STOCKS
Dow (25415.19, +0.43%) has risen slightly and needs to remain above 25250 to keep the upside momentum active. A sideways movement or a dip to levels below 25250 could weaken the current upside pace and could negate immediate strength.
Dax (12805.50, +0.057%) could rise towards 13000-13100 on the upside before facing a rejection. For at least the next 2-3 sessions Dax looks bullish. Immediate support visible at 12700.
Nikkei (22674.32, +0.53%) spent some time trading sideways below important resistance at 23000. While the resistance holds, the index could continue to see range-trade. A break above 23000 is needed to negate bearishness over the medium term.
Shanghai (2873.57, -0.099%) is likely to come off in the near term towards 2800 or lower as immediate resistance could hold over the medium term. 2900-2950 is a crucial resistance zone.
Nifty (11356.50, +0.33%) continued to rise yesterday also and is headed towards the long term resistance near 11400-11500 region. This is crucial which if holds could bring a decent correction in the index for major part of August. Else, a rise above 11500, if seen could mean continuation of the current up move for the medium term. Nifty seems to be outperforming just now with its strong upmove. Price action near 11400-11500 would be important to watch.
COMMODITIES
Nymex WTI (68.35) could bounce from immediate support near 68. On the 3-day candles, there is little room below 68 but indicates a bounce back to higher levels in the next few sessions. Brent (73.89) came off sharply from levels below 76 and continues to trade lower. A test of support near 72.50 is possible now before the price moves back towards 76. Both the crude prices could soon move up again targeting higher levels of 72-73 and 76-78 respectively.
Gold (1231.30) has been slowly inching up in the last few sessions. A rise towards 1240-1260 is possible in the coming sessions.
Copper (2.8050) could rise towards 2.90 from where a short dip is possible. Overall ranged movement is likely to continue over the rest of the sessions this week.
FOREX
Euro (1.1684): As per our expectation, Euro moved up yesterday to test and slightly breach resistance near 1.174 on daily candles and today, has again dipped from there, continuing the sideways triangle consolidation in July. From the charts, it looks like this ranging could continue for another week before breaking on either direction. If the FOMC today drives some strength into the Dollar, the break could well be below 1.16. Currently, preference only slightly tilts towards bearishness.
Dollar Index (94.59): As expected, support near 94.30-35 on daily candles held for the Dollar Index yesterday and it is now trading near the 21 days MA, which has provided some resistance in the last 6-7 sessions. All eyes are now on the FOMC meet today, which could strengthen the Dollar Index towards 95.0-95.5. Whether it breaks resistance in the 95.0-95.5 zone will determine if it becomes bullish in the weeks ahead or not.
Dollar Yen (111.88): The Bank of Japan yesterday maintained status quo in its policy decision, which thereby did not strengthen the Yen. Instead it weakened to levels near 111.96. With the FOMC later today, it could continue moving higher towards 112.5, where there is crucial resistance on weekly candles. If it breaks above 112.5, previous high near 113.18 could be approached quickly in the next 1-2 sessions.
Euro Yen (130.72): Against our expectation, Euro Yen saw a bounce from support on daily candles yesterday as the Dollar Yen moved up towards 112 and the Euro hovered around resistance near 1.174 longer than we were expecting. The resistance provided by the 55 weeks MA near 131.58 again comes back into the picture. A breach of 131.58 would require both Euro and Dollar Yen to break above 1.175 and 112.5 respectively. Looking at Euro Yen charts, this breach might well happen.
Pound (1.3110): Repeating yesterday’s comment about the BOE meet: The BOE meeting on Thursday is expected to see a historic rate hike, which seems to have been already factored in by the markets. Even though the broader trend for Pound looks bearish, we still need to see if Pound can decisively break below the 89 weeks MA (1.312) and then, below the horizontal support near 1.3050 on weekly candles. A break below these levels could even happen this week, in spite of the BOE policy release. The Pound trades quietly ahead of the FOMC and BOE meets as the markets possibly wait in anticipation.
Dollar Rupee (68.675): Showing 68.45/50 on the NDF. If it opens below support near 68.52 in the onshore markets today, there are chances of the dip extending to 68.30. Alternatively, a bounce to 68.75 could also happen. All eyes on RBI and FOMC.
INTEREST RATES
The Bank of Japan maintained status quo in its policy – keeping the target for Japanese 10 year yield at 0% and Japanese short term interest rates at -1.1% – but it also announced that its policy framework will be more flexible in future for the long term yield. This opens up the possibility for Japanese 10 year yield to be more reactive to positive news about the Japanese economy.
Infact, the Japanese 10 year yield (0.11%) has seen volatile movement after yesterday’s policy. First it dropped to 0.05% yesterday and now has again shot back up towards 0.11% today. If the yield climbs above 0.11%, that would be an extremely important development and could signal further bullishness.
The RBI policy decision today could move Indian yields. Consensus is only slightly in favour of a 25 bps rate hike. If that happens, the recent downtrend of the Indian 10 year bond yield (7.7722%) could pause.
US 10 year yield (2.97%), 30 Year (3.10%), 5 Year (2.85%), 2 Year (2.67%):
US yields trade quietly prior to the FOMC. Repeating yesterday’s comment: The US 5 year yield has broken above horizontal resistance near 2.82%-2.83%. Moreover, the US 10 year yield might just break above 3% if the FOMC appears hawkish to the markets. The possibility of the US 10 year yield testing 2.85%-2.80% on the downside is now reducing.
