STOCKS
Trump’s move to impose tariffs on Mexico from June 10 has increased the concerns of the US trade war getting worse. As a result, the global equities are witnessing a sharp sell-off on increased risk aversion in the market. But interestingly in the middle of all these noise, China’s Shanghai Composite index is trading stable and holding on to its sideways move. Does this signal anything significant? Not clear at the moment. We will have to wait and watch. Sensex and Nifty, though looks bullish from a broader picture, might see some down ticks in the near term or move up at a slower pace.
Dow (24815.04, -354.84, -1.41%) keeps our bearish view intact and has come closer to 24792 38.2% Fibonacci retracement support) as expected. An intermediate bounce to 25000 is possible before the overall downtrend resumes towards 24500 and 24000.
DAX (11726.84, -175.24, -1.47%) remains bearish and is heading towards 11600 as expected. The supports at 11660 (21-Week moving average) and 11620 (200-day moving average) may arrest the pace of fall and can trigger a corrective rally to 11750-11800.
Nikkei (20376.00, -225.19, -1.09%) has declined well below our expected level of 20500. The outlook continues to remain bearish. Nikkei now head towards 20000 and even 19500.
Shanghai (2891.41, -7.29, -0.25%) is retaining its 2835-2950 sideways range and can dip to 2850-2835 within this range now. We have to wait for a range breakout to get a clear idea on the next trend.
Sensex (39714.20, -117.77, -0.30%) is bullish to test 40000 and 40200 while above 39500. But, given the weakness in the global markets, the possibility of testing 39000-38800 first cannot be ruled out before we see 40000-40200 on the upside.
Nifty (11922.80, -23.10, -0.19%) can test 11800 on a break below 11900 in the near term. However, the broader view remains bullish to test 12100-12150.
COMMODITIES
Gold has risen sharply and can rise further on safe-haven demand as the fear of the trade war getting worse that could trigger a slow-down and a recession keep the market risk averse. Copper remains bearish. Oil prices have tumbled after Trump’s move to levy tariffs on Mexican imports. The outlook continues to remain bearish for oil.
Gold (1311) broken its 1265-1300 range on the upside and now looks bullish to test 1320-1325 in the near term and then 1345-1350 in the short term.
Silver (14.65) can test the key resistance at 14.80, but has to breach it to extend the current upmove towards 15.
Copper (2.64) keeps our bearish view intact to test it crucial 2.60-2.58 support region. A bounce to 2.65 is possible from this support zone.
Brent (61.25) has tumbled much beyond 64 and keeps out long-term bearish outlook intact to test 55 on the downside. However, the key Fibonacci retracement support at 59.74 can trigger an intermediate corrective rally to 63.50-64 before an eventual fall to 55.
WTI (52.95) can test 51.72 (61.8% Fibonacci retracement support) now and bounce to 54-55 before testing the long-term target level of 45.
FOREX
Dollar Index (97.61) fell sharply from 98.17 but is trading above immediate support at 97.50. If the support holds, we could see a bounce from here towards 98 and higher again. A break below 97.50, if seen could take it lower to 97.
Euro (1.1184) has risen back after testing 1.1116 last week. Although it could not re-test the May low of 1.1107, it could be ranged sideways while below 1.1220.
Euro-Yen (120.98) has broken below our expected support levels and has fallen sharply. The fall could extend to 120.50 in the near term before it can bounce back. Near term is bearish.
Dollar-Yen (108.13) has also broken on the downside sharply, falling below our expected support at 109. This opens up scope of testing 107.50-107.00 on the downside for the near term. View is bearish while below 109.
Aussie (0.6958) has been rising from 0.6866 and looks bullish in the very near term towards 0.6975 and then towards 0.7000/20.
Pound (1.2655) is trading just above support at 1.26 and the currency looks bullish in the near term towards 1.2700-1.2750.
USDCNY (6.8998) is trading below 6.90 and could fall towards 6.87/85 in the near term. We could see some strength in Yuan in the next 3-4 sessions.
USDINR (69.6850) could test 69.35 on the downside today while our view of a fall towards 69.20/00 remains intact.
INTEREST RATES
Plunging yields are bringing up fears of economic slowdown and a possible recession in the US. The US yields have dipped further. The 2Yr (1.92%) is down from 1.94%, 5Yr (1.90%) and 10Yr (2.12%) have dipped by 1bps while the 30Yr (2.57%) remains stable. While the medium term view is bearish, we could expect a pause for a couple of sessions before the fall resumes.
The German-Japan 10Yr (-0.10%) could be headed towards Apr’15 low of -0.17%. Near term looks bearish.
The US-Japan 10YR (2.22%) has surprisingly fallen sharply from 2.28% and could find some support near 2.20% where a pause looks likely. A pause in the yield spread and a bounce from current levels is important to limit the fall in Dollar Yen below 108 in the near term.
