STOCKS
Dow (25162.41, -0.54%) tested 25000 before bouncing back to close at higher levels. The channel on the 3-day chart is holding well and indicates some more room on the downside for Dow in the coming sessions. Near to medium term looks bearish for now.
Dax (12163.01, -1.58%) fell sharply breaking below support at 12300. While the index trades below 12300, there could be chances of a further fall towards 11800-11600 in the near term.
Nikkei (22228.51, +0.11%) is trading above 21800 just now which could be a decent support. But the 3-day chart suggests some more room on the downside towards 21600-21200 levels in the medium term. A fall below 21800 this week would open up chances of a fall towards 21600 or lower but while the index remains above 21800, a short bounce could be expected.
Shanghai (2720.02, -0.12%) came down to levels below 2700 with a gap down opening today. Although currently the index has bounced back to levels above 2700, a risk of testing 2650 remains on the cards. Near term looks weak.
Nifty (11435.10, +0.70%) is trading at an important juncture where if the index faces rejection from 11500, it could come off in the next week with a short corrective fall while a break above 11500, if seen would be continuation of the current rally towards 11600-11800 in the near term. For now we may respect the resistance at 11500 and prefer a fall towards 11300-11200 in the next few sessions.
COMMODITIES
Almost all major commodities have fallen sharply and are trading low. Near term view is bearish with little hope of stability.
Nymex WTI (64.96) has fallen sharply and looks bearish in the near term towards 62-60 levels. Brent (71.00) has immediate support near 71-70 and while that holds, downside could be limited just now. However, if the WTI falls sharply, it could drag down Brent prices to levels below 70.
Gold (1180.30) has almost reached to our expected 1175 levels on the downside. It would be important to see if the support near 1175 holds in the near term or takes the price to much lower levels in the medium term. A bounce from 1175 is preferred just now; else the current fall could continue towards 1150 or even lower in the coming sessions.
Copper (2.5940) fell sharply on a plunge in the Chinese stock index. While copper prices follow the Chinese markets closely, the weakness in the Yuan and Shanghai composite stock index may take copper prices low in the near to medium term. 2.48-2.50 seems to be a decent support just now and if it holds, there could be a short bounce in the copper prices in the next 2-3 sessions.
FOREX
There is some consolidation in Dollar strength currently underway. The Turkish Lira (5.976) has strengthened rapidly after Turkey secured a $15 bn loan from Qatar. Emerging market currencies are also seeing some strengthening. There is also some anticipation regarding Trump intervening (through Twitter) to stop the Dollar’s rise.
Euro (1.1375): Euro did break below the 200 weeks MA near 1.136 yesterday to a low of 1.1316. However, currently, it is again trading above 1.136 and could see a rise towards 1.14 this week and then towards 1.145 by next week.
Dollar Index (96.52): Dollar Index rose slightly above resistance on daily candles yesterday to see a high near 97 and is now consolidating for a bit. It could dip a bit more towards 96 and then again rise from there towards 97 next week. The 97-98 zone is an important resistance zone, which might just hold in the weeks ahead.
Dollar Yen (110.85): Dollar Yen has crucial resistance near 111 – trendline resistance on 3 day candles and 21 days MA (111.20) on daily line chart. While below 111.20, Dollar Yen is looking bearish towards 110.0-109.5 by next week.
Euro Yen (126.13): Euro Yen hasnt been able to move below its earlier low (May ’18) of 124.62. If Euro rises towards 1.145 by next week (as per our forecast above), Euro Yen could continue staying above 124.62. However, after that, a gradual downtrend towards crucial support near 123.75-123.00 is likely.
Pound (1.2718): Pound is looking bearish in the next 1-2 weeks towards 1.25-1.24
Dollar Rupee (69.90): Could trade in the 69.60-70.30 region in the next 3-4 sessions. A dip to 69.60 is possible before a rise to 70.30 is seen.
INTEREST RATES
Some consolidation in emerging market currencies after the recent crash might pause the fall in bond yields in US, Germany and Japan. However this could just be temporary – there is decent likelihood of some more volatility ahead, which could thereby keep bond yields in the lower end of their range. Moreover, US-China trade tensions look like they could only intensify moving forward – which could thereby enhance the ‘risk off’ sentiment.
US 10 year yield (2.87%), 30 Year (3.04%), 5 Year (2.75%), 2 Year (2.62%):
Repeating Tuesday’s comments: The US 10 year yield is trading above crucial support near 2.82-85%. It wasn’t able to break below this support in Jun-Jul ’18 either. Few more sessions of trading above 2.82% could imply that the support is still strong and that, another rise beyond 2.9% could happen anytime soon. While below 2.9%, a break below 2.82% and a test of support near 2.75%-2.70% could still take place.
Look out for important support on medium term chart near 0.3% for the German 10 year yield (0.30%) . A break below this support would make it bearish towards lower support near 0.18%-0.19%. The downside might well be restricted till 0.18% in the medium term.
