STOCKS
Shanghai has fallen breaking crucial 3000 support indicating further bearishness. Nikkei, Nifty and other Asian equity indices could follow soon. Dax and Dow are also trading lower and could also be dragged down in the near to medium term.
Dow (24987.47, -0.41%) and Dax (12834.11, -1.36%) are trading lower. Dow has immediate support near 24750 and while that holds, there is a slight chance of a bounce back to higher levels. A break below 24750 would turn strongly bearish for the medium term. Similar support on the Dax is seen near 12700, which on a downside break would trigger bearishness.
Asian equities have been falling for the last few sessions and are indicative of bearishness for the near term. Nikkei (22482.89, -0.87%) is heading towards our mentioned 22400-22200 target. A break below 22200 would take it to much lower levels in the near term.
Shanghai (2961.78, -1.98%) has led the Asian equities being the first to break immediate support at 3000 and to indicate upcoming bearishness in the overall indices across major currencies. Shanghai is likely to test 2900 in the coming sessions.
Nifty (10799.85, -0.17%) continues to remain stable near 10800. A sharp down move is required to take it lower towards 10600.
COMMODITIES
Brent (74.99) and WTI (65.99) have recovered a bit from the recent fall. WTI may head towards 67 while Brent could test 77 resistance in this week.
Gold (1283.51), if falls below 1275-1270 could open up chances of testing 1250/40 on the downside. For now there could be some stable movement near current levels.
Copper (3.1170) has dipped some more from 3.13 seen yesterday. Looking at the bearishness in Shanghai and Aussie, Copper could also move down in the near to medium term. A break below 3.10 could take it down towards 3.07-3.05 in the coming sessions.
FOREX
Euro (1.1634): As per expectation, Euro has risen towards 1.165 and could test levels near 1.167 in today’s session before dipping towards 1.162 again. Last week the ECB’s decision to keep key rates constant till 2019 summers was perceived to be dovish and led to a fall in the Euro from 1.185 to 1.154.
Dollar Index (94.596): Dollar Index could see a further dip towards 94.5-94.4, followed by a rise back towards 94.6-94.7. This week could see a gradual downmove towards 94.3-94.2, while it stays below resistance near 95.5. Last week, the Euro’s weakness and a strong US Retails Sales data release had led to a rise in the Dollar Index from 93.2 to a high near 95.1.
Dollar Yen (109.87): Dollar Yen has dipped after testing resistance near 110.9 on daily candles. It could see oscillation between 111.0-109.5 in this week and then break below support on daily candles (near 109.5-110.0) ultimately, which could make it bearish towards 107 in the medium term.
Euro Yen (127.84): Euro Yen has been testing crucial horizontal support on weekly line chart near current levels. A week close below this support (near 127) would be crucial for Euro Yen turning bearish towards 124 in the medium term.
Aussie (0.7407) has been falling sharply for quite a few sessions now and has immediate supports near 0.7370 and further down near 0.7325. These are likely to hold in the medium term with some hope of an upward correction in Aussie back towards 0.75. Near term looks bearish but downside could be limited to 0.7325.
Pound (1.3267): As mentioned yesterday, Pound could be bearish towards 1.30 in the medium term. In this week, it could target support near 1.31 on 3 day candles.
Dollar Rupee (67.99) : Dollar Rupee may test 67.75 on the downside while below 68.
INTEREST RATES
US 10 Year (2.88%), 30 Year (3.0173%), 5 Year (2.76%), 2 Year (2.52%):
The US 10 Year yield (2.88%) seems to be sustaining its break of support on medium term chart. Elevated US-China trade tensions might be a reason for a rise in risk-averseness amongst investors. As mentioned yesterday, this downmove might just extend till 2.60%-2.55% in the medium term.
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.
US 10 – 2 Year yield Spread (0.36%) continues to stay below long term support near 0.4%. The persistence of this break would suggest an impending slowdown 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%.
