STOCKS
Dow and DAX take a breather within their overall downtrend. Key resistances on both these indices can cap the upside and keep the downtrend intact. Nikkei remains bearish while Shanghai trades mixed within its sideways range. Sensex and Nifty have bounced as against our expectation to see an intermediate dip. The broader picture continues to remain bullish for both the Sensex and Nifty.
Dow (25169.88, +43.47, +0.17%) has key resistances at 25250 and 25500 which can cap the upside and keep our bearish view intact for a test of 24792 (38.2% Fibonacci retracement support) initially and then 24500 and 24000 eventually.
DAX (11902.08, +64.27, +0.54%) may now find it difficult to rise past 12000. While below 12000, the outlook is bearish for a fall to 11800 and 11600.
Nikkei (20798.51, -144.02, -0.69%) has declined further. The bearish view is intact for it to test 20500.
Shanghai (2915.89, +10.08, +0.35%) oscillates around 2900 over the last few days. The 2835-2950 sideways range remains intact. A breakout of this range will decide the next direction of move.
Sensex (39831.97, +329.92, +0.84%) is holding above 39500 and remains bullish to test 40000 and 40200.
Contrary to our expectation for a fall Nifty (11945.90, +84.80, +0.71%) has bounced back above 11900 again. The outlook remains bullish for a rise to 12150. But the possibility of a sideways consolidation between 11800-12000 cannot be ruled out before we see a fresh rally.
COMMODITIES
Gold has risen sharply as the expectations are turning high for the Fed to cut rates. Gold and Silver have room for further rise, but the upside is expected to be capped. Copper remains bearish. Oil prices have tumbled after the US inventory data failed to meet the market expectation. The US crude inventories fell 300,000 barrels as against the market expectation for a draw-down of 900,000 barrels. Our bearish view on oil remains intact.
Contrary to our expectation for a fall, Gold (1291) has risen sharply. The possibility of a head and shoulder formation (as a continuation pattern) seems to have negated. Immediate support is at 1287. while this support holds, gold can rise to 1296 and 1300 – the upper end of its 1265-1300 sideways range.
Silver (14.51) can test 14.60-14.65 while it sustains above 14.50. But the upside is likely to be capped and silver can reverse lower again targeting 14.25 and 14.
Copper (2.65) remains bearish for a fall to 2.60. As mentioned yesterday, a break below 2.65 will strengthen the downmove.
Brent (66.18) has tumbled towards 66 and can test 65-64 in line with our expectation in the coming sessions. A corrective bounce to 67-68 cannot be ruled out from the 65-64 support region. However, our long-term bearish view will continue to remain intact to test 60 and 55 eventually.
Similarly, WTI (56.21) can bounce to 57-58 from the 55-54 support region and then can resume the downtrend towards 50 and even lower levels over the long term.
FOREX
Major currency pairs are stable and trading near important supports. Aussie, Pound, Euro and Dollar-Yen could be headed towards near term supports and could soon see a bounce back in the medium term.
Dollar Index (98.10) is stable and could test 98.50-99.00 on the upside before falling from there. Overall trade for the next week could possibly be within 99-97.50 with a possibility of testing the upper limit first.
Euro (1.1136) is likely to test 1.11-1.10 which is an important support zone for the coming sessions. A bounce from 1.11 is possible before 1.10 is tested in the medium term.
Euro-Yen (121.61) is trading just above support near 121.50/30 and while that holds, we could see a bounce towards 122.50 in the near term. View is bullish while immediate support holds.
Dollar-Yen (109.22) has dipped and could test support at 109 or lower at 108.50 before a bounce from there is seen. A bounce from support levels by end of next week looks likely.
Aussie (0.6913) could continue to trade within 0.6950-0.6860 in the near term.
Pound (1.2612) is trading just above support at 1.26 which may produce a bounce and push the currency back to higher levels in the near term.
USDCNY (6.9107) has dipped from levels near 6.9125 yesterday. Yuan could slowly strengthen towards 6.90 in the near term.
USDINR (69.88) has immediate support near 69.60 and while that holds, we could see a trade within 70.0-69.60 in the near term. We are cautious to look for a break above 70 because that could trigger a rise towards 70.10/25 in the medium term. For now we would prefer 70 to hold and produce a rejection within the next couple of sessions.
INTEREST RATES
US yields looks bearish for the near term. The US 30YR (2.63%), 10Yr (2.19%), 5YR (1.99%) and 2Yr (2.02%) have fallen sharply and looks weak for another 1-2 sessions before the yields pause and starts to see some corrective upmove. The 10Yr (2.19%) yield may get some support near current levels while 2Yr (2.02%) could test 2%.
The German-US 10Yr (-2.36%) has risen sharply breaking above immediate resistance and while the near term directional correlation with Euro is negative, a further rise in the spread could lead to weakness in Euro in the near term. The spread looks likely to rise towards -2.28%.
The US-Japan 10YR (2.28%) has fallen breaking below immediate support. There is now scope of falling towards 2.20% in the near term that could pull down Dollar Yen also in the near term.
