STOCKS
All Equity markets, except India, are testing important medium-term Resistances. India is testing near-term Supports.
The Dow (24553.24, -22.38, -0.09%) traded a mite lower than Wednesday. We see very little impetus to break past Resistance at 25000 given the rising growth concerns in Europe and China.
Dax (11,130.15, +58.64, +0.53%) has moved up, coming close to testing the Resistance at 11300 on the 3-day line chart. Again, given the growth concerns, we are expecting this to hold. But in case it breaks, there can be a further rise to 11400-600. Let us see how this goes.
Shanghai (2606) is trading strong today, testing the 2600-60 Resistance region mentioned yesterday. Whether this holds or breaks will set the trend for the next few weeks. If it holds, as we currently expect, we can see a dip back towards 2550-2500.
Nikkei (20784) is up strongly today as the Yen (109.76) is weakening again. Still, we continue to see important Resistance at 21000 for now.
In line with expectation both Sensex (36195.10, +86.63, +0.24%) and Nifty (10849.80, +18.30, +0.17%) have risen slightly. We have called for a corrective decline towards 34000 and 10500 in the long-term, but there is also Support available near 35600 and 10800-700 in the near term.
COMMODITIES
Precious metals and Copper look bearish for the near term apart from the possible fall in Crude prices. Overall commodities are set to enter a near term bearish phase.
Brent (61.79) and WTI (53.79) are holding well below the resistances near 62.50-64 and 54-56 respectively. Near term could be stable to bearish towards 60-58 and 50 respectively.
US crude inventories were up by 8mln barrels according to the EIA report. This year, the EIA expects U.S. production to grow by 1.7 million bpd, with the rise slowing down further in 2020 to 1.2 million bpd.
US said it could impose sanctions on Venezuela oil exports. Further drop in exports could squeeze global supply. This could be one factor that could be positive for the Crude prices in the near term and pull them up.
Gold (1281.90) and Silver (15.37) are stable just now. While Euro looks bearish in the near term, a corresponding stronger US Dollar would indicate some bearishness for the precious metals in the near term (Refer FOREX section below). Gold below 1280 could target 1270/60 levels while Silver could be headed towards 15.
Copper (2.6590) is almost stable today. Given the close directional correlation with Aussie and Shanghai, Copper is likely to come off from current levels. Shanghai has resistance at 2600-2660 zone and Aussie looks bearish towards 0.70-0.69 while below 0.7150. These could be negative cues for Copper for the next few sessions. (Refer Stocks section above and FOREX section below) Immediate view is bearish with a possible fall towards 2.55.
FOREX
Currencies look bearish. Watch important support on Euro at 1.13 while Pound could face resistance above current levels and eventually come off. Aussie looks bearish. Rupee and Yuan could see some strength against the US Dollar.
Euro (1.1316) declined sharply from trying to attempt a rise towards 1.14 yesterday after the ECB policy statement yesterday. Although the rates were kept unchanged, there is concern on the overall economic growth of Europe. Technically we have support at 1.13 which if breaks would turn bearish for the Euro for the medium term taking it down towards 1.12 or lower. This would be in line with our long term view as published in our Euro Jan’19 report (see below link to buy the report)
https://kshitij.com/eurusd-forecast-payment-details/jan-19
Although the movement below 1.1350 in Euro has gone contrary to your expectation of a bounce back towards 1.14-1.15, we need confirmation of a break below 1.13 to turn bearish for the near term. The German-US 10Yr (-2.54%) is looking bearish too towards -2.60% indicating a fall in Euro could be more likely. (Refer Interest Rates Section below)
Dollar Index (96.42) has moved up and could target 97-98 again on the upside as seen on the weekly candles.
Dollar Yen (109.71) is slightly higher and could test 110.0-110.5 on the upside while Nikkei has some scope towards 20900-21000. Thereafter, the Yen could see some strength back towards 109. Immediate view is bullish for 3-4 sessions followed by a decline.
Pound (1.3116) has risen above the 1.31 resistance mentioned yesterday and could now test 1.3150-1.32 before coming off from there. A rise on the upside if continues could open up chances of testing 1.36 in the longer run. See the weekly line charts.
Aussie (0.7099) has come off as expected and could head towards 0.70-0.69 in the near term. View looks bearish while below 0.7150.
USD-CNY (6.7709) is looking bearish just nowand could come off towards 7.76-7.74 before again bouncing back towards 7.80.
Dollar Rupee (71.08) has clearly broken below 71.10 indicating Rupee strength in the near term. We could see a test of 70.90/80 while below 71.10. Immediate view is bearish for Dollar-Rupee.
INTEREST RATES
The ECB kept interest rates unchanged yesterday and said principal maturity proceeds from earlier asset purchases will continue to be reinvested for a long time after it starts raising rater. It was also bearish on growth.
The German Yields (5Yr -0.32%, 10Yr +0.18% and 30Yr +0.77%) all seem to be headed lower, with potential to fall another 5-7bp at least, maybe even 10bp. Only the 2Yr (-0.60%) continues to have Support at -0.60%. A slow dip towards -0.62% might be possible.
The German-US 2Yr Spread (-3.17%) could dip towards -3.19% if that happens, especially while it remains below -3.15%. The German-US 10Yr Spread (-2.54%) could also gravitate lower towards -2.60%. This would keep downward pressure on the Euro.
Let us see if the 10Yr GOI (7.5577%) turns lower in the near term itself or remains ranged between 7.55-65%, as mentioned yesterday.
