STOCKS
Dow (26062.12, -0.35%) dipped yesterday. The index is likely to trade in the 26000-26500 region for the near term. O major movement is seen since the last few sessions and the index seems to have come to a halt. While below 26500 resistance, Dow could spend some time in a sideways consolidation; a break above 26500 is necessary to trigger an upmove in the medium term.
Dax (12096.41, -0.23%) dipped back instead of moving higher towards 12300. If the index does not rise above 12150 just now, it could fall again to re-test 11800-11900 levels in the near term. Else, the index could start moving towards 12300 in the next 2-3 sessions.
Nikkei (23344.14, +1.08%) is up about 1% today continuing its rise above 23000. While the rise sustains, a test of 23600-24000 is possible in the medium term. Near term looks bullish.
Shanghai (2652.86, +0.049%) is trading just at the important support levels near 2650. It would be important to see if the index breaks below or bounces back from here as that would decide the medium term direction for Shanghai. The tariff announcements on $200bln of Chinese goods rolled out yesterday could be negative for the index and could probably trigger a further fall in the index from current levels. We would watch for a couple of sessions to see how the index moves. Charts suggest a bounce from here back towards 2700+ in the longer run.
Nifty (11377.75, -1.19%) continued to dip yesterday as Dollar-Rupee rallied in the intra-day session with a sharp gap up opening. While there could be some chances of correction in the Dollar-Rupee, fresh weakness in the Chinese Yuan could put pressure on the currency thereby keeping the Indian stocks under pressure too. A re-test of support at 11200 is possible this week.
COMMODITIES
Near term looks bearish just now for Crude prices. Brent (77.51) and WTI (68.36) are down slightly today.
Brent seems to be holding well below the resistance at 80 on the daily candles. If 80 hold in the near term, the price could re-enter into the 70-78 channel as seen on the 3-day candles. Immediate support is seen near 76.70.
WTI on the other hand, is also likely to come down towards 67-66 levels this week.
Gold (1202, -0.32%) saw a slight rise but continues to trade below the resistance at 1220. Immediate range is seen between 1190 and 1220. Only on a sustained break above 1220, we may turn bullish for the medium term.
Copper (2.6385) tested support at 2.60 yesterday. Narrow range trade in the 2.60-2.70 is possible this week. A break on either side is necessary to get clarity on further direction.
FOREX
Watch Resistance @ 1.17 on Euro-Dollar and near 1.316 on GBPUSD. If breached, it could be bullish for both pairs. USDINR could stay below 72.80 today as well.
Dollar Index (94.48): Resistance near 95.0-95.2 looks strong and could push Dollar Index below support near 94.5 in the next 1-2 sessions. However, the imposition of 10% import tariff on $200 bn worth of Chinese goods by US could again strengthen the Dollar and levels near 96 could open up again.
Euro (1.1696) is again trading at resistance near 1.17. Trendline support is now near 1.1625. A break above 1.17 or below 1.1625 could happen in the next couple of sessions – the bullish alternative is looking slightly more likely.
Dollar Yen (111.96) had dipped after testing levels near 112.12 yesterday but is now again rising back towards 112.1. The chances of a rise towards 112.5 (resistance on weekly candles) still remain, while it stays above 111.5. Our Sep ’18 monthly forecast report on Japanese Yen (released yesterday) discusses the next long term move in the narrowing contraction since 2016.
Euro Yen (130.92): Crucial resistance near 130.75-131.0 looks like it could be breached in the near term as chances of a rise in Euro and Dollar Yen beyond 1.17 and 112.17 remain strong.
Pound (1.3153) has now decisively broken above the 1.31 resistance on daily candles. It now faces the 21 and 89 weeks MA near 1.316 – a breach of this level could make it bullish towards 1.34 by Oct.
Aussie (0.7186) has immediate support on daily candles near 0.714, which if broken could again take it down towards 0.708-0.707 – long term support level on weekly line chart. A decisive break above 0.72 would be bullish and could gradually take place by next week.
Dollar Rupee (72.515) Another test of 72.30-20 likely today – a rise past 72.80 is not preferred in today’s session either. Upside near 72.80-91 could again be tested later in the week.
INTEREST RATES
German 10 year yield (0.46%) has risen above 0.45% as well – as mentioned yesterday, if it approaches 0.5% in the next few sessions, a near term rise towards 0.58% is possible.
Looking at the spread (-2.52%) between German 10 year yield and US 10 Year yield, it has trendline resistance near -2.50% which could push it down towards -2.60%.
The US 10 Year yield (2.98%) rose to a high near 3.02% but has again come off from there. Although we have been saying that 3% barrier should stay strong, there is a slight chance of a rise to 3.10% if the German 10 Year yield rises to 2.5% and the German-US spread falls to -2.6%.
On the trade war front: US has imposed 10% tariffs on $200 bn worth of Chinese goods (effective from next Monday) -this could bring down expectations of a Dec ’18 rate hike by the Fed. If that happens, the 3% barrier might remain strong on the US 10 year yield.
Previous month economic data points like the US CPI and US Retail Sales have not been very positive in the last few days – if the trend continues for future data releases in the month, that could also be bearish for yields.
