STOCKS
Equities have recovered sharply as the impact of the of the trade war seems to be fading away as there is no fresh developments on the same. While there is room for further rise in the near term, indices like the Dow, Sensex and Nifty have crucial resistances ahead which can halt the current corrective rally and trigger a fresh fall. As such we would like to remain cautious and see how the indices behave after testing their resistances.
Dow (25862.68, +214.66, +0.84%) has crucial resistances at 26000 and 26250 which can be tested in the coming sessions. We have to see if it surpass these hurdles or not. A strong turn-around from either of these levels could indicate a fresh leg of sell-off.
DAX (12310.37, +210.80, +1.74%) has risen sharply above 12250 and looks bullish to test 12450-12500 while it sustains above 12250.
Nikkei (21391.53, +1.56%) has risen from support near 21000 and has been moving towards our expected 21400-21500 levels. Near term looks bullish for the next 1-2 sessions.
Shanghai (2917.75, -1.28%) has dipped from 2950 seen yesterday. While the index remains below 3000, it could be ranged within 3000-2850/00; 2850/00 being immediate supports below current levels.
Sensex (37393.48, +278.60, +0.75%) and Nifty (11257.10, 100.10, 0.90%) retains their 36950-37600 and 11100-11300 sideways range respectively and has risen within it yesterday. We continue to remain bearish for a fall to 36500-36000 on Sensex and 11000-10800 on the Nifty. However, given the rise seen in global equities we may have to allow for a rise to 38000-38300 on Sensex and 11350-11400 on the Nifty before we see a fresh fall again.
COMMODITIES
A strong bounce in the equities coupled with the strength in the US dollar has pushed gold lower negating the chances of 1310-1320. Silver is bearish and can fall further. Copper’s corrective rally has a key resistance ahead. Oil sustains higher and has room to rise further in the coming sessions.
Gold (1285.60) has declined below 1290 thereby reducing the chances of testing 1310-1320 which we have been mentioning over the last few days. 1290-1292 will now be a good resistance and while below it, a fall to 1280 can be seen in the coming sessions.
As expected Silver (14.5150) has declined, indeed much beyond our expected level of 14.60. The outlook is bearish. While below 14.60, a fall to 14.15-14 is possible in the coming days.
Copper (2.7405) spiked to 2.78 and has come-off slightly from there. A strong break above 2.78 is needed for the corrective rally to extend up to 2.80-2.81. While below 2.78, a dip to 2.72 is possible again.
WTI (63.51) has risen above 63. As mentioned yesterday, while above 63, a rise to 64-65 is possible in the coming sessions.
Brent (73) is holding well above 72 and is keeping the chances alive for a test of 74 the next crucial resistance. A close watch is needed around 74 as a break above it will open doors for a further rise to 76 and even 78.
FOREX
Overall currencies are trading weak against the US Dollar today. We could possibly see the week’s closing at weaker levels today.
Dollar Index (97.84) rose sharply yesterday after initially coming down to 97.44. Immediate trade between 97.25-97.75 is possible with preference of support at 97.25 to hold and eventually push prices up towards 68-69 in the mdium term.
Euro (1.1176) is trading lower and could test 1.1150 on the downside. A break below 1.1150 could pull it down towards 1.11 or even lower in the longer run.
Euro-Yen (122.80) is trading between 122-123.50 region and while support at 122 holds, the pair could gradually move higher towards 124-125 in the longer run. Only on a break below 122, we may have to revisit our current projection of a bounce from here.
Dollar Yen (109.87) is also fairly dipping towards the 109 support and could eventually push prices to higher levels from here back to 110-111.
Aussie (0.6893) has plunged sharply from levels above 0.69 seen yesterday. If the pair remains below 0.69, it could target 0.68-0.67 in the longer run. Near term looks weak.
USDCNY (6.9049) has risen as expected. It would be important to see if the pair breaks above 6.91 to rise further towards 6.95 or comes off from current levels itself to move lower in the medium term. Our preference would be a test of 6.95 before falling from there.
Dollar Rupee (70.03) closed lower yesterday and has scope of testing 69.75/65 on the downside in the medium term. Before that we could see a rise back towards 70.20/30 today possibly due to sharp rise in Brent to 73 and in USDCNY to 6.9050.
INTEREST RATES
The US yields are down in line with our expectation and look further bearish for the coming sessions. The 30Yr (2.84%), 10Yr (2.41%) and 5Yr (2.18%) are trading higher today and have seen slight corrective upmoves. There is scope for s rise towards 2.90% (30Yr), 2.50% (10Yr) and 2.22% (5Yr) respectively before the yields again resume the longer term downtrend.
The German-JGB 10Yr (-0.03%) is likely to bounce from current support levels, moving back towards 0% and 0.05% in the medium term. This could indicate that the support near 122 on Euro-Yen may hold for the near term.
The Indian 10Yr GOI (7.4726%) could be broadly ranged within 7.40-7.55% region in the near term.
