STOCKS
Dax looks strongly bearish for the near to medium term. Dow, Shanghai and Nifty may have little room on the downside before a bounce while Nikkei is trading above support levels and could start moving up next week.
Dow (25974.99, +0.087%) has been almost stable and could test 25500 on the downside before bouncing back again. Overall the trend on the daily candle chart may hold for some more time.
Break below the immediate support at 12200 on Dax (12040.46, -1.39%) came in as a surprise as we had expected a bounce back towards 12400+. On the contrary Dax looks strongly bearish now and while below 12200, the index is vulnerable to a fall towards 11800-11600 in the medium term. View is strongly bearish.
A test of 22200 is on the cards for Nikkei (22528.46, -0.23%) which could be seen by this week. The index could then start rising back towards 23000 from Monday onwards. Overall broad range of 22200-23000 is likely to hold in the near to medium term.
Shanghai (2706.90, +0.095%) is holding well below immediate resistance and is trading just near 2700. A break on the downside could take it lower towards 2650 in the next 3-4 sessions followed by a possible rise back towards 2750.
Nifty (11476.95, -0.38/%) could have some chances of holding above 11400 and bouncing back to resume its uptrend in the near term. Only a break below 11400 would open up chances of further fall towards 11200 before a fresh bounce is seen. The next 2-sessions this week is likely to remain bearish for Nifty.
COMMODITIES
Slight dip in the Crude prices and gain in precious metals and Copper is seen in current trade.
Worries over the Tropical Storm Gordon’s minor impact along Gulf of Mexico and Central Gulf coast could have aided a fall in Crude prices yesterday. Also there are talks of a possible period deadline ending today for the US tariffs on another $200 bln of Chinese Goods. We will have to be careful of another round of pressure building up on the EM currencies in the near term. Taking into consideration the overall global factors, upside seems limited for Crude prices in the near term.
Brent (77.09) and Nymex WTI (68.56) have dipped. As expected the resistance n Brent is holding and could push the prices to lower levels in the near term towards 76-75 while WTI could also be dragged down towards 66. Near term looks bearish.
Gold (1204.90) has risen back above 1200 and as mentioned yesterday the broad 1230-1190 range is likely to exist. Gold could re-attempt a rise towards 1215-1220 by mid-next week.
Copper (2.6280) could test 2.65 before again coming off from there. Broadly the 2.70-2.58 region is likely to hold in the medium term.
FOREX
A rise in Euro towards 1.17 could help in Dollar Rupee’s correction (possibly towards 71.20). However, crucial support near 95 on Dollar Index could yet again lead to Dollar strength.
After bouncing from support @ 1.1550, Euro (1.1645), as expected, has moved up further on both Germany and UK bending a little on Brexit, which makes a deal a little more possible. If it breaks above 1.165, there could be some resistance at 1.1700 as well. We expect the 1.165-1.170 resistance to hold and slowly push the Euro down again towards 1.1550 and lower. BUT, a surprise break above 1.1700 (if seen) would be significant. It would establish the 1.13 low (mid-Aug) as a medium-term bottom, and open up chances of 1.18-19.
Dollar Index (94.99) , as per our expectation, is testing support near 95 on daily candles. It could either rise back from here itself or from lower support near 94.5 on weekly candles.
Dollar Yen (111.32) is respecting resistance on daily candles near 111.50. However, while above 111, it could still rise towards resistance on weekly candles near 112.5 in the next 1-2 weeks. A break below 111 could lead to a test of support near 110.50-70 on 3 day candles.
Euro Yen (129.64) : As expected, Euro Yen has moved up towards 130. Preference is for a dip from 130. However, if Euro rises further towards 1.17 and Dollar Yen towards 111.50-112.00, then a test of resistance on daily candles near 130.5-131.0 could also take place. A week close below 129.44 (21 weeks MA) would be important for sustained bearishness.
Pound (1.2921): Crucial resistance near 1.305-1.310 is expected to hold in the near term. Some bullishness from current levels towards 1.305 now looks possible, given the progress around Brexit.
Dollar Rupee (71.755): Chances of topping out for a while from anywhere between 71.80 and 72.35. A rise in Euro to 1.1700 may help Dollar-Rupee to dip towards 71.20. Thereafter, depending on whether 1.17 holds or breaks, Dollar-Rupee could see a fresh rise from 71.20, or break below 71.20.
INTEREST RATES
The Indian 10 year GOI (8.05%) moved up to resistance near 8.12% yesterday and has dipped from there. We expect the dip to continue in the next 1-2 sessions.
Following news points are currently important in context of US Yields:
Improvement in US manufacturing data released on Tuesday (bullish for yields).)
USA and Canada’s inability to reach a trade deal (bearish for yields)
impending possibility of $200 bn worth of tariifs by USA on China
Note that the May high of 3.125% for the US 10 year yield might have been the year’s top.
US 10 Year Yield (2.90%) is still near the crucial 2.9% resistance level. As mentioned yesterday, a breach above 2.9% could lead to another test of the psychological barrier of 3%. A break above 3% is not preferred. Infact, the preference still remains tilted for a downmove towards 2.82%-2.75%.
