STOCKS
A confirmation on the US-China trade talks happening gave a breather to the US equities overnight. But Trump’s comment that China has broken the deal in the on-going negotiation has triggered a fresh sell-off in the Asian markets in the early trades today. As the trade talk begins, volatility is guaranteed and we need to watch the market closely for the next couple of days to get a clarity on whether the corrective fall that has begun will extend into next week or not.
The support at 25850 on the Dow (25967.33, +2.24, +0.01%) is holding well for now. But a strong rise past 26250 is needed to bring back to positive sentiment. Else Dow will be vulnerable for a fall to 25500 or even lower.
DAX (12179.93, +87.19, +0.72%) can consolidate between 12100 and 12300 for some time before falling to 12000 and 11900.
Nikkei (21340.02, -236.66, -1.1%) has declined below 21500 and keeps the bearish outlook intact for a test of 21000 and 20900.
Shanghai (2874.10, -19.65, -0.68%) is continuing to move down but at a slower pace. Near-term view is negative for it to test 2850-2830.
Given the sell-off seen in the Asian markets early morning, Nifty (11359.45, -138.45, -1.20%) might break the support at 11350 and fall to 11300 and 11200 in the coming sessions. But in case if Nifty manages to hold above 11350, a corrective rally to 11420-11450 can be seen.
Sensex (37,789.13, -487.50, -1.27%) remains weaker than Nifty with strong resistance at 38100 and remains vulnerable to test 37500 and even 37000 in the coming days.
COMMODITIES
Surprising to see Gold not gaining momentum as a safe haven at this time on uncertainty which reflects the inherent weakness in it. The sideways range is intact and it can fall within this range in the near term. Copper remains bearish and can extend its fall in the coming sessions. Oil trades stable by getting support from the US Crude inventory data that showed a decrease in inventories by 4 million barrels as against the expectation for an increase of 1.2 million barrels.
Contrary to our expectation for a rise to 1300, Gold (1280.8) has come-off from 1292.8 itself. A fall to 1270-1266 looks possible again as the 1266-1292 range is still intact.
Silver (14.81) has failed to break the psychological level of 15 and looks vulnerable to test 14.70 in the coming sessions.
Copper (2.76) has declined below 2.78 and keeps the bearish outlook intact for a test of 2.70 in the short term.
WTI (61.69) oscillates around 62 and has equal chances for either a rise to 64 or a fall to 61-60.50 in the near term.
Similarly, Brent (69.01) can either move up to 71 or fall to 68 from current levels. But the broader picture remains bearish for Brent to break 68 and fall eventually to 66-65.
FOREX
All eyes on the US-China talks for the next 2-sessions of the week. Movements in Dollar Index and USDCNY is important and could impact the other currencies as well. Euro, Euro-Yen, Aussie, Rupee all looks weak against the US Dollar for the near term.
Dollar Index (97.62) has been trading along the support trend line on the daily candles and looks bullish in the near term targeting 98-99 on the upside.
Euro (1.1188) continues to hold stable for now and could be seen trading within the 1.1250-1.1100 region just now. A sharp rise in dollar Index from current levels, if seen could take Euro towards 1.11.
Euro-Yen (122.92) could test 122 or slightly lower in the coming sessions while it trades below 124. Near term looks weak.
Dollar Yen (109.87) is nearing our mentioned support of 109.70. It would be important to see if the pair manages to break below 109.70 as that would be significant and may indicate bearishness for the medium term. We would wait to see price confirmation at 109.70 to decide on further direction. Our preferred view would be a bounce from 109.70 but the US-JGB 10Yr spread (Refer interest rates section below) looks bearish and indicates a possibility of a further fall in Dollar Yen.
Aussie (0.6971) is unable to sustain above 0.70 and has fallen again to trade below 0.70. This is indicative of upcoming bearishness towards 0.6950-0.6900 in the near term. Only a sustained rise above 0.70 would keep the possibility of a rise towards 0.71 intact.
USDCNY (6.7940) is heading towards 6.81, the high seen in Jan’19 where a small pause could be seen. But overall in the medium to long term, there is scope of testing 6.85 before coming off from there.
Dollar-Rupee (69.72) closed near the day’s high yesterday. Note that 69.80 is a crucial resistance above current levels now which if holds could limit further sharp rise in Dollar Rupee. We would keep a close watch for any news from the US-China trade talks. Any trigger could take USDINR higher towards 70.Above 69.80, 70.25/50 would come into the picture.
INTEREST RATES
Overall bond yields are trading low and look bearish for the near term.
Slight bounce is seen on the US Yields. The 30Yr (2.88%), 10Yr (2.46%) and 5Yr (2.27%) are trading higher by 1bps but overall have scope of falling in the medium term. The corrective bounce seen just now is short lived as the yields would soon turn around to move down soon.
The German-JGB 10Yr (0.01%) has scope of falling towards -0.5% which if seen could pull down Eur-Yen further from current levels.
The US-JGB 10Yr (2.52%) ha scope towards 2.50/45% in the near term and looks weak just now. This is indicative of a bearish Dollar-Yen for the next few sessions.
The German yields are coming down from immediate resistances. The 5Yr (-0.46%), 10Yr (-0.043%) and the 30YR (0.602%) are down from -0.454%, -0.041% and 0.637% seen previously. Near term looks bearish for the German yields as the 5Yr, 10Yr and the 30Yr could target -0.48%, -0.07% and 0.57% respectively.
The UK yields are also falling and look bearish in the coming sessions. The 5YR (0.83%), 10Yr (1.14%0) and the 20Yr (1.58%) could fall towards 0.75%, 1% and 1.50% respectively. This could indicate a fall in Pound too in the near term.
The Indian 10Yr GOI (7.4695%) is trading above 7.45%. A break below 7.45% could take it lower to test 7.40% which is an important near term support.
