STOCKS
The news on the US and the Chinese Presidents meeting next week at the G-20 summit has renewed the optimism on the trade talk front and has boosted the equities. The broader bullish view on the equities remain intact. Will the Fed boost the momentum further in equities today with a rate cut? We will have wait and see. Dow, DAX, Nikkei have gained strength and remains bullish. Shanghai retains its sideways range, but gives bullish signals to break the range on the upside. Sensex and Nifty have key resistances ahead which may cap the upside in the near term and keep it pressured on the downside.
As expected, Dow (26465.54, +353.01, +1.35%) has surged breaking above 26250 and is heading towards 26500-26600. Though an intermediate pull-back to 26250 cannot be ruled out, Dow is likely to breach 26600 eventually and target 27200-27500 over the medium term.
DAX (12331.75, +245.93, +2.03%) dipped to test 12000 and has risen sharply from there in line with our expectation. Though there is resistance near current levels, the outlook remains bullish. DAX can extend its upmove to 12430-12450. Support is in the 12235-12200 region.
Nikkei (21311.89, +339.18, +1.62%) has risen past 21250 contrary to our expectation for a fall. While above 21250, the outlook is bullish to see a rise to 21750..
Shanghai (2928.64, +38.48, +1.33%) has bounced above 2900 and can now test 2935 and 2950 – the upper end of its 2835-2950 sideways range. The price action over the last one week leaves the bias positive to see a break above 2950 and a rise to 3000.
As expected, Sensex (39046.34, +85.55, +0.22%) and Nifty (11691.50, +19.35, +0.17%) have key resistances at 39500/39750 and 11800/11850 respectively. A test of resistances is possible in the near term, but a rise past them is less preferred. As such, while below these resistances, the outlook is likely to remain bearish to see a fall to 38500-38000 on the Sensex and 11600 on the Nifty
COMMODITIES
A rate cut either today itself from the Fed or in the coming months in line with market expectation can drag Gold and Silver lower on profit-booking as the market has already priced in the same. Copper has surged breaking on the upside of it sideways range as against our expectation. Oil retains is sideways range as expected and has risen within it. We expect the range to remain intact for some time before the overall downtrend resumes.
Gold (1343) is struggling to breach 1350 decisively indicating the inherent weakness in it and possible fall going forward. As such we expect the crucial resistance in the 1355-1360 region to hold and a fall to 1320-1310 looks likely. As mentioned yesterday, while below 1360 our bias is bearish to see a fall to 1300 and even lower levels – may be post fed meeting.
The upside in Silver (14.95) is likely to be capped at 15.10 which has been holding well over the last few days. We expect a fresh fall to 14.60-14.50 (initially) and then to 14.35-14.25 (eventually) in the coming days.
Contrary to our expectation, Copper (2.70) has surged above 2.68. A strong rise past 2.72 will pave way for 2.75-2.77 on the upside and prove our bearish view wrong.
Brent (62.24) has bounced from near 60. As we have been mentioning for some time, Brent can remain range-bound between 59.5 and 64 for some time. Within this range, a rise to 64 is possible on a break above 62.80.
WTI (54.08) has surged from a low of 51.50 and can test 55 – the upper end of the 50.5-55 sideways range. We expect the range to remain intact and a pull-back to 53-52 is possible from 55 in the coming sessions.
FOREX
Trump has agreed to have an extended meeting with Xi Jinping next week in the G20 summit reviving hopes of a positive outcome of the stalled trade-war concerns between the two countries. Chinese Yuan (6.9036) strengthened from 6.93 yesterday but could overall trade within 6.8960-6.9300 for the next few sessions. A fall below 6.8960 could take it lower to test support near 6.88/87 in the medium term. The sideways range could possibly extend for the week.
Draghi’s comments on willingness to ease policy if inflation does not reach target saw sell off in the Euro (1.1191) yesterday as the currency was pushed down from levels of 1.1230 to 1.1193. Euro came off from 1.1250 itself contrary to our expectation of testing 1.1260/70 on the upside. While below 1.1250, the possibility of re-testing 1.1150/25 comes into the picture.
Dollar Index (97.63) held above 97.40 against our expectation of initial test of 97.20 on the downside while the overall medium term view remains bullish. 98 is immediate resistance on the upside which may be tested in the next few sessions followed by a fall towards 97.25 again.
Dollar-Yen (108.44) is stable just now, holding above 108.40.A break below 108.40, if seen could take it down to 108.
Near term is likely to turn bearish.
Euro-Yen (121.40) has support at 121 on the daily candles which if holds could produce an immediate bounce back towards 122. Only if 121 break, we will have to consider a fall towards 120.5-120.0 for the medium term. But we would give more possibility of a bounce from 121 itself in the near term.
Aussie (0.6877) rose back contrary to our bearish view mentioned in yesterday’s edition. Support near 0.68 and 0.6850 is likely to hold in the near term producing a bounce towards 0.69 or higher.
Pound (1.2562) could rise towards 1.2600-1.2620 before resuming the overall medium term downtrend targeting 1.25.
USDINR (69.71) fell yesterday from levels near 69.90. We could see Rupee to strengthen in today’s session targeting 69.40/30. Note immediate resistance is seen near 69.75 and then higher near 69.95/70.00.
INTEREST RATES
Bond market awaits FED meeting today but saw a sharp decline after Trump’s tweet of meeting Xi Jinping next week recovering by the close of the session as comments from ECB stated its willingness to ease policy if inflation does not reach its target. However, this has pushed the European yields lower. Overall globally, yields are trading low today and could take few sessions to recover. As the market has already priced-in the rate cut from the Fed, it will be important now to see the number of rate cuts hinted/projected today by the Fed.
The US yields rose to close at higher levels after an initial dip. The 2YR (1.87%), 5Yr (1.84%), 10YR (2.07%) and 30YR (2.56%) are up from earlier levels of 1.83%, 1.81%, 2.05% and 2.54% respectively. The broader outlook is bearish and could be resumed after some corrective upmove is seen for a few sessions.
The German-US 2YR (-2.57%) is heading towards -2.75% and could be indicative of bearishness in Euro going forward.
European yields saw a sharp fall yesterday. Italy 10Yr (2.0930%) fell from 2.28% while Spain 10Yr (0.3940%) is down from 0.5280%. France and Germany 10 Yr yields are also sharply down from 0.107% and -0.2430% to 0.0090% and -0.3180% respectively. Near term looks bearish with a possible recovery likely after a couple of sessions.
The 10Yr GOI (6.9430%) has fallen below our mentioned level of 6.95%. The bearish view is intact, but the falling momentum seems to be much faster just now than expected. The 10Yr can test 6.75% on the downside indicating a fall in Dollar-Rupee.
