STOCKS
It would be prudent to expect a bit of profit-taking on global Equities today in the wake of the attack on the Saudi refinery. At the same time, we might not see panic-selling. In particular, Dow and DAX appear more vulnerable to profit-taking, while the Asians might even surprise on the upside.
Although we had called for a rise to 28000 on the Dow (27219.52) on Friday, we also have to keep strong Resistance at 27500 in mind. A break thereof is needed to accelerate the rally, else we may see a profit-taking dip towards 26700-600 over a week or two.
Japan is closed for “Respect for the Aged Day” today, so the Nikkei (21988.29) will not see any movement today. Although it has registered a strong rise over the last three weeks, we have to allow for a dip to 21750-600 at least. That said, intra-month Support at 21500 may well hold.
Note that the KOSPI (2056, +0.34%) actually trades a little higher today and so does the Shanghai (3035, +0.14%) compared to their closes at 2049 and 3031 respectively on Friday. The larger picture appears bullish enough for 3150-3200 on the Shanghai while above 2950.
India had continued to disappoint last week with the Nifty (11075.90) still being unable to rise past 11100 decisively. However, we have to acknowledge that it might have been trying to make something like a rounding-bottom since August which now gives us credible near-term Support near 10900. The Sensex (37385) has to break above 37650 to become bullish and has to break below 36750 to become bearish.
As stated on Friday, the DAX (12468.53) has important Resistance on the Weekly Candle at 12500, which could push it down towards 12300-100.
COMMODITIES
Gold consolidates while silver has a key resistance ahead which needs to be broken for it to avoid a fall again. Copper has broken above a key resistance and has turned bullish. Oil has spiked with a wide gap-up after the drone attack on Saudi Arabia’s key oil fields on Saturday. Following the attacks Trump has announced that the US will release its strategic reserves if needed to maintain the supply. With the fear of supply disruption on one side and the US deciding to ease the situation with its reserves, we will have to wait for a few sessions to see how the market reacts.
At the moment, Brent (67.20) is trading near the crucial 68-68.50 resistance zone. Inability to breach 68.50 could see the prices easing towards 65-64 in the coming days and avoid a further rise to 70+ levels going forward.
Similarly, WTI (60.53) has key resistance in between 61 and 62 while below which a dip to 59-58 is possible in the coming sessions. A strong rise past 62 is needed to take the prices further higher towards 64 and 66.
Gold (1507) is holding above 1480 and is consolidating between 1480 and 1520 as expected. As mentioned earlier, a breakout on either side of 1480 or 1520 will determine whether gold will move up to 1540-1555 or fall to 1460-1440.
Though Silver (17.92) has bounced after making a low of 17.40 it has to break above 18.10 to ease the downside pressure and rise to 18.25 and 18.50 again. While below 18.10, silver is vulnerable to test 17.25 on the downside.
Copper (2.67) has come-off from Friday’s high of 2.70. It will have strong support now at 2.65 while above which a rise to 2.74 looks likely in the short term. Our bearish view for a fall to 2.55-2.53 has been negated.
FOREX
Dollar index looks weak and can dip in the near term. Euro has key supports at 1.1065 and 1.1045 and is bullish to breach 1.11 while these holds. Dollar-Yen might consolidate or see an intermediate dip before resuming the upmove. Aussie continues to consolidate but looks vulnerable for a corrective fall. Pound has surged above a key resistance and looks bullish in the short term. USDCNY remains lower and has room to dip further. Dollar-Rupee remains bearish but will need to see the near-term impact of the surge in crude prices.
Dollar Index (98.10) has dipped and can test 97.80 and even 97.60 while it remains below 98.35. The index has to rise past 98.55 to turn the outlook positive for a rise to 99 and 99.25.
The Euro (1.1075) is managing to hold higher. Key supports are at 1.1055 and 1.1045. While these supports hold, we see high possibility of the Euro breaking above 1.11 and rallying towards 1.1165 in the coming days..
The Dollar-Yen (107.73) has come-off below 108. Our preferred rise to 108.7-109 seems to be getting delays. The pair can consolidate between 107.45 and 108 for some time. A break below 107.45 can see the pair moving further lower towards 107.25.
The EUR-JPY (119.32) cross has come-off after testing 120. A corrective fall to 118.50-118.30 is likely in the near-term while it remains below 119.50.
Aussie (0.6870) remains stuck in between 0.6850 and 0.6900. The near-term view is unclear and we will have to wait for a breakout on either side of 0.6850 or 0.6900. As mentioned on Friday, we see an early sign of a top formation on the charts which leaves the possibilities high of the pair breaking below 0.6850 and fall to 0.6820-0.6800 in the coming days. We will have to wait and see. .
Pound (1.2479) has surged breaking above 1.24 and can now rise to 1.2600-1.2630 on a further break above 1.25. Supports are now poised at 1.2410 and then in the 1.2390-1.2370 region.
USDCNY (7.0735) remains lower. Immediate resistance is at 7.08. While it holds, a fall to 7.05-7.0480 looks possible in the coming days.
Dollar-Rupee (70.9175) came-off from its high of 71.1450 on Friday failing to sustain above 71. The broader view remains bearish for it to test 70.50-70.45 and even 70.34 on the downside. However, we will have to see how the sudden surge in crude prices impact the rupee in the near-term.
INTEREST RATES
The US Treasury yields have surged last week as the fear of recessions seems to be fading away and the concerns on the trade-war front has eased after the US delayed the tariffs and hinted for a possibility of an interim deal. The outcome of the FOMC meeting this week on Wednesday could be a key trigger to determine whether the yields can sustain higher or not. The German yields have also risen sharply last week and are coming closer to key resistances which will need a close watch. The 10Yr GoI can consolidate before moving higher.
The US 2Yr (1.80%) was up 12 bps, 30Yr (2.37%) surged 17 bps while the 5Yr (1.75%) and 10Yr (1.90%) were up 15 bps each last week. The yields have room to move up in the short-term. The 30Yr has resistance in the 2.40%-2.42% region which needs a close watch. The 10Yr has an immediate resistance at 1.95% a break above which can take it higher towards 2.03% in the coming days.
The German 2Yr (-0.71%) 5Yr (-0.70%), 10Yr (-0.44%) and the 30Yr (0.09%) were up across tenors in the past week. The 30Yr has an immediate resistance at 0.11% a break above which can take it further higher towards 0.20% in the coming days. The 10Yr can test -0.40% on the upside.
The 10Yr GoI (6.6367%) dipped to 6.6084% on Friday and bounced from there. We expect the yield to consolidate between 6.60% and 6.70% for some time before our preferred rise to 6.73%-6.75% happens.
