STOCKS
Slight correction seen in the stock indices today. But overall the indices look bullish in the longer run.
Dow (24700.45, -0.88%) came off from levels just below 25000. While 25000 holds, the index could test 24500 before attempting higher levels of 25000-25250 soon.
Dax (12417.13, -1.53%) came off from 12650 and could possibly bounce back from 12400-12300 levels again in the next few sessions. Overall view remains bullish with some corrective dips.
Nikkei (22174.92, +1.11%) could trade in the broad 21600-22800 region for the coming sessions. A break on either side would indicate further direction and could impact the movement in dollar Yen too in the longer run.
Shanghai (2816.94, +1.41%) could trade in the 2750-2850 region for some time. A fall towards 2700-2650 is possible in the medium term before the index finally starts rising higher.
Nifty (10948.30, +0.0096%) made fresh high yesterday and could stall near 11000 for some time. Overall there is enough room on the upside just now towards 11100-11200 levels.
COMMODITIES
Brent (74.62) and Nymex WTI (70.76) have both fallen sharply. Crude prices started falling yesterday after news stated that Libya’s National Oil Company would reopen its ports that had been closed since June. Also the US-china worries continue on further tariffs on $200bln of Chinese goods. Overall crude prices could trade lower in the next few sessions and could see some range trade in the near term.
Gold (1243.20, -0.10%) has fallen sharply and could remain in the 1240-1270 region for sometime. We expect 1240 to hold for now. A break on the downside, if seen would be vulnerable to a medium term downside targeting 1225 in the longer run. For now we may expect a bounce from 1240.
Silver (15.83, -0.05%) looks weak and may test 15.75 on the downside.
Copper (2.7620, +0.67%) has bounced from immediate support near 2.70 and while that holds, trade in the 2.85-2.70 is possible for the week. A break below 2.70, would make the price vulnerable to further downside towards 2.55.
FOREX
Euro (1.1672): The 55 days MA near 1.175-1.176 proved to be a stronger than expected resistance which has again pushed the Euro down towards 1.165. The 1.167-1.165 region is a strong support zone (1.165 being the 21 days MA). We prefer an upmove from here towards 1.17 in today’s session. The ECB minutes’ release will be crucial – it could drive strength into the Euro if it turns out to be hawkish.
Dollar Index (94.76): Against our expectation, Dollar Index breached the 21 days MA near 94.5-94.6 yesterday. There could be some resistance near 94.85, which could produce a dip. If it crosses 94.85, then it could again test 95 in 1-2 sessions. The US CPI data release today would be important – stronger than expected CPI inflation would strengthen the Dollar Index.
Dollar Yen (112.26): Contrary to expectations, Dollar Yen has breached the crucial resistance on long term charts at 112 and now seems bullish towards horizontal resistance on weekly line chart near 114.0-114.5. If US CPI beats expectations today, the rise to 114 could be quick.
Euro Yen (131.05): Euro Yen has breached the 21 weeks MA near 130.28 and the chances of bullishness towards 135 (resistance on weekly line chart) in the next 4-5 weeks has increased. Bullish projections for Euro and the unexpected bullishness in Dollar Yen support the view of an upmove towards 135.
Pound (1.3197): As per expectation, Pound has moved back lower towards 1.32 and could possibly continue the downmove towards 1.31 in the next 1-2 sessions.
Dollar Rupee (68.775): Dollar Rupee likely to hold above support at 68.70; may rise towards 68.90/95 in the near term. Needs to be seen if Brent Crude’s fall has some strengthening impact in today’s session.
INTEREST RATES
US PPI data came out stronger than expected yesterday. Markets now await the US CPI data release later today. Trade wars induced risk aversion continues to grow. US long term yields are near crucial support levels while the shorter term yields continue to rise, thereby flattening the yield curve.
US 10 year yield (2.85%), 30 Year (2.96%), 5 Year (2.76%), 2 Year (2.59%): As mentioned yesterday, US 10 Year yield needs to break horizontal support zone of 2.84%-2.82% which has been restricting a decisive downmove towards 2.75% since May. The 10 Year bond auctions yesterday have generated decent demand. Moreover, the fall in Brent Crude prices is bearish for yields. If CPI data today fails to surpass expectations, we might well see a break of 2.84%-2.82% soon.
German 10 Year bond yield (0.37%) has risen towards resistance in the downward channel on short term chart. It could move higher to 0.4% and then again dip from there. The ECB will release minutes of its previous meeting today – if the minutes turn out to be very hawkish, the German 10 Year could even breach 4%.
