STOCKS
Overall the equity indices look bullish except Dow and Dax which could dip in the coming sessions before again starting to move up.
Dow (25044.29, -0.055%) and Dax (12548.57, -0.10%) have both dipped slightly and continue to head towards 24750 and 12400 respectively as mentioned yesterday. The dip is slow and gradual indicating that the current fall could be short lived. Dow and Dax could get some support near 24750 and 12400 levels. For now, near term looks bearish.
Nikkei (22534.03, +0.61%) has bounced back from support at 22400, on line with our expectations and could be headed higher towards 22800-23000 levels again while the rise sustains. Immediate view is bullish. This could also pull up Dollar Yen (111.23) to higher levels in the coming sessions.
Shanghai (2906.11, +1.63%) has risen finally above 2850, which could possibly mean that the immediate bottom has been made. Resistance is now visible at 2950 which if holds could produce a small rejection within an overall medium term uptrend.
Nifty (11084.75, +0.68%) closed higher yesterday and while above 10950, the index could continue to move up towards 11100-11200 in the coming sessions. Near term looks bullish.
COMMODITIES
Not much strength is visible in the commodities just now. Crude and Gold prices look bearish while Copper could remain ranged for a few sessions.
Nymex WTI (67.66,-0.34%) has dipped a bit and has room on the downside towards 66-65 levels while Brent (72.77, -0.36%) could also be pushed lower towards 71 to test immediate supports before resuming the rise in the longer run.
Gold (1223.20, -0.20%) came down again to test 1220. While below 1240, there is scope of testing 1200 in the next few sessions. Near term could be bearish to sideways in the 1200-1240 region.
Copper (2.7590, +0.46%) is unable to rise above 2.80 just now and could remain ranged in the 2.80-2.65 region for some more time.
FOREX
Euro (1.1685): Resistance near 1.175 held well for the Euro and it might now move down towards support near 1.16. It looks like the Euro could break out of its contracting range (since May) very soon. The ECB Meeting is on Thursday and could help in deciding the next course of movement for the Euro. In the recent past, Draghi has been persistently maintaining a dovish tone while talking about the QE’s end or about the rate hike in 2019 – if that continues on 26th July, the Euro’s break of range could be downward ie below 1.160-1.155.
Dollar Index (94.63): The support near 94 held well for Dollar Index yesterday. It is now trading near the 21 days MA near 94.6. A further rise towards 95.00-95.25 in the next 2-3 sessions could take place. Resistance @ 95.5 is the crucial level which needs to be watched. A decisive breach above that would correspond with a break below 1.155 for the Euro.
Dollar Yen (111.25): Support on daily candles has held perfectly for the Dollar Yen. This indicates that a last leg of upmove in the rally since March might be still left, which might end near 114-115. With some correction expected in Japanese yields as well, we could see Dollar Yen rise towards 112 in the next couple of sessions. Note that on weekly candles it might again have to face the resistance near 112.5. A breach of 112.5 would make us more confident of a rise to 114 in the weeks ahead.
Euro Yen (130.01): With the Euro expected to move towards 1.16 and Dollar Yen expected to rise towards 112, Euro Yen could stay within the 131.5-129.5 range in this week. There is support on daily candles near 129.5, which should hold unless the Euro breaks below 1.155.
Pound (1.3097): A slight upmove towards channel resistance near 1.32 in this week is still possible. However the broader trend remains bearish. If it closes below the 89 weeks MA (1.3114) this week, then a gradual downmove to 1.29 in the next week would be quite possible.
Dollar Rupee (68.86): Support at 68.65-60 holding. See a range of 68.60-69.00 this week, with growing chances of a run up to 69.30-60 after that. It could open higher near 68.90-95 since its trading higher on NDF.
INTEREST RATES
The Bank of Japan’s indication that it might modify its interest rate target has led to a steep rise in Japanese yields with the 10 year yield (0.078) testing resistance on short term chart near 0.09%-0.10% yesterday. Till now, the Bank of Japan has been firm in keeping yields below the 0.10%-0.11% level. Till there is some further indication from the BoJ about its new target level, Japanese 10 Year yield could see some correction towards 0.07%-0.06% in the days ahead.
Since inflation in the Japanese economy is yet to reach the 2% target set by the BoJ, it is expected that there won’t be much tightening ie the interest rate upper targets might not be too different from the current 0.10%-0.11% levels.
As mentioned yesterday, the rise in Japanese yields has led to a rise in US Yields as well – investors might have moved out of US bonds and towards Japanese bonds, leading to a rise in yield for US bonds.
US 10 year yield (2.956%), 30 Year (3.093%), 5 Year (2.8176%), 2 Year (2.6245%):
Both US 10 Year and 5 Year yields are close to short term resistance levels. US 10 year yield near 2.95%-3.00% has tended to attract investors, quickly driving down the yield again. If the 10 year yield falls quickly again or stays stable around 2.95%, it would be an indication that the 3% barrier is still strong and a gradual downmove towards 2.75%-2.70% could still be possible. However, a quick rise above 3% from here would imply that the 3% barrier has lost some of its strength and that, we may expect the 10 year to move beyond the previous high of 3.125% in the rest of 2018.
