STOCKS
Asians are trading mixed today. While the positive outcome of the US-China meeting over the weekend has boosted the sentiment, news on the US considering additional tariffs on the EU and China conducting anti-ship ballistic missile test may weigh on the markets in the near term. However, the broader picture continues to remain bullish and the rally is likely to continue in the global indices.
Dow (26717.43, +117.47, +0.44%) remains bullish to target 27200-27500 in the coming days. A strong break above 27000 can accelerate the rally. Support is in the 26500-26450 region which can limit the downside.
DAX (12521.38, +122.58, +0.99%) surged as expected to test our first target level of 12600 and has come-off from there. While above the support at 12450, DAX has the potential to target 12800 and even 13000 in the coming weeks.
Nikkei (21744.09, +14.12, +0.06%) has risen as expected to test the crucial resistance level of 21750. A strong rise past 21750 is needed for the current upmove to extend towards 22000 and 22250. s poised at a crucial juncture. A pull-back from current levels can drag the index to 21500 and 21350.
Shanghai (3041 3037.82, -7.09, -0.23%) is bullish to test 3080 and 3100 in the near term. Support is in the 3010-3000 zone. As mentioned yesterday, the current leg of upmove has the potential to the Shanghai up to 3200 over the medium term.
Sensex (39686.50, +291.86, +0.74%) and Nifty (11865.60, +76.75, +0.65%) bounced yesterday taking cues from other markets, but did not break their respective resistances at 39750 and 11900. The indices have to breach their resistance to gain momentum and target 40000-40500 (Sensex) and 12000-12150 (Nifty) on the upside. While below these resistances, the Sensex can trade sideways between 38900 and 39800 while the Nifty can remain range bound between 11600 and 11900.
COMMODITIES
OPEC agreed to an extension of the current 1.2 mln barrels per day production cut upto Mar’20, a nine month extension from July’19. This initially led to a rise in Crude prices but failed to sustian at those levels. Cude prices are trading lower today and day the markets await further details after the non-producers meeting due today.
Brent (64.9) tested 66.75 yesterday before coming off towards lower levels. Note that 67-69 is important technical resistance zone that is likely to hold for the medium term. For now 67 seems to be holding well.
Nymex WTI (58.89) has also come off from resistance near 60 and while that holds, prices could be pushed towards 56 in the near term.
There is scope of a re-test of immediate resistances in the next few sessions.
Gold (1393.3) has dipped slightly. We continue to look at support near 1390/80 from where a bounce back towards 1400+ levels is probable.
Silver (15.22) has come off from resistance near 15.50/60 and while that holds we could see some ranged movement within 15.5-15.0 region for the near term. Immediate support is seen near 15.
Copper (2.6860) has dropped sharply. Note that there is important resistances near 2.78 and 2.80 which is likely to hold in the medium term.
FOREX
Strength in the US Dollar yesterday paused gains for major currencies. News of an additional $4 billion tariffs over EU aircraft subsidies dragged Euro further. Aussie, Pound and Yuan could fall in the near term. Dollar Yen and Dollar-Rupee have some scope to rise in the near term but have important resistances above current levels.
Dollar Index (96.85) moved up yesterday and trades higher while support near 95.50 holds. A test of 97.25 on the upside looks possible in the near term before the index starts falling from there back towards current levels. Near ter, looks bullish.
Euro (1.1279) fell sharply to test lower support at current levels. Below 1.1280, there is support at 1.1250. A bounce from current levels or from 1.1250 is expected in the next 1-2 sessions that could take the pair higher towards 1.1300-1.1350 again.
Dollar-Yen (108.40) trades higher on stronger Dollar. The pair could face some resistance from 108.80-109.00 region in the near term from where a fall back towards 108 is possible.
Euro-Yen (122.30) tested 123.35 yesterday before falling sharply from there. Support near 121.0-121.5 is likely to hold in the medium term pushing the currency pair back to higher levels.
Aussie (0.6976) has come off sharply to test support near 0.695. If the current level holds, Aussie could start moving up again towards 0.7050. Failure to bounce back immediately would take Aussie towards 0.69 in the near term.
Pound (1.2641) also dipped on stronger Dollar and is heading towards support at 1.26. Broad sideways movement within 1.28-1.26 looks likely in the medium term.
USDCNY (6.8602) has bounced from 6.83 and while that holds, the pair could attempt to rise towards 6.89 again in the near term.
USDINR (68.89) could not sustain a rise above 69 yesterday and came down to close lower. There is some scope of re-attempting a rise towards 69.10/20 while the medium term outlook is bearish towards 68.60 on a break below 68.90/80 in the near term.
INTEREST RATES
Risk appetite in the market is giving a breather to the US yields. As mentioned yesterday, the US Yields can consolidate or may even see a slight corrective rally before the next leg of downmove begins. The German Bund yields on the other hand is under pressure as the fall seems to gather momentum.
The US Treasury yields have risen across tenor with the 2Yr (1.78%) moving up the most by 3 bps. The 5Yr (1.78%), 10Yr (2.02%) and the 30Yr (2.54%) were up 1 bps each. Our view remains the same. The 30Yr yield can consolidate between 2.53% and 2.60% within its overall downtrend in the near-term and then can eventually fall to 2.50% and 2.48%. The 10Yr on the other hand can trade sideways between 2% and 2.10%.
The German Yields were down across tenors. The 2Yr (-0.77%), 5Yr (-0.69%), 10Yr (-0.36%) and the 30Yr (0.24%) were down between 2 and 4 bps. The bearish view remains intact. The 5Yr can test 0.73% and the 10Yr can dip to -0.40% and -0.42% in the coming days.
The 10Yr GOI (7.0070%) was stuck between 7% and 7.05% for the second consecutive trading day thereby leaving the near-term outlook mixed. The yield can trade in a range between 6.90% and 7.10%. Within this range we expect it to break below 7% and fall to 6.90% in the near term. The broader view remains bearish for the 10Yr GOI to decline below 6.90% and target 6.80% and 6.75% over the medium term.
