STOCKS
As mentioned yesterday, the US considering additional tariffs on EU goods has renewed the trade war concerns and started to weigh on equities. As a result, the uptrend in the equities which got accelerated after the positive developments on US-China trade talks over the weekend seems to be losing pace. However, the broader picture continue to remain bullish and the equities can resume their uptrend, may be after an intermediate consolidation.
Dow (26786.68, +69.25, +0.26%) is getting support near 26600 and remains bullish to test 27000 in the near term. A break above 27000 will pave way for our preferred target levels of 27200 and 27500.
DAX (12526.72, +5.34, +0.04%) is managing to hold above its support at 12450. As mentioned yesterday, DAX is bullish to test 12800 and even 13000 in the coming weeks while it remains above 12450. A break below 12450 will take it to 12400-12350 and delay the above mentioned rally.
The resistance at 21750 on Nikkei (21623.55, -130.72, -0.60%) seems to be holding well. While below 21750, a pull-back move to 21500 and 21350 is possible. The bullish sentiment will come back in to the picture only on a strong rise past 21750.
Shanghai (3018.48, -25.47, -0.84%) has failed to breach 3050 and has come-off today. However, the outlook remains bullish. A sideways consolidation between 3000 and 3050 is possible in the near-term before we see a fresh rally to 3080 and 3100.
Sensex (39816.48, +129.98, +0.33%) has risen above its resistance at 39750. The bias is turning bullish and the chances are high now for it to breach 40000 and rise to 40500 in the coming days. Support is at 39500.
Nifty (11910.30, +44.70, +0.38%) has closed just above 11900. The daily candle yesterday indicates that the index could be gearing up for a fresh rally. Support is at 11800. While above 11800, the outlook is bullish for the Nifty to target 12100-12150 on the upside.
COMMODITIES
The American Petroleum Institute (API) reported a large crude oil inventory draw of 5mln barrels (higher than market expectation of 2.48mln barrels) for week ending 27th June, initially leading to a rise in Crude prices but could not sustain higher prices as important news events across markets with fears of slowdown in demand dragged crude lower on fresh Dollar strength.
Brent (62.74) and Nymex WTI (56.55) are trading lower. While 67 holds on Brent, it could come off towards support at 60 in the near term. Similarly, resistance at 60 on WTI is holding well and has succeeded in putting up a string rejection there. WTI could now fall towards 56-54 levels before bouncing back in the medium term.
Gold (1426.70) added to gains on falling US Dollar. Immediate resistance near 1440/50 is to be watched in the near term. A break above 1450 could lead to an eventual rise towards 1500 in the medium term. View is bullish for Gold while above 1380.
Silver (15.37) has risen back and could target resistance near 15.50/60 again in the near term. Overall sideways trade within 15.0-15.60 looks likely.
Copper (2.6625) has fallen sharply and while below 2.68, Copper could head towards support near 2.60. Interim support is visible at 2.65 which if holds could help Copper bounce back in the near term negating a fall to 2.60. Watch price action near support at 2.65.
FOREX
Carneys speech and the lower than expected PMI data weighed down on Pound which could test support levels before recovering. Euro bounced after comments from ECB policy makers stated they were in no rush to cut rates in July meeting but fell soon after the news came in that Christine Lagarde is elected to replace Draghi. Aussie and USDCNY are trading higher while Rupee could strengthen a bit today. Dollar-Yen looks weak.
Dollar Index (96.70) may not be able to move up from 97.25 and is likely to trade below 97.25 while 95.50 continues to remain an important support.
Euro (1.1291) bounced from 1.1275 and is trading almost stable just now. We could see a test of 1.1250 before the currency bounces sharply from there. Break below 1.1250, if seen would be bearish for Euro in the medium term. Watch price action near 1.1250/75
Dollar-Yen (107.60) is down sharply falling from resistance near 108.53. If the fall continues, Yen could test 106.50-106.00 in the near term.
Euro-Yen (121.51) could possibly spend some time in sideways ranged movement between 123-121 in the near term before breaking on either side. While 121 holds, Euro-Yen could bounce back towards 123 in the near term.
RBA cut rates by 25bps yesterday to 1% from the earlier 1.25%. Although a short bounce is seen from 0.6950 yesterday, Aussie (0.6989) could be capped at 0.70-0.7050 on the upside unless a sharp break is seen above 0.705. A near term rise could be in place for the next 2-3 sessions but we may look for a fall in Aussie in the medium term towards 0.68.
Mark Carney’s speech led to a sharp fall in Pound which was already trading weak after the lower than expected construction PMI. Carney said that the stance of monetary policy is tighter than intended. Markets have interpreted for more rate cuts in the upcoming policy meets although Mark laid possibilities of rate hike in case of a smooth Brexit which looks unlikely considering current scenario. Adding to the speech he mentioned that he expects economic growth to weaken in the second half of the year.
Pound (1.2592) faced stiff selling yesterday and has declined sharply. There is scope of testing 1.25-1.24 in the near term before bouncing back towards 1.26 or higher. While important support in the 1.25-1.24 exists, Pound may not be trading at lower rates for long and could soon see a bounce back in the medium term.
USDCNY (6.8784) has scope to rise towards 6.89/90 again in the near term while support near 6.83 holds. Near term looks bullish to sideways within 6.90-6.83 region.
USDINR (68.93) can possibly test 68.80 today. Immediate resistance is seen near 69.05 on the upside and the pair is likely to fall below 68.80 in the near term bringing in chances of 68.60/50 into the picture. View is bearish for USDINR.
INTEREST RATES
The US threatening to levy additional import tariffs on Euro zone goods has renewed market concerns on the trade war front. The fear of the global economy slowing down as a result of the ongoing trade war is back into the market. As a result, bond yields have fell sharply on increased risk aversion in the market.
The US Treasury yields were down across tenors. The 10Yr (1.95%) declined below the 2% mark for the first time since November 2016. The 2Yr (1.73%), 5Yr (1.72%) and 30Yr (2.49%) were also down significantly. The 10Yr has an immediate support at .93% and a bounce-back to 2% from there cannot be ruled out. However, an eventual break below 1.93% will pave way for further fall to 1.85% and even 1.75%. The 30Yr has declined below 2.50% as expected and can now move down to 2.45%-2.43%.
The German yields were also down across tenors. The 2Yr (-0.78%), 5Yr (-0.69%), 10Yr (-0.37%) and 30Yr (0.25%) were down between 2 and 4 bps. The trend remains down for the German yields. As mentioned yesterday, the 5Yr can dip to -0.73% and the 10Yr can test -0.40% and -0.42% on the downside.
The 10Yr GOI (6.9773%) has dipped below 7% and can test 6.95% and 6.90% in the near term. A break below 6.90% will accelerate the fall to our preferred target levels of 6.80% and 6.75%. But while 6.90%, a sideways move between 6.90% and 7.10% is possible before we see the above mentioned fall.
