STOCKS
Renewed concerns on the US-China trade war is weighing on the equities. Trump’s comment yesterday that the trade deal has a long way to go has raised concerns. This has stalled the rally in Dow. The Asians broadly remain subdued.
The rally in the Dow (27335.63, -23.53, -0.09%) seems to be losing steam and strengthening the case of the resistance at 27500 to hold well. As we have been mentioning, we expect the resistance at 27500 to hold and the Dow can dip to 27200-27000 and the possibility of the corrective fall extending to 26500 or even lower cannot be ruled out.
DAX (12430.97, +43.63, +0.35%) has moved up further. As mentioned yesterday, a strong break above seems 12450 (most preferred) will boost the momentum to revisit. While 12450 holds, DAX can dip to 12300 again and even 12250.
Contrary to our expectation, Nikkei (21450.31, -84.94, -0.39%) broken the 21500-2175 range on the downside. Immediate support is at 21435 a break below which will accelerate the fall to 21350-21300 in the coming sessions.
Shanghai (2941.73, +4.11, +0.14%) remains stable below 2950. While below 2950 it can consolidate between 2900 and 2950. Our bias continues to remain bullish and we expect the index to breach 2950 and rise to 3000 in the coming days.
As against our expectation, the Sensex (39131.04, +234.33, +0.60%) and Nifty (11662.60, +74.25, +0.64%) have risen past 39100 and 11650. If they manage to sustain higher a further rise to 39500 on the Sensex and 11700 on the Nifty is possible in the coming sessions. Our bearish view will go wrong on a strong break above 39500 (Sensex) and 11700 (Nifty).
COMMODITIES
Trump indicated easing of tensions with Iran as news came across that Iran was willing to negotiate on its missile program. This has led to a dip in Crude prices yesterday. Oil prices may continue to dip some more in the next few sessions before bouncing back. Gold and Copper are trading low while Silver has broken above immediate resistance near 15.50 and has moved higher outperforming Gold just now.
Gold (1407) is also down but could be ranged in the 1380-1440 region for the near term.
Silver (15.65) has surprisingly risen amongst the falling commodity prices overall outperforming Gold. Earlier resistance near 15.50 has now turned to be an important support and it would be crucial to see if the rise sustains in the medium term.
Copper (2.7015) has dipped slightly. A fall towards 2.66/64 could be on the cards for the near term.
Brent (64.47) has fallen sharply on news of easing tensions between Iran and US. Although there is scope of falling towards 63 on the downside, prices may bounce back from 64 to re-test 65-66 on the upside. On the 3-day candles the resistance is holding well and indicated bearishness for Crude prices towards 62-60 in the coming weeks with some scope of rising towards 68-69.
Nymex (57.58) has broken below our expected 58.50 and now looks bearish towards 56 in the near term.
FOREX
US retail sales yesterday came out stronger than expected and helped Dollar Index to move higher.
Dollar Index (97.36) rose sharply but higher than our expected 97.20. But as mentioned yesterday, the rise could be short lived as 97.50 could act as an important resistance on the upside. Only a break above 97.50, if seen and sustains could indicate some possibility of a rise towards 98.50. Preferred view would be a fall from 97.50 towards 96 in the medium term.
Euro (1.1210) could get some support near current levels and could bounce back towards 1.13 in the near term. Break below 1.12, is needed to turn bearish towards 1.1125 in the longer run. We would watch price action near 1.12
Dollar-Yen (108.18) has risen on sharp rise in the US Dollar and could test resistance near 108.5-109.0 on the upside. While below 109, Dollar Yen is bearish for the medium term.
Euro-Yen (121.27) is down and could test support at 121 from where a bounce back towards 122-123 looks likely. Only a break below 121 would negate our current bullish view and target lower levels of 119. We would watch price action near 121.
Aussie (0.7005) is trading lower and could target 0.695 in the near term.
Pound (1.2412) is trading lower as well. Unless it bounces back from 1.24 immediately, it could fall further towards 1.22 in the medium term.
USDCNY (6.8820) has also moved above 6.88 but could face rejection either from current levels or from levels near 6.89/90 from where a fall looks likely.
USDINR (68.72) rose towards our upper limit of 68.80 within the mentioned 68.25-68.80. It would be important to see if 68.80 holds and pushes the pair back towards 68.50. Else a break above 68.80 could open up scope of rising towards 69.0-69.25.
INTEREST RATES
Strong economic data release has pushed the US Treasury yields yesterday. The Treasury yields can move further higher in the coming days. The German Yields remain stable and are closer to key resistances which can halt the recent rally. A near-term correction is possible. The Indian 10Yr GoI has dipped below a key support and can extend its fall further in the coming sessions.
The US retail sales in June increased by 0.4% (MoM) / 3.4% (YoY). Though the US Federal Reserve is ready to cut rates, the recent data releases like the job numbers, inflation and yesterday’s retail sales indicate that the central bank may not decrease rates at a faster pace as the market would expect. This could limit the downside in the yields going forward.
The US 2Yr (1.85%) and 5Yr (1.87%) yields were up 3 bps each while the 10Yr (2.10%) was up 2bps. The 30Yr (2.61%) remained stable. As mentioned yesterday, the yields are likely to rise further in the coming days. The 10Yr can rise to 2.20% while it remains above the 2.05%-2.00% support zone. Similarly, the 5Yr has support at 1.8% and can rise to 2% on a strong break above 1.92%.
The German yields remained broadly stable across tenors. The 2Yr (-0.75%), 5Yr (-0.60%), 10Yr (-0.25%) were stable while the 30Yr (0.33%) inched up by 1 bps. The yields have risen sharply since the beginning of the month and are closer to a key resistance. The 30Yr has resistance at 0.40%. While it holds, a dip to 0.28%-0.26% is possible. Similarly, the 10Yr has resistance at -0.19% which can cap the upside and trigger a corrective fall to -0.30% in the coming days.
Contrary to our expectation for a bounce, the 10Yr GOI (6.3316%) has declined below 6.35%. The yield can now extend its down trend to 6.25% the coming sessions.
