STOCKS
The “Wait and watch” drill continues in global Equity markets with everyone looking at the status of the US-China talks/ spat. The expected range trade continued in most Equity markets yesterday, apart from the DAX which was more bullish than the rest. And, of course, there is the important Resistance on the Shanghai to be watched.
As it turns out, the DAX (11802.85, +151.67, +1.30%) did not see any further dip yesterday, stayed well above the mentioned intra-day Support at 11590 and moved up. However, it will have to break above 21-day MA at 11888 in order to attract further buying.
Watch crucial Resistance at 2900 on the Shanghai (2883, +0.11%). A break thereof will be a very important event, if seen at all. Else, there will be a danger of a medium term decline towards 2700. Trump says talks with China are progressing well. It is to be seen whether the Chinese share his point of view.
As expected, the Nifty (10918.70, -98.30, -0.89%) fell to test the Support at 10900 yesterday. Today is crucial. Will we get a further decline to 10800 or a bounce from 10900? It’s a wait and watch. Looking at the way the Sensex (37060.37) has fallen off from the 21-day MA on the Daily, one would be bearish. But, looking at the trendline Support near 36850 on the Weekly Candles, one would not want to sell.
The Nikkei (20644, +0.14%) is inching up, but as mentioned yesterday, it needs to break above 21000 in order to acquire long-term bullishness. A rise in Dollar-Yen (106.43) past 107 and in Euro-Yen (118.02) past 118.25 would be helpful.
The Dow (26202.73, +240.29, +0.93%) rose past 26250 yesterday. Need to see if it can break above the range resistance near 26500.
COMMODITIES
Gold and silver are struggling to gain strength and are unable breach their resistances mentioned yesterday. This leaves the possibility of seeing a corrective fall in gold and silver in the coming days. Copper continues to trade lower and remains bearish in the near term. Oil has come-off from its high and can reverse lower in the coming. A mixed inventory (a fall in crude inventory but a rise in refined product inventory) data has dragged oil lower.
The 1507-1510 resistance zone on Gold (1503) mentioned yesterday has been holding very well. This keeps the possibilities alive for seeing a corrective fall to 1480-1473 in the near term. Only a strong break above 1510 will negate the chances of the above mentioned fall and take gold higher to 1520-1528.
Similarly, silver (17.08) is facing resistance at 17.2 as expected. While below 17.2, it can dip to test 16.8 again and will remain vulnerable to break 16.8 and fall to 16.7-16.6.
Copper (2.58) continues to trade lower. The near-term bearish view is intact to test 2.55-2.54 on the downside. Resistances are at 2.61 and 2.62.
Brent (60.31) has come-off sharply from the high of 61.40 and looks vulnerable for a fall to 59.50-59.30 breaking below the 60.15-60.00 support zone.
Similarly, WTI (55.80) has come-off sharply from the high of 57.13. A fall to 55-54.75 I possible while it remains below the near-term resistance levels of 56.15 and 56.30.
FOREX
Dollar has bounced but has to breach a key resistance to sustain this bounce-back move. Euro is not gaining strength and remains vulnerable for a fall. Dollar-Yen and Aussie continue to consolidate. The USDCNY has room to rise further. Dollar-Rupee can move higher on a strong today on a break above 71.60. Key support to watch is at 71.33.
As expected, the Dollar Index (98.25) dipped towards 97.9 and has bounced from there. The near-term view is unclear. A strong rise past the 98.40-98.50 resistance zone is needed to test 99 on the upside. While below 98.5, a fall to 97.9-97.8 can be seen again.
Euro (1.1089) seems to lack strong follow through buyers above 1.11 and has come-off below the 1.1095 resistance again. While below 1.1095, a revisit of 1.1065 is possible and a break below 1.1065 can drag it further lower to 1.1030.
Dollar-Yen (106.43) continues to trade mixed between 106.15 and 106.7. As mentioned yesterday, the pair can remain in the narrow 106-107 range for some time within its broader 105-107 range.
EUR-JPY (118.05) remains within the narrow 117.5-118.5 range as expected. Within this range, a dip to 117.70-117.5 looks likely in the coming sessions.
Aussie (0.6771) continues to trade in the 0.6735-0.6835 range sideways range. Within this range the pair can now come down to 0.6750-0.6735 in the coming sessions.
Pound (1.2133) has come-off failing to breach 1.22 again. However, cluster of supports between 1.2130 and 1.2100 can limit the downside and keep the possibilities alive of the pair breaking above 1.22 and rise to 1.2250-1.23. A break below 1.21 will negate the bullish view. We will have to wait and see.
USDCNY (7.0669) has risen above 7.06 again and is keeping alive the chances of seeing 7.08-7.09 on the upside. A strong rise past 7.0685 will accelerate the upmove.
USDINR (71.5650) has bounced from the low of 71.3575 yesterday. A strong rise past 71.60 will pave way for a revisit of 71.80 levels. The pair has to decline decisively below 71.33 to negate any further rise and also to reverse the current uptrend.
INTEREST RATES
The US Treasury yields continue to remain under pressure. As mentioned yesterday, the yields can continue to remain subdued ahead of the US Federal Reserve Chairman Jerome Powell’s speech at the Jackson Hole Symposium on Friday. Market will be keen to get a hint on further rate cuts. The German yields remain lower and keeps the broader downtrend intact. The 10Yr GoI is holding well above 6.52% as expected and can remain sideways before moving higher again.
The US Treasury yields have dipped at the far end. The 10Yr (1.58%) and the 30Yr (2.06%) were down 2 bps each. At the near-end, the 2Yr (1.56%) yield was up 2 bps while the 5Yr (1.47%) remained stable. The broader bearish view remains intact. We expect the 5Yr Treasury yield to test 1.3% on the downside and the 30Yr to break 2% and fall to 1.8% in the short term.
The Germans remained stable at the near-end while the far-end dipped slightly within their overall downtrend. The 2Yr (-0.90%) and 5Yr (-0.89%) were stable. The 10Yr (-0.67%) and 30Yr (-0.15%) were down 1 bps each. The bearish view is intact and the 10Yr can test -0.83% on the downside in the short term while the 5Yr can test -1% and can even fall below it.
The 10Yr GoI (6.5673%) dipped during the day but has bounced-back as expected. As mentioned yesterday, the yield can remain range bound between 6.52% and 6.65% with a bullish bias to breach 6.65% and rise to 6.68%.
