STOCKS
Dow is gaining strength and can move further higher which would negate our bearish view. DAX remains below its key resistance and looks vulnerable for a fresh fall. Nikkei can move further higher in the near term before resuming it downtrend. Sensex and Nifty are poised near crucial supports which have to hold to avoid a fresh sell-off.
Dow (25720.66, +181.09, +0.71%) is poised just below the key level of 25740 (21-week moving average). However, the daily chart looks strong and bullish indicating a possible break above 25740 and a rise 25950-26000
The resistance at 12100 is continuing to hold well on DAX (11953.14, -27.67, -0.23%). While below 12100, the outlook is bearish for a fall to 11800 and 11600. A break below 11900 will accelerate the downmove.
The corrective rally in Nikkei (20873.44, +99.40, +0.48%) remains intact. There is room on the upside to test the 21000-21100 resistance region after which the downtrend is likely to resume targeting 200000 and 19500 over the medium term.
Shanghai (2827.80, -33.62, -1.17%) is closed today on account of a public holiday.
Sensex (39529.72, -553.82, -1.38%) has crucial supports at 39500 and 39350 which have to hold in order to avoid further fall to 38700-38500.
Similarly, Nifty (11843.75, -177.90, -1.48%) has to sustain above 11800. Else a fall to 11700-11600 can be seen in the coming days.
COMMODITIES
Gold and Silver remains higher and can move up in the near term. But key resistances are coming up for both gold and silver which may cap the upside. Copper can consolidate before resuming its downtrend. Oil has bounced from the key Fibonacci support. A near-term corrective rally is possible before the overall downtrend resumes.
Gold (1333) sustains higher, but is not gaining momentum. It has to breach the 1345 resistance to move up further targeting 1355-1360. In the absence of any fresh triggers, we expect the upside to be capped at 1360 and gold is likely to reverse lower again.
Silver (14.88) can test 15 in the near term and need to see if it manages to break above it or not. A strong break above 15 will see the current corrective rally extending towards 15.15-15.20 after which a pull-back is possible.
Copper (2.65) may consolidate between 2.61 and 2.68 for some time and then resume its downtrend targeting 2.58 and 2.55 on the downside.
Brent (62.21) has bounced from the 61.8% Fibonacci retracement support level of 59.74. A Brent can rise to 63.5 and 64 on a break above 62.75 The overall downtrend is likely to resume thereafter.
WTI (53.11) can test 54-54 before the overall downtrend resumes targeting 45 on the downside over the long term.
FOREX
Mexico and US are in talks for significant changes in the asylum rules and border enforcement that could keep Trump away from imposing tariffs on all Mexican imports. The talks increases optimism that an agreement could be reached soon and prevent imposition of tariffs. Yesterday’s all day negotiations that ended without an agreement is likely to be continued with another set of discussions today in Washington.
Dollar Index (97.05) has managed to hold above immediate support at 96.75. Markets await a series of data today including the US NFP which is expected to come our lower. A fall in NFP data could probably see some sell-off in US Dollar before the index recovers. Below 96.75, there could be scope of testing 96.50/30 in the near term from where a bounce back towards 97.50/75 looks likely.
ECB kept rates unchanged as expected but also said that the rates are likely to remain lower until at least middle of next year. Euro (1.1272) tested 1.1309 yesterday, below our mentioned upper limit of 1.1320/25. While below yesterday’s high Euro could possibly see some trade within 1.13-1.12 in the near term before falling below 1.12. There is still some scope of falling below 1.12 in the near term which would be negated on a sharp and sustained break above 1.1325.
Euro-Yen (122.30) has risen and could target 123.50 on the upside in the near term.
Dollar-Yen (108.51) could re-test 109 while support at 107.50 holds. Hopes of optimism from US-Mexico talks could boost global equities and could possibly pull up Nikkei and Dollar-Yen to higher levels in the near term. It would be important to see if the currency pair manages to break above 109 in the near term. While below 109, medium term is bearish for USDJPY.
Aussie (0.6977) is holding below 0.70 just now. Immediate support is seen near 0.6940 which if holds could gradually push Aussie towards 0.70/71 on the upside. Near term is sideways to bullish while above 0.6940.
Pound (1.2693) is seeing sell-off near 1.2750 for the last 2-sessions. While 1.2750 holds, we could see a fall towards 1.2600 again.
USDCNY (6.9081) has fallen and could test 6.87 on the downside while below 6.92. We would continue to watch price action closely near 6.92.
USDINR (69.2750) saw a decline after the RBI cut 25bps yesterday in line with the market expectations. The dip in the pair is likely to continue today targeting 69 on the downside before a bounce from there is seen.
INTEREST RATES
The US yields are mixed. The yields at the shorter end have risen while we see a dip at the longer end. The US 30Yr (2.62%) is down 2bps while the 10Yr (2.13%) is stable and the 5Yr (1.89%) is up by 3bps. the US 10-5yr (0.24%) has sharply fallen from trend resistance near 0.26% and could continue to fall in the near term. This could possibly indicate a faster rise in 5Yr yield compared to the 10Yr yield.
The German-US 10Yr (-2.36%) and German-US 2Yr (-2.54%) have declined and could pull down Euro from current levels towards 1.12 or lower. The German-Us 10Yr could fall towards -2.39%.
The US-Japan 10YR (2.26%) has risen 2bps and looks bullish in the near term indicating a bounce in Dollar-Yen. But the sharp fall in the Japan yields could be a concern for the near term. The Japan 5Yr (-0.24%), 10YR (-0.129%) and 30Yr (0.40%) are down from -0.248%, -0.122% and 0.424%. the 5Yr has some support near current levels and could bounce back in the near term while the 10YR could have some more room on the downside.
The UK and German yields also have fallen sharply and look bearish for the near term. The UK 10Yr (0.83%) and German 10Yr (-0.237%) are down from 0.8570% and -0.227%. Near term looks bearish.
