STOCKS
Dow (24924.89, +0.91%) and Dax (12492.97, +0.61%) have risen sharply. Dow could test 25250 on the upside while Dax has interim resistance in the 12500-12600 region which if holds could push the index a bit in the near term before taking it higher towards 12800-12900 levels.
Nikkei (22483.13, +1.33%) is headed towards 22800 resistance. It would be important to watch price action near 22800 as that would be the driver for Nikkei in the medium term. A rejection from 22800, if seen would again take it down to 21400-21200.
Shanghai (2825.98, -0.44%) could slowly and gradually rise towards 2900-2950 in the medium term while above 2700. Medium term looks bullish.
Nifty (11023.20, +0.68%) rose sharply yesterday. Upside target for the near term is seen at 11200 before the index sees a short dip. 11200 is a decent resistance on the upside.
COMMODITIES
Brent (74.17, -0.38%) has support just below current levels and could bounce from here over the next few sessions targeting 77 in the near term.
Nymex WTI (70.34, +0.01%) is stable near 71. There is room on the downside towards 67-66 levels but we could see a short bounce from current levels before the crude prices fall further. Near to medium term looks bearish for WTI.
Gold (1247.10, +0.04%) is unable to rise up and is stuck in the 1260-1240 region. Some range trade within this region is possible in the coming sessions before the prices tries to move up further towards 1270/80.
Copper (2.7860, +0.32%) could come off in the near term towards lower levels of 2.70 which could be a decent support for the coming sessions.
FOREX
Euro (1.1671): As per expectation, the 21 days MA near 1.165 did provide strong support to the Euro yesterday, which was bogged down by weak German inflation data as well as by dovish ECB meeting minutes. US CPI’s monthly growth fell below expectations and might have provided some strength to the Euro. While it stays below the 55 days MA near 1.174, a break of 1.165 is possible, which could take it lower towards 1.16. A breach of 1.174 would be bullish. The preference is divided equally between both alternatives currently.
Dollar Index (94.83): Dollar Index could turn bullish towards 95 in the coming sessions if trade war rhetoric continues to rise. A fall in the Euro below 1.165 would take the Dollar Index past 95. However we still remain cautious on the Dollar Index and would wait for a break below 1.165 and then below 1.16 on the Euro before inferring a bullish Dollar for the next few weeks. Currently the bearish – bullish preference remains 50-50.
Dollar Yen (112.59): As per expectation, Dollar Yen is rising quickly after having breached crucial long term resistance near 112. As mentioned yesterday, it seems bullish towards horizontal resistance on weekly line chart near 114.0-114.5 in the next 3-4 weeks. This rise has taken place despite growing risk aversion, which is unusual since the Yen (regarded as a safe haven asset) often strengthens during such phases. Maybe, Yen strength could resurface after a test of 114-115. A target of 113 is possible for next week.
Euro Yen (131.36): Euro Yen could pause for a bit near current levels as there might be some horizontal resistance here. Higher up, it’s next target could be levels near 133.5 which could be tested quite quickly. In fact, a quick rise in Dollar Yen to 114 while Euro stays near 1.17 could result in Euro Yen moving up to 133.5. Let’s wait and watch how quickly Euro Yen rises from here.
Pound (1.3187): After testing resistance near 1.33 earlier in the week, Pound has continued its downtrend and could move lower towards 1.310-1.305 again next week. Levels near 1.305 are a crucial support zone, which when broken, could make Pound very bearish.
Dollar Rupee (68.575): Dollar Rupee is likely to test 68.40 today before bouncing back from there.
INTEREST RATES
US CPI increased 0.1% m-o-m in June against expectation of a 0.2% rise; whereas core CPI met expectations by rising 0.2%. However the record year on year rise by 2.9% has caught the market’s attention and is being considered another reason for the US FED to go ahead with 2 more rate hikes this year. This is contrary to the sentiment created by trade war fears. Unless there is some moderation from Trump on the trade rhetoric or by US Fed on its hawkish intent – it could lead to an inversion of the yield curve much sooner than what the markets are expecting.
US 10 year yield (2.855%), 30 Year (2.954%), 5 Year (2.755%), 2 Year (2.594%):
US 10 Year yield is still trading above the horizontal support zone of 2.84%-2.82%, but its inability to rise past 2.86%-2.87% inspite of decent US CPI and PPI data points to further bearishness in yields. The US Retail Sales data release next week becomes very important for the next move in US yields. In May, a strong Retail Sales release had taken the 10 year yield to a high of 3.125%.
US 2 year yield could be gearing up for a breach of resistance near 2.6% in the next 1-2 weeks as the murmurs of another rate hike in September get progressively stronger.
German 10 Year bond yield (0.357%) remains elevated and could move up further towards 0.4% next week.
