STOCKS
Dow (25857.07, -0.23%) dipped in yesterday’s session and could head lower to test 25750 as mentioned in the earlier edition. Some bearishness in the near term is a possibility.
Dax (11986.34, +0.22%) could pause near current levels for a couple of sessions before resuming the fall towards 11800-11700-11600 zone. Note that decent supports are visible near each of the mentioned levels which could bring in a medium term bounce for Dax. For the current week, Dax looks bearish.
Nikkei (22596.26, +1%) has bounced from support on the daily candle chart. The bounce if continues could take it higher towards 23000 resistance in the near term. Thereafter, it would be important to see in which direction the index breaks out to indicate signs of longer term movements.
Shanghai (2661.34, -0.31%) has fallen as expected. There is some scope of falling towards 2650, which if breaks could move down further towards 2630.
Weekly Nifty (11438.10, -1.30%) chart has support just above 11200 which could possibly be tested by next week before the index bounces back to move higher. Immediate support to look at would be 11400-11390 levels which if breaks could take the index towards 11200.
COMMODITIES
Crude prices are at important levels and could move either side, clarity of which is not there just now. Gold and Copper looks bearish for the near term but could eventually rise higher with weekly long term supports holding well.
Brent (77.51) moved up a little to test 78 again while WTI (67.58) is stable. As we have been mentioning for quite some time now, WTI has long term supports on the 3-day and weekly candle charts and could move up in the longer term while Brent needs to breaks above 78 to ensure an upmove. It would be interesting to see which one impact the other as a fall from 78 on Brent could prevent a rise in WTI just now and a sharp rise in WTI if seen could help Brent break above the crucial resistance at 78.
Gold (1199.00) is almost stable just now. 3-day and weekly candles show a scope of re-testing 1180 on the downside while the price is below 1210 resistance. At the same time long term support on the weekly line chart suggest bullishness in the longer term indicating that a fall towards 1180, if seen would be short lived and could soon pick up upside momentum.
Copper (2.6235) looks bullish in the longer run with the weekly long tern support holding just above 2.55. But on the shorter term charts a last leg of a fall towards 2.55 is possible before the price moves higher. A sustained rise above 2.65 would negate this fall however where the bullish momentum might pick up. For now, while Shanghai has some downside in the near term, Copper could possibly remain sideways if not see a fall.
FOREX
Resistances @ 1.165 on Euro-Dollar and @ 6.87 on USDCNY could help the Rupee consolidate below 72.65 in the next few sessions. However, we can’t yet rule out a quick rise to 73+ in the near term either.
Euro (1.1589) bounced from horizontal support near 1.153 yesterday. It should stay below immediate resistance near 1.165 in the next 1-2 sessions. Movement could be minimal till the ECB meet on Thursday.
Dollar Index (95.24) came off from resistance near 95.5 yesterday. It is likely to stay above support near 95 in the next 1-2 sessions. We prefer a rise past 95.5 in the coming weeks. The US CPI release on Thursday might well be the trigger for some more Dollar strength ahead.
Dollar Yen (111.36) has immediate resistance at 111.50, which if breached will lead it to the next important resistance near 111.75-80. However, looking at the 3 day candles, it seems that resistance @ 111.50 could hold for the time being – the preference is slightly tilted towards a test of support near 110.75 in the next 2-3 sessions.
Euro Yen (129.06) has immediate resistance on daily candles near 129.25. Moreover, given our above forecasts for EURUSD and USDJPY, if we keep the upper targets for both as 1.165 and 111.50 respectively (for this week), then the upside cap for Euro-Yen comes out to be 129.9. Preference is for a downmove to 128.5-128.0 in the next 2-3 sessions.
Pound (1.3032) breached resistance near 1.30 on daily candles yesterday and now has crucial resistance near 1.3050-1.3100, which we think should hold and push Pound down in this week back towards 1.295.
Dollar Yuan (6.87) could have some temporary resistance near current levels and could see a dip to 6.85 in the next 1-2 sessions. A breach above 6.87 would be bullish and could take it to 6.89 rather quickly.
Dollar Rupee (72.455): Dollar Rupee has scope of testing levels above 73 on a break above 72.80. Important levels to watch above 72.55 is 72.80 which may hold at first testing. But at the same time, given the current upward momentum, we cannot rule out 73 or higher in the next few sessions.
INTEREST RATES
India 10 year bond yield (8.1578%): Contrary to expectation, the GOI 10 year yield moved up yesterday and now has resistance coming up near 8.18%-8.20%. We prefer a dip from current levels or from 8.18%-8.20%. Conversely, if the resistance is breached in the next few sessions, the next upside target would be near 8.25%-8.30%, from where the yield should then come off.
Following news points are currently important in context of US Yields:
New treasury auctions of 10 year and 30 year notes in this week could potentially push US yields slightly higher.
US CPI data release on Thursday coupled with the ECB meet could both act together to push up US yields. Expectations are for strong US CPI numbers: on Friday, US non farm payroll data beat expectations and the average hourly earnings also came out strong.
Earlier in the previous week, US manufacturing data had also reflected improvement – another reason for yields to be bullish.
Meanwhile the US-China trade conflict continues to intensify with Trump reportedly saying that tariffs might be imposed on all Chinese imports to USA (ie on $467 bn worth of goods)
if that happens, risk aversion would prevent any significant rise in yields. This is one of the major reason why we believe that the May high of 3.125% for the US 10 year yield might have been the year’s top.
US 10 Year Yield (2.93%) breached the 2.9% resistance level and is likely to rise more towards the 3% barrier before coming off from there once again. A break above 3% is not preferred.
Repeating yesterday’s comment regarding German yields: German 10 year yield (0.40%) is trading near immediate resistance @ 0.40% . Looking at the German 5 Year yield (-0.17%), which has breached above the resistance near -0.20% and the German 30 Year yield (1.08%) which has enough to room to go up towards 1.10%-1.15%, there is a slight chance that the German 10 Year yield could go above 0.4% in the near term – moreover horizontal support near 0.3% on medium term chart has been holding very well.
However, a dovish stance by ECB on Thursday could prove to be bearish for yields
