STOCKS
Risk aversion is increasing in the market on fears of the global economy slowing down and a possible recession. As a result the equities are witnessing a strong money outflow which are in turn flowing into the bond market. Dow and DAX has declined below their key supports and can fall further. The weakness in global equities could delay the expected rally in India’s Sensex and Nifty. They can see an intermediate dip before a fresh rally.
Dow (25126.41, -221.36, -0.87%) has declined below 25250 thereby confirming a near-term top. The bearish outlook is intact to 24792 (38% Fibonacci retracement support) immediately. An interim bounce from there to 25250 cannot be ruled out before the index moves further lower to our preferred targets of 24500 and 24000.
As expected, DAX (11,837.81, -189.24, -1.57%) has declined below 12000 and keeps our bearish view intact for a test of 11800 and 11600.
Nikkei (20835.25, -168.12, -0.80%) has declined below 20900 as expected. The bearish view is intact to test 20500 on the downside. The region between 20900 and 21000 will now act as a good resistance.
Shanghai (2888.08, -26.62, -0.91%) has come-off from its high of 2935. While below 2900, a test of 2850-2835 (the lower end of the 2835-2950 sideways range) is possible.
Nifty (11861.10, -67.65, -0.57%) has declined below 11900 and can test 11800 or even 11700. This in turn would delay our expected rally to 12150 and higher levels.
Similarly, Sensex (39502.05, -247.68, -0.62%) can test 39000 before we see a fresh rally to 40200.
COMMODITIES
Commodities broadly remain weak. Gold is not gaining safe haven amid a sharp sell-off in equities. Gold and Silver can fall in the near term. Copper keeps our bearish view intact has resumed its downtrend. Oil has bounced. But the key resistance region in both Brent and WTI are likely to cap the upside and drag the prices lower. The US Crude inventory data due for release today will need a watch to see if the resistances can hold in line with our expectation or not.
Gold (1278.10) remains subdued and is vulnerable to test 1270. As mentioned yesterday, a head and shoulder pattern (continuation pattern in this case) is getting formed with the neckline support around 1270. A break/decisive close below 1270 can drag gold below 1265 targeting 1250-1240.
Silver (14.38) continues to trade below the resistance at 14.50. The outlook remains bearish for it to test 14.25 and 14.
As expected the resistance at 2.72 has held well and Copper (2.66) has resumed its downtrend. A break below 2.65 will accelerate the fall to our preferred targets of 2.62 and 2.60.
Brent (69.65) dipped to 68 as expected yesterday and has bounced from there. We expect the 70-71 resistance region to cap the upside and keep the bearish view intact for a fall to 66 and 64. A sideways consolidation between 68 and 71 cannot be ruled out in the near term before we see an eventual fall.
WTI (59.10) has bounced sharply from its low of 56.89. A test of the 60-61 resistance region looks likely before we see the overall downtrend resuming towards 56-54.
FOREX
US Dollar trades strong and could pull up Dollar Yen with itself. Euro is headed towards support at 1.11. Aussie and Pound could face near term supports but look weak. Dollar Rupee could trade below 70.
Dollar Index (98.14) has risen above 98 and is likely to head towards 98.50, the immediate daily resistance. A possible rejection from 98.50-99.00 region looks likely within the next 2-3 sessions.
Euro (1.1135) is also headed towards 1.11 in the near term while immediate resistance near 1.1215 is holding. Near term is bearish towards 1.11 before a corrective bounce from there is seen.
Euro-Yen (121.98) has broken below 122 but could get support at 121.50 from where a bounce to 122.50 is possible in the near term. Thereafter, we could see another leg of dip towards 121.50-121.20 before the pair resolves on either side of the 121.20-122.50 region.
Dollar Yen (109.54) is up a bit but has been overall stable above 109. While the dollar Index moves up, Dollar Yen could see a small upmove in the next 2-3 sessions followed by a fall in the medium term. Next week could see a test of 109 (max extension to 108.50) on the downside.
Aussie (0.6923) is stable without any major movement in the last 2-3 sessions. Trade within 0.6950-0.6960 looks possible in the near term before breaking out on either side.
Pound (1.2626) has support coming up at 1.26 on the daily and 3-day candles and a bounce from 1.26 looks likely in the near term. However, on the downside there is room for a test of 1.25/24 which would come into the picture on a break below 1.26. Watch price action near 1.26 from where a short bounce is expected.
USDCNY (6.9125) needs to come down from current levels towards 6.87 or lower. While the pair trades below resistance at 6.92, it could be ranged for the week before falling.
USDINR (69.83) tested 70 yesterday breaking above our expected upper range of 69.75/80. Note that 70 is an important resistance on the near term and while that holds, we could see trade within 69.50-70.00 in the near term.
INTEREST RATES
The US 30YR (2.69%) is trading below our expected support at 2.70% while the 10YR (2.27%) and 5Yr (2.08%) has bounced from above support levels of 2.20% and 2% respectively. A short corrective bounce is likely for the near term taking the yields up by 2-3bps. The 3-mnth traded near 2.36% and the yield curve is indicative of a warning on the economic growth sentiments for the US increasing fears of recession. The market is now pricing in 3-rate cuts by the end of next year.
The German 10yr (-0.176%) is falling as expected and could test -0.2% before bouncing back from there. Near term looks weak.
The US-Japan 10YR (2.35%) has bounced from trend support and could move up towards 2.4% in the near term. There is enough room on the upside for the coming week.
The 10Yr GOI (7.2617%) is stable but needs to bounce back above 7.30% to avoid further fall towards 7.20%. While the yield trades lower, it could be supportive of Rupee strength in the near term.
