STOCKS
Overall the global indices are trading low. Shanghai is weakening at the fastest pace when compared to the other indices. Worries over Chinese stocks would continue next week also.
Dow (20919.42, -0.11%) came down to 20798 as mentioned yesterday and while above 20780, we could expect a sideways consolidation in the 20780-20980 region. On a confirmed break below 20780, we may see a test of 20600 in the medium term.
Dax (12711.06, -0.36%) is testing support near 12690 and could remain stable in the 12600-12800 region for a few sessions or bounce back immediately towards 12800 and higher.
Shanghai (3065.58, +0.13%) is in a downtrend as expected and is headed towards 3000 and lower in the near term. We look for a fall to 2978 within the next week.
Nikkei (19828.92, -0.66%) has come off sharply from just below crucial resistance near 20010, in line with our expectation. While this holds, we could see a fall towards 19600 in the coming sessions. Only on a break above 20010, would we focus on the next resistance near 21000. For now a short corrective dip is possible.
Nifty (9422.40, +0.16%) closed higher making fresh highs. As mentioned yesterday, we watch closely the immediate resistance near 9500.
COMMODITIES
Gold (1226) traded within the 1220-31 region this week, could be ended on a higher side. If the rise continues we may possibly see a test of 1255-65 levels in the next week. A failure to break above 1265 could keep the price range-bound in the 1220-1265 regions.
Similar kind of trading pattern has been seen in Silver (16.36) also. The scrip is highly oversold in near term chart, thus a possibility of a rise towards 17 levels can’t be ruled out.
Copper (2.50) is hovering around its crucial support of 2.48-50 and if these levels hold then we might see a bounce towards 2.60 regions. But we will remain bearish on copper while t is trading below 2.67-72 levels.
Sideways consolidation in the broader ranges of 49.50-51.36 for Brent and 46.80-49.30 for WTI continues as expected. Holding above the interim supports of 49.50 in Brent and 46.80 in WTI implies strength in oil prices in the extreme short term.
In the Morning Briefing dated 10th of May, 2017, it was written – “Brent and WTI may consolidate within these levels for few more sessions though the possibility of a corrective bounce towards resistance can’t be ruled out. We have U.S weekly crude inventory today at 8:00 pm with an expectation of decrease by 2 million barrels. If the actual figure could match the expectation then we might see some short term rally in both Brent and WTI”.
Still, the bulls will be assured of strength of Brent (50.80) and WTI (47.88) only when a firm closing above 53 and 51 are made by both Brent and WTI respectively.
FOREX
While the US CPI & Retail Sales data may affect the Dollar tonight, Rupee may wait for the Inflation and Trade Balance data due today.
Dollar Index (99.57) has registered a high at 99.89, just a bit lower from our initial target of 100.00, before a minor correction but the bullish momentum remains intact above 99.35-25.
Dollar Yen (113.67) is undergoing a similar correction from 114.37, not far away from our target of 114.60 but if it manages to hold above the support of 113.30-10, another bounce may emerge. On the other hand, Nikkei (19823.28, -0.69%) being rejected from the major resistance around 20000 may boost Yen against Dollar. So while the bullish preference remains in place for now, a break below 113.10 may force adjustment to that view.
Euro (1.0877) has taken a pause and may consolidate for a couple of sessions in the range of 1.0840-1.0940 before resumption of the near term downtrend.
Pound (1.2887) corrected sharply to test the support of 1.2860 after the BOE May’17 minutes showed expectations of slower than anticipated growth in 2017 and the real earnings to fall this year. The weakness may be used by the global investors to buy, especially if it comes near 1.2800 as the larger trend still remains up.
Aussie (0.7375) is stuck in the range of 0.7325-0.7425 for the week but a resumption of the major downtrend may resume in the next week for the target/support of 0.7300-0.7290 from where a significant recovery may be expected.
Dollar Rupee (64.38) corrected more than expected as it made a low at 64.33, beyond our expected 64.40. Bidirectional possibilities visible at the moment. Bounce from 64.30-25 can push it higher once more but a failure to hold 64.25 can push it down to 64.00. Wait for clarity.
INTEREST RATES
The US yields are trading lower. The 5Yr (1.91%), 10Yr (2.38%) and the 30Yr 93.02%) are down from 1.94%, 2.40% and 3.04% respectively.
The Japan yields have moved up sharply this month. The 5Yr (-0.12%) is testing immediate resistance and could come off in the near term. The 10Yr (0.05%) and the 30Yr (0.84%) could also pause for sometime after the recent rally.
The UK yields have stated to fall and could remain stable or come off to lower levels just now. Near term looks bearish.
The German-US 2yr (-2.01%) is almost stable and could possibly bounce back in the coming sessions. We need to keep a closer watch on this. The German-US 10yr (-1.95%) is however headed higher and may not pause or come off immediately. A clearer picture is needed to determine the further course of movement.
The Japan-US 10Yr (2.33%) has come off a bit as Nikkei faced rejection from resistance levels, pulling down Dollar-Yen also to levels below 114. While the immediate resistance on Nikkei holds, we may expect some more Yen strength in the near term and a fall in the Japan-US yield spread towards 2.25%.
