STOCKS
The US-China trade war is getting worse. China slapping fresh tariffs on the US and Trump retaliating by increasing the tariffs on Chinese import lead to a sharp sell-off in the US equities on Friday. The Asians equities are bleeding now taking cues from Friday’s fall in the US markets. Broadly, the global equities remain bearish and can fall further in the coming days. India’s Sensex and Nifty which had bounced on Friday may fall-back again following the global markets
Dow (25628.90, -623.34, -2.37%) tumbled to 25630 on Firday itself which we had expected to happen this week. 25500 and 25000 are crucial levels to watch now. A strong break below 25000 will increase the chances of the Dow extending the fall to 23500-23000.
DAX (11611.51, -135.53, -1.15%) has been struggling to breach 11800 decisively since the beginning of this months and looks weak to revisit 11400 in the near term. As mentioned on Friday, the recent fall may have the potential to drag DAX to even 11200 on the downside.
Shanghai (2859.48 -37.95 -1.31%) is continuing to face resistance at 2900. While below 2900 we remain bearish on Shanghai to test 2700 on the downside over the medium term. A strong close below 2850 will accelerate the fall.
Nikkei (20244.31, -466.6, -2.25%) can fall to 20000-19900 on a break below the immediate support level of 20200.
Sensex (36701.16, +228.23, +0.63%) and Nifty (10829.35, +88.00, +0.82%) may come under pressure taking cues from the global markets. Sensex can dip below 36500 again to test 36000 while the Nifty can break 10800 and fall to 10600.
COMMODITIES
Gold and silver have surged on the back of high risk aversion in the market following the recent developments on the US-China trade front. They both are bullish and can move further higher in the coming days. Copper has declined below a key support and is vulnerable for further fall. Oil is also looking weak and can fall in the coming days.
Gold (1547) has surged above 1510 and has negated the chances of a corrective fall to 1480-1473 that we had expected last week. The outlook is bullish. 1530-1525 will now be a good support zone. While above 1525 a rise to 1580-1590 is likely in the coming days.
Silver (17.66) has held well above its support t 16.8 all through last week. The outlook is bullish to test 18-18.10 in the near term. Supports are at 17.5 and 17.25.
Copper (2.50) has declined below 2.5250 to test 2.50. The bearish view is intact to test 2.46. From a medium-term perspective the picture is weak to test even 2.25 on the downside while it remains below 2.64.
Brent (58.95) has declined much below our expected level of 59.30 mentioned on Friday. The outlook is bearish. Next key supports are at 58.3 and 57.9 which can be tested in the near term. A strong break below 57.9 will see the fall extending to 57 and 56 in the coming days. Cluster of resistances are in the 59.6-60 region which can cap the upside this week.
WTI (53.65) has an important support at 53.20. A strong break below can drag it lower to 52-51.50 and even 50.50 in the coming days.
FOREX
Dollar has been beaten down badly after the US-China trade war got worse on Friday. The Dollar index can remain subdued and can fall further in the near term. Euro has risen sharply above 1.11 and can test 1.12. Dollar-Yen has a crucial support at 104.5 which needs a close watch. A break below it can trigger further fall. The Euro-Yen and Aussie has broken their respective range on the downside and are bearish in the near term. Pound has a key resistance ahead which has to be broken for it to keep the current upmove intact. USDCNY has risen past a crucial resistance and can move further higher. Dollar-Rupee which has been moving in tandem with USDCNY can surge past 72 today.
Contrary to our expectation for a rise above 98.50, the Dollar Index (97.26) has tumbled below 98. Key resistances are at 97.5 and 97.7 and a test of 97 is likely in the near term. A break below 97 will drag the index further lower to 96.6-96.5 thereafter.
Euro (1.1145) is bullish to test 1.1210. Supports are at 1.1130 and 1.1115. The fall to 1.1030-1.10 that we were expecting last week has been negated now.
Dollar-Yen (105.06) has bounced from the low of 104.45. The level of 104.5 is very crucial which will need a very close watch. A strong break below it will increase the possibility of the pair tumbling to 102 and even 100 in the coming weeks.
EUR-JPY (117.05) has broken the 117.5-118.5 range on the downside. While below 117.5, it is now bearish to test 116 on the downside.
Aussie (0.6760) has also broken its 0.6735-0.6835 sideways range on the downside. While below 0.6735, Aussie can fall to 0.66 and even 0.65 in the coming days.
Pound (1.2268) is oscillating between 1.22 and 1.23. A key resistance is at 1.2315 which has to be broken for it to move further higher towards 1.24. But while below 1.23, there are chances for it to break 1.22 and fall to 1.2165.
USDCNY (7.1390) has risen past the crucial resistance level of 7.10 and can move up to 7.17.
USDINR (71.6650) which has been moving in tandem with the USDCNY may also rise past 72 today to test 72.11-72.13. The pair key support in the 71.50 which has to be broken in order to fall towards 71.27 that we had mentioned in our evening comments on Friday.
INTEREST RATES
Renewed tensions on the US-China trade war have dragged the yields further. The US Treasury yields have declined sharply across tenors. The broader downtrend is intact and the yields can fall further in the coming days. The German yields also continue to remain weak and keeps the bearish view intact. The 10Yr GoI is stuck in a narrow range between 6.53% and 6.60%.
The US Treasury yields have declined sharply across tenors. The 2Yr (1.47%), 5Yr (1.36%) and 10Yr (1.48%) were down 6 bps each while the 30Yr (1.98%) was down 5 bps. This has negated the intermediate bounce that we had expected on Friday. In turn the broader bearish view has come back into the picture. The 30Yr has declined below 2% as expected and it can test 1.8% on the downside. The 5Yr has a very crucial support at 1.3% which can be tested this week and will need a close watch.
The German yields (2Yr, 5Yr and 10Yr) continue to remain weak while at the far end the 30Yr has inched slightly higher. The 2Yr (-0.90%) was down 1 bps and the 10Yr (-0.70%) was down 3bps. The 5Yr (-0.89%) yields remained stable. The 10Yr looks vulnerable to break -0.70% and fall to -0.80% and even -0.90% in the short term while the 5Yr can test even -1% on the downside.
The 10Yr GoI (6.5722%) continues to remain stuck in between 6.53% and 6.60%. It will have to be seen if it can break 6.53% today and fall to 6.48%.
