STOCKS
Overall global equity indices look bearish for the coming sessions.
Dow (25090.48, -0.34%) has come off in line with our expectations and could test support near 25000. Watch price action there as a break below 25000 would be bearish for the medium term. But if 25000 holds, we could see a bounce from there towards 25500 again.
Dax (13010.55, -0.74%) did not see follow through buying above 13100 and came off from the close of 13107 seen on Thursday. Failure to see immediate rise above 13100 would be indicative of medium term bearishness towards 12800 or even lower.
Fall in Dollar Yen to 110.38 has prevented a rise above 22800 in Nikkei (22662.68, -0.83%) bringing it sharply down to current levels of 22660. While the fall sustains, a test of 22400-22200 looks possible.
Shanghai (3021.90, -0.73%) is almost stable at current levels and needs to dip below 3000 to indicate medium term bearishness. We would watch closely the price movement in the 3000-3050 region as there is lack of clarity on further course of direction just now.
Nifty (10817.70, +0.089%) needs to see an immediate break above 10850 to move up in the coming sessions towards 10950. While immediate daily resistance holds at 10850, there is some scope of a fall towards 10650 on the downside.
COMMODITIES
Commodities look weak too. Gold could come off in the medium term while the Crude prices could find some support below current levels in the next few sessions.
Brent (72.62) and WTI (63.80) have fallen sharply in the last couple of sessions. WTI looks bearish towards 62 on the weekly candle charts while the weekly line charts looks strongly bearish with a possibility to test 60 or even lower. Brent may test weekly support of 71-70 before bouncing back from there.
Gold (1279.80) has broken first support at 1280 and while it sustains to move lower and breaks below 1275, we may see chances of 1260-1250 opening up on the downside for Gold in the medium term.
Silver (16.49) has also fallen sharply and could head towards 16.25-16.00 in the near term. View is bearish.
Copper (3.13) has come off further from levels near 3.20 and could test immediate support near 3.10. Failure to bounce back from 3.10 would lead to a full retracement of the rise from 3.00 to 3.30 in the longer run.
FOREX
Euro (1.1585): The ECB’s plan of keeping key rates constant till 2019 summers made the Euro fall from 1.185 to a low near 1.155. Support at 1.155 is holding for now. Euro could test levels near 1.165 this week, while above 1.155-1.150.
Dollar Index (94.89): The ECB policy-induced Euro fall and a strong US Retail Sales data release led to rise in Dollar strength last week. This week could see a downmove in the Index towards 94.3-94.2, while it stays below resistance near 95.5.
Dollar Yen (110.44): Dollar Yen tested a high near 110.9 on Friday, thereby testing resistance on daily candles and daily line chart. In this week, it could test higher resistance near 111.5 on 3 day candles, which is a crucial long term resistance level and is likely to hold.
Euro Yen (127.93): Euro Yen continues to trade near horizontal support on weekly line chart. Targets of 111.5 and 1.165 on Dollar Yen and Euro respectively implies levels near 129.8-130.0 for the Euro Yen, which corresponds to a test of resistance on daily candles. While below 130.5, Euro Yen is looking bearish in the medium term.
Pound (1.3264): Pound could be bearish towards 1.30 in the medium term. However in this week, there are equal chances of it moving up to test resistance on daily candles near 1.335-1.340 or moving down towards 1.315.
Dollar Rupee (68.015) : Dollar rupee looks bullish towards 68.25 but the rise could be gradual.
INTEREST RATES
Last week, US Fed had hiked rates by 25 bps. Although the rate hike was expected, the language in the policy statement turned out to bemore hawkish than expected. The likelihood of 2 more rate hikes this year has increased beyond 50% for the first time this year. This hawkishness was seen in a rise in the US 10 Year yield towards 2.97%.
The US 10 Year yield (2.91%) seems to be breaking support on medium term chart. If this break happens, our earlier forecast of medium term bearishness towards 2.60%-2.55% might come into play.
US 10 – 2 Year yield Spread (0.367%) has broken long term support near 0.4% against our expectation. If this break persists, it could be negative for the US economy.
Last week, the ECB came out with a mixed policy. The end of quantitative easing was expected by the markets – however that was overpowered by its dovish stance on interest rates, which led to a fall in the German 10 Year yield towards 0.4%.. On medium term chart, the German 10 Year yield looks bearish towards 0.3%; but for that, it would have to break support on short term chart near 0.4%
