down towards 3.00-2.90% in the coming sessions. A break above 3.08 could keep the upside limited to 3.12-3.15.
FOREX
Dollar index (92.3650), as we had predicted, has risen to 92.5 (seeing a high of 92.57 yesterday) and might get some resistance here for a few sessions. The next few sessions could also depend upon the perception of the FOMC’s stance in its meeting later today. Although a rate hike isn’t expected today, expectation of further hawkish intent from the Fed could help the Dollar strengthen. Its next target on the upside in the medium term could be 94-95 (which corresponds to the 5th wave starting point of the downmove since Dec ’16). The upside could be capped till 94-95 after which the Dollar could dip.
Euro (1.2006) weakened further yesterday, seeing a low of 1.1981 and thereby testing support on daily candles near 1.198-1.200. There could now be a pause in the Euro’s downtrend for a couple of sessions. We don’t prefer a bounce for the Euro from these levels currently; rather it could creep down lower towards 1.195 in this week. The Euro’s medium term target corresponding to the Dollar Index’s target of 94-95 would be levels near 1.16 (which is the 5th wave starting point of the Euro’s upmove since Dec ’16) .
Dollar Yen (109.71) : Dollar Yen has moved up further in the upward channel on 3 day candles instead of dipping to 108.5 (which we had expected). As mentioned earlier as well, the current uptrend could be capped till 110.0-110.5, after which Dollar Yen could dip. In the next 2-3 sessions, we prefer a dip to 109 (support on daily candles) and rise back towards 110 thereafter.
Euro Yen (131.74) : In line with our prediction on Friday, Euro Yen has moved further down towards 131 (seeing a low near 131.5 yesterday). Our targets of 1.195 on the Euro and 109.0 on the Dollar Yen for this week suggests that Euro Yen could break below 131 to target 130. However, there is support near 131 on weekly candles which could prevent a test of 130. In that case, our prediction of 109 on the Dollar Yen could possibly go wrong, with levels of 110 being tested this week itself. Lets wait and watch.
Pound (1.3614), against our expectation, has broken below crucial long term support level near 1.385 on weekly line chart. This could prove to be a crucial break, making the Pound very bearish in the medium term. Next target on the downside could possibly be 1.35 (seen on daily candles).
Dollar Rupee (66.665): Overbought conditions had corrected to a considerable degree on Friday. Watch Support at 66.60 today.
INTEREST RATES
Draghi’s dovishness last week had led to a dip in US yields with the 10 Year moving back below 3%. However with the FOMC later today, we are expecting the Fed to express some hawkish intent (rate hike however is not expected), which could thereby again take yields higher this week. Our Apr ’18 US Treasury (available on demand) report predicts a medium target of 3.2%-3.3% (10 Year), 3.4%-3.5% (30 Year), 3.15% (5 Year) and 2.75% (2 Year). We also expect some more yield curve flattening in the next month followed by steepening after that, as yields bounce from long term supports.
We repeat that the upmove in US yields in April had happened on back of positive sentiment around the US economy’s growth and due to the rise in Crude towards 74-75.
US 10 Yr Yield (2.97%), 30 Yr (3.13%), 5 Yr (2.81%), 2 Yr (2.50%):
The US 2 year yield (2.5) has moved to the psychologically important 2.5% level and could now see a short term correction towards 2.45%.
The 10 Year yield (2.97%) had dipped below 3% last week but could possibly react to the FOMC today by rising back above 3%. Any sign of dovishness however could mean a retreat back towards 2.95%-2.90%.
