STOCKS
Most Equity indices have rallied well over this week and are testing near term Resistances. We could see a near term dip because of that, but the longer term could be bullish.
The Dow (23879, +91.67, +0.39%) saw a high of 23985.45, a hair’s breadth away from the 24000 Resistance, the 21-MA on the 3-day chart. Gains beyond 24000 are a 50-50 probability. A break above 24000 takes the Dow up towards 24500. Failure brings it down towards 23500-250, before it picks up steam again.
Dax (10893.32, +89.34, +0.83%) rose to 10962, just below outer Resistance at 11000, which has held for now. Need to see if it now triggers profit-taking in line with what we said yesterday.
As it turns out, the Nikkei (20142, -285, -1.40%) rose momentarily past 20400 yesterday to a high of 20494.35, but was unable to rise past 20500 and has run into profit-taking today. We remain bullish in the longer term, given long-term Support near 19500 on the Weekly Line chart.
Shanghai (2539, -0.20%) has found Resistance at 2575 yesterday. Possibly a dip towards 2500 is needed to bring in fresh buying that can propel it past 2575 later.
Sensex (36212.91, +231.96, +0.64%) has risen past immediate resistance at 36100 while the Nifty (10855.15, +53, +0.49%) has closed just below 10900. With the Sensex breaking above 36100 and Nifty close to 10900, both could be showing strength for further bullishness 37000 and 11000 in medium-term.
COMMODITIES
Commodities are trading higher today.
Crude prices picked up momentum after the Saudi Energy minister said they would meet their goal of reducing output to 10.2 mln bpd this month which is about a reduction of 900,000bpd from the November output. According to him, Saudi Arabia would export around 7.2mln bpd in January and 7.1 mln bpd in Feb’19. Crude prices also got a boost from the Weekly US stockpiles that fell by 1.7 mln barrels according to the data by EIA yesterday.
Brent (60.82) and Nymex WTI (51.73) are trading higher just now. Brent has resistance on the weekly candles near 64 which could be tested in the near term before a dip is seen from there. WTI, on the other hand could test 54-56 levels on the upside. View is bullish for the near term for Brent and WTI towards 64 and 54/56 levels respectively.
Gold (1294.80) and Silver (15.76) have moved up. Gold could test 1300-1320 levels on the upside while above immediate support at 1280. Silver could trade below 16 for now. Weekly candles show 2 important resistances at 16.0 and 16.50 respectively which would be difficult to breach in the medium term. The current rise is likely to be short lived unless a sharp break above the respective resistances is seen.
Copper (2.6550) tested 2.6805 on the upside yesterday before dipping back towards 2.65 again. Currently trading below 2.66, there could be some sideways consolidation above 2.60.
FOREX
Strong rise in Euro (1.1557) above 1.15 contrary to our expectation of a fall from 1.15 towards 1.13. It would be crucial to see if the rise above 1.15 sustains in the medium term, as this could indicate initiation of a fresh rise. However, we would wait for confirmation on a break above weekly resistance at 1.16 also coming from long term moving averages. Failure to come off from 1.16 would be bullish for Euro indicating upside levels of 1.17-1.18 in the medium term.
Dollar Index (95.12) seems to be holding well below the crucial resistance at 98. While below 95.50, the index is likely to remain bearish towards 94.50 on the downside. A bounce back to 95.50+ from current levels would be needed to turn the sentiment otherwise.
The Euro-Yen (124.82) has potential to rise towards 128 in the medium term while we also keep an eye on the immediate resistance at 125.20. In case a break above 125.20 is seen, we would target 128 on the upside indicating a possibility of rising past 1.16 on the Euro, unless the rise is triggered by a rally in Dollar-Yen (107.91) towards 110-112.50 levels. A close watch on the movement in Dollar Yen would be crucial.
Dollar Yen (107.91) is trading below 108 just now. While there is support near 107, we do not expect much of a fall in the medium term. A bounce from 107 looks likely while the long term support on the weekly line charts hold. Failure to bounce from 107 would open up chances of a fall towards 105.
Pound (1.2791) is trading just below 1.28. A dip from here could be expected in the near term; else a rise towards 1.31 could come into the picture.
Aussie (0.7174) is trading slightly lower just now but has scope of testing upside resistance near 0.73 in the coming 1-2 weeks.
USD-CNY (6.7935) is trading below support at 6.80. Failure to bounce back from current levels could make the pair vulnerable to fall towards 6.73. Watch price action near current levels.
Dollar Rupee (70.47) could trade within 70.80-70.00 today. Direction is unclear just now as rising Crude and Indian equities and weakness in the US Dollar and other EM currencies indicate mixed views.
INTEREST RATES
As expected, both the US 5Yr (2.52%, down from 2.57%) and 10Yr (2.69%, down from 2.72%) have dipped from near-term Resistances, as mentioned yesterday. Some more dip towards 2.48% and 2.65% might be expected in the near term. In the longer term, we have to see whether the US 5Yr will break below long-term Support at 2.45% or not.
The drop in US Yields has pulled up the German-US 2Yr Spread (-3.10%, up from -3.17%) and German-US 10-yr (-2.47% up from -2.5%) again yesterday, after they fell the day before. We need to see whether these will rise further towards -3.0% and -2.2% or not. While the German 2Yr (-0.584%) could creep modestly higher, the German 10Yr (0.222%) could move lower. So, a further rise in the German-US Spreads might have to come from a further decline in US yields.
While that is our preferred long-term scenario, we have to see whether the Support at 2.45% on the US 5Yr breaks or not.
The Indian 10Yr GOI (7.47%) was largely stable yesterday. There is some chance of a further rise towards 7.59%.
