STOCKS
Equities get a breather. Strong short-covering rally has been seen across global indices. The current corrective bounce can extend in the near term across indices to test their respective resistances. Will the broader downtrend resumes thereafter? We will have to wait and watch. But broadly, on the charts, the bias is still negative and we expect the downtrend in equities could resume after the current corrective rally.
Dow (26378.19, +371.12, +1.43%) has risen sharply and move further higher to test 26560 and 26600. The Dow has to surpass 26600 (revised higher from the earlier mentioned level of 26500) in order to turn the sentiment positive. A reversal from 26600 will see the current downtrend resuming back towards 25500 and 25000 in the coming weeks.
DAX (11845.41, +195.26, 1.68%) has risen above 11800 thereby negating the fall to 11350-11300 for now which we had been expecting. DAX can now test 11920 or 11940 – the key resistances in the near-term and then can resume its downtrend going forward.
Nikkei (20745.75, +152.40, +0.74%) has risen further as expected and can now test the next resistance level of 20830. A break above this hurdle will see the current corrective rally extending to 21000 and even 21250 going forward
As expected, Shanghai (2799.50, +4.95, +0.18%) has risen to test 2800. Resistance is at 2805 a break above which can take it further higher to 2820 today. A strong rise past 2820 is needed to turn the sentiment positive and trigger further rise to 2850 and higher levels.
Sensex (37327.36, +636.86, +1.74%) has moved up in line with our expectation and can test 37800 on the upside in the near-term. Immediate support is at 37250 and the next significant supports are at 37000 and 36730.
Similarly, Nifty (11032.45, +176.95, +1.63%) has risen to test 11000 as expected. The near-term view is bullish to move further higher to 11150 and 11180. Immediate support is at 11000 and the next one is poised at 10870.
COMMODITIES
Overall commodities may trade within sideways range. Crude prices and Copper could move up slightly while Gold and Silver could remain below immediate resistance levels.
Brent (57.40) and Nymex WTI (52.64) are almost stable and could hold above immediate supports near 57 and 52 respectively targeting to rise towards 60-62 and 54-56 in the coming sessions. Only on a break below the above mentioned supports, we would negate our view of immediate rise and look for lower levels. For the near term crude prices could remain stable and look to rise in the coming week.
Gold (1516.50) has risen slightly while Silver (17.08) has dipped from 17.16 seen yesterday. We would look at price action near immediate resistance levels of 1521 and 17.25 and while these holds; prices could remain stable just now.
Copper (2.5975) has moved up a bit. While above 2.55, we may expect a bounce to 2.65 in the coming week. Support near 2.55 seems to be holding well for now.
FOREX
Potential weakness in the Yuan could continue to see sell off in major currency pairs next week. Dollar Index could see a rise from current levels while Euro could test 1.1150. Dollar-Yen and Euro-Yen looks weak in the near term. USDINR could remain stable before a rise is seen next week. Aussie and pound may see a slight rise.
PBOC set USDCNY reference rate for the day at 7.0136 compared to 7.0039 yesterday. USDCNY (7.05) has risen and could re-test the week’s high at 7.0643. It would be crucial to watch if the Yuan continues to weaken past 7.0643 in the coming week towards 7.09/7.10 or manages to fall below current levels. Looking at the charts, a rise looks more likely for the coming week.
Dollar Index (97.56) is almost stable near levels seen yesterday. Immediate support is seen near 97.21 and while that holds, we could possibly see a bounce back in Dollar Index towards 98 or higher. Overall broad range of 97.21-98.0 could continue to hold today also.
Euro (1.1194) has dipped below 1.12 and could fall towards 1.1150 as mentioned yesterday. Near term trade is likely to be seen within 1.1150-1.1250.
Dollar-Yen (106.01) has fallen and looks bearish towards 105.50 in the near term.
Euro-Yen (118.70) has fallen on weakness in Euro. As mentioned yesterday, while the currency pair remains below 120, there is scope of falling towards 117. View is bearish while below 120.
Aussie (0.6806) has risen along with the rise in Copper (refer commodities section above). If Aussie manages to sustain above 0.68, it could turn bullish towards 0.6880-0.6900 in the near term before again seeing a short dip.
Pound (1.2135) is forming a base after the sharp fall seen from levels near 1.2519 since the last week of July’19 and could soon break on either side of the range. Note that 1.20 and 1.2250 are respective support and resistance levels which could hold in the medium term.
USDINR (70.70) continued to trade within 70.95-70.5475 yesterday. We could possibly see trade below 71 today also but our medium term view of a break above 71 to target 71.38/41 remains intact for the coming week. After a sideways consolidation between 70.40 and 71.00, there could be some scope of seeing a rise above 71 before a medium term top is formed.
INTEREST RATES
Some of relief for the yields as the US-China trade worries seems to be fading out. Both the US Treasury and the German yields have bounced yesterday and can see a corrective rise in the near term. However, the broader picture continues to remain bleak and the yields may resume the fall after this near-term correction/consolidation. The 10Yr GoI can rise to 6.50%-6.55% on a break above 6.44%.
The US Treasury yields have bounced across tenors. The 2Yr (1.60%) and 5Yr (1.53%) were up 3 bps and the 10Yr (1.70%) was up 2 bps. The 30Yr (2.21%) was stable. If the yields manage to sustain higher, the 2Yr can rise to 1.65%-1.68% and the 10Yr can test 1.73%-1.75% in the near term. However, the broader picture is negative and the yields are likely to resume their fall after this corrective upmove.
The German 2Yr (-0.86%), 5Yr (-0.82%), 10Yr (-0.56%) and 30Yr (-0.04%) bounced yesterday. The 10Yr has little room on the upside and can test -0.54% in the near term. However, if the 30Yr can sustain the current bounce, it will have more room to move into the positive territory again and test 0.03% in the near term.
The 10Yr GoI (6.4017%) has risen just above 6.40%. As mentioned yesterday, the near-term view is bullish for a test of 6.50% and 6.55%. A break above 6.44% can accelerate the upmove. Supports are at 6.35% and 6.33%.
