STOCKS
Equities continue to trade lower. The renewed concerns on the US-China trade war on one side and increasing hopes for a rate cut from the Fed later this month on the other side keeps the market little mixed and cautious. The near-term view remains negative for the Dow, DAX and Nikkei. Shanghai continues to consolidate while the Sensex and Nifty looks vulnerable for a fall.
Dow (27222.97, +3.12, +0.01%) dipped further as expected but has bounced from the day’s low of 27068. The near-term view remains negative for it to test 27000. We also reiterate to remain cautious as a break below 27000 will accelerate the fall to 26500 and even lower levels.
DAX (12227.85, -113.18, -0.92%) has dipped below 12250. As mentioned yesterday, the dip below 12250 has turned the outlook negative for a fall to 12000 in the near term.
Nikkei (21384.77, +338.53, +1.61%) has bounced sharply much above the resistance at 21350 mentioned yesterday. But the next resistance in the 21400-21450 region can cap the upside and keep the negative view intact to test 20900 and 20750 in the coming days.
Shanghai (2935.60, +34.42, +1.19%) bounced after testing 2900 and keeps the 2900-2950 sideways range intact as expected. Our bias remains bullish to see the index breaking this range above 2950 and rally to 3000 in the coming days.
Sensex (38897.46, -318.18, -0.81%) failed to sustain above 39000 and has negated the chances of testing 39500 on the upside. The dip below 39000 can now drag it to 38750 and 38500 as mentioned yesterday. The possibility of the fall extending to 38000 also cannot be ruled out.
Similarly, Nifty (11596.90, -90.60, -0.78%) has declined sharply failing to breach 11700. This has brought back the bearish view into the picture. While below 11700, Nifty can fall to 11500-11450 again and will remain vulnerable to test 11400 on the downside.
COMMODITIES
Almost all commodities are trading higher and look bullish for the very near term.
Brent (63.14) tested 62.50 in line with our expectation before bouncing from there while Nymex WTI (56.34) tested 55.75 on the downside before rising back from there. While immediate support near 62.5 and 55.75 holds, we could see some range trade in the next few sessions. Brent has scope of testing 62-60 in the longer run while Nymex has crucial support near 54.
Both Gold (1446.40) and Silver (16.49) are in a strong upward rally and has more room for further rise. If Gold managaes to break above 1450, it could continue to rise targeting 1500 in the medium term while Silver is trading at crucial weekly resistance at 16.50. It would be important to keep a watch on Silver to see if it faces stiff rejection from 16.50 or manages to break on the upside.
Copper (2.7630) rose sharply, breaking above 2.75, contrary to our expectation. If the rally continues, Copper could head towards upper resistance near 2.85/90 soon. Near term looks bullish while above 2.75.
FOREX
Dollar Index (96.97) has fallen as expected and could test 96.75 on the downside. /on the longer term charts there is scope for testing 96 in the medium term, but we would watch price action near 96.75 before turning bearish towards 96.
Euro (1.1267) has risen well and trades higher just now targeting 1.13. It would be important to see if 1.13 can push back the currency towards 1.12 or lower in the medium term. A break above 1.13, if seen would be crucial indicator of medium term bullishness for Euro.
Dollar-Yen (107.49) is trading near support at current levels. If the break below 107.50 sustains, the pair could test 107.30-107.00 levels in the near term before bouncing back from there.
Euro-Yen (121.12) is trading in very small and narrow range just above support near 121. Watch price action near current levels because a fall from here could be indicative of fresh bearishness in the medium term.
Aussie (0.7071) has resistance near 0.71 which if holds, could turn Aussie down towards 0.69 in the medium term.
Pound (1.2551) has risen sharply over the last 2-sessions and could move up towards 1.2620 in the near term. View is bullish while above 1.2400/2450.
USDCNY (6.8731) has been trading near current levels. There could be some chances of testing 6.89/90 before Yuan strengthens in the longer run.
USDINR (68.96) closed higher yesterday but could face a short dip from 69. The dip from 69, if seen could take it down towards 68.75 before the currency pair attempts another rise towards 69.25.
INTEREST RATES
The US Treasury yields have dipped further. One of the US Federal Reserve officials stating that the central bank should act quickly pulled the yields lower as it increased speculation for an immediate rate cut. However, another Fed official had clarified that the statement is just from an academic research and is not a hint on the central bank’s actual action.
The US Treasury yields were down across tenors with the very near-term falling the most. The 2Yr (1.78%) was down 5 bps while the 5Yr (1.79%), 10Yr (2.04%) and the 30Yr (2.56%) yields were down between 1 bps and 3 bps. As mentioned yesterday, the yields can dip further. The 30Yr can test 2.50% and the 10Yr can dip to 2%.
The German yields continue to trade subdued. The 2Yr (-0.77%) and 5Yr (-0.65%) dipped 1bps each. The 10Yr (-0.31%) remained stable while the 30Yr (0.27%) inched up by 1bps. The near-term view remains negative. The 30Yr can dip to 0.20% and the 10Yr can test -0.40% on the downside.
As expected, the 10Yr GoI (6.3868%) is managing to sustain above 6.25% and a corrective bounce to 6.50% looks likely in the near term.
