STOCKS
Although the Fed lowered interest rates by 25bp last night, Crude fell and so did Gold, global Equities (except Nikkei) seem hesitant in their bullishness. The Dow, DAX and KOSPI have Resistances overhead while the Sensex-Nifty are close to super-crucial Supports. Only the Nikkei looks properly bullish in the long-term.
Of course, the Dow (27147.08, +36.28, +0.13%) recovered from an intra-day low of 26899.15 and may well try to move up towards 27500, we remind that 27500 could be a strong Resistance on the Weekly Candles.
Similarly, the DAX (12,389.62, + 17.01, +0.14%) has important Resistance near 12500-550 on the Weekly Candles, which can hold in the near term at least. A break above 12550 is needed to bring in further bullishness.
As mentioned yesterday, the Sensex (36563.88) has super-crucial support in the 36400-36390 region on the 3-day Line chart, which has to hold to avoid further fall to 36100-36000. A bounce can lead to a test of 37000+ on the upside. But, we are not sure and will want to wait and see how the market behaves today. The Nifty (10841) looks potentially more bearish on the 3-day Line chart, while below 11200-11000.
In Asia, the KOSPI (2081.84, +11.11, +0.54%) trades higher but has an important near-term Resistance coming up near 2125. Failure to break above this Resistance could give rise to chances of a fresh decline towards 1900 also. Want to watch how the market behaves today.
The Shanghai (2986.01, +0.35, +0.01%) continues to trade below 3000. It also has Support at 2960-2950. If it holds, there can be chances of bullishness up towards 3150-70 over the next few weeks.
Lastly, the Nikkei (22167.14, +206.43, +0.94%) is up smartly again today, testing the target of 22100-300 mentioned yesterday. This market continues to look bullish overall. At the same time, we have to remember that it has rallied 10.3% from 20174 (26-Aug) and should not grudge it a small pullback towards 21750-500 if it happens to take one.
COMMODITIES
Lack of conviction on future rate cuts from the Fed has dragged gold and silver lower. Both look vulnerable for a corrective fall. Copper has come near a key support which needs to hold in order to avoid further fall. Oil has declined further in line with expectation. Trump ordering to increase the sanctions on Iran and Saudi to restore the supply by end of this month are weighing on the prices. Both Brent and WTI are likely to come down further in the coming days unless there is any fresh escalation.
Gold (1492) is holding on to its 1480-1520 range. But, the bias is inclining towards the bearish side to see a break below 1480 and a fall to 1460-1440 in the coming days. We will have to wait and see.
DC Similarly, Silver (17.65) looks vulnerable to test 17.40-17.25 on the downside as mentioned yesterday. Cluster of resistances are poised in between 18.10 and 18.25 which can cap the upside.
As expected, Copper (2.61) fell to test the crucial support level of 2.595. As mentioned yesterday, copper has to sustain above this support to avoid a further fall to 2.52. While 2.59 holds, a range bound move between 2.59 and 2.65 is possible and a bounce to the upper end of this range can be seen in the coming days.
Brent (63.66) has declined below the support at 63.85 mentioned yesterday. It can now fall further towards 62.40-62.20 while it remains below the key resistance levels of 63.85 and 64.15.
Similarly, WTI (58.20) fell breaking below 58.70 to test 58. Resistances at 58.50 and 59.35 are likely to cap the upside now and the WTI can fall to 57 on a break below 57.60.
FOREX
Currencies broadly remains mixed and are consolidating. Dollar index, Euro and Pound are range bound. The bias for the Euro and Pound are positive to see a bullish breakout of their respective range. Dollar-Yen has come-off but continues to remain bullish in the short term. Aussie has declined sharply in line with our expectation and has room to fall further. Contrary to our expectation the USDCNY has risen above 7.10 and can move further higher. Dollar-Rupee has declined sharply and might have limited room on the downside from current levels. A bounce from the support levels of 71.05 or 71.92 is likely.
Dollar Index (98.53) is trading sideways between 98 and 98.75 as expected and remains mixed. We need to wait for a breakout on either side of 98 or 98.75 to determine whether the index will move up to 99-99.25 or fall to 97.50-97.25.
The Euro (1.1034) has come-off within the preferred range of 1.0985-1.1090 and can test 1.10-1.0985 on the downside from where a bounce is possible again. We prefer the Euro to break its current range above 1.1090 and rise to 1.1165-1.1180 in the short term.
As expected the Dollar-Yen (108.12) rose to test 108.5 but has come-off from there again. However, it is holding above 108 and while above 108, the outlook remains positive for it to test 109-109.20 in the coming days.
The EUR-JPY (119.30) cross has come-off slightly and the expected rise past 120 targeting 120.7 on the upside seems to be getting delayed. The cross can test 119-118.80 and then can reverse higher towards 120 again. A strong break below 118.8 will negate the possibilities of seeing a break above 120.
Aussie (0.6786) has tumbled well below our expected level of 0.6800. There is room to test 0.6765 and 0.6750 while it remains below 0.6800.
Pound (1.2464) remains stuck between 1.24 and 1.25. As mentioned yesterday, the bias remains positive within this range and we expect the pair to break 1.25 and rise to 1.26 in the coming days.
Contrary to our expectation USDCNY (7.1041) has risen above 7.10. The fall to 7.05-7.048 seems to be getting negated for now. If the pair manages to sustain above 7.10, a further rise to 7.13 and 7.14 is possible in the coming days.
The Dollar-Rupee (71.2350) fell sharply breaking below the key level of 71.40. Though there is room to test 71.05 and 70.92 on the downside, a bounce thereafter towards 71.40-71.50 cannot be ruled out in the coming days.
INTEREST RATES
The US Treasury yields were mixed yesterday as the US Federal Reserve cut rates by 25 bps in line with expectation but failed to hint anything clear on its future policy path. The near-end yields moved higher while those at the far end dipped. Broadly we expect the Treasury yields to move lower again. The German Yields have dipped across tenors and could negate our bullish view if they continue to fall further. The 10Yr GoI has declined below a key support and can fall further on a break below 6.60%.
The US 2Yr (1.77%) and 5Yr (1.68%) were up 2 bps and 3 bps respectively while the 10Yr (1.80%) and 30Yr (2.24%) were down 3bps and 5 bps respectively. The 30Yr has dipped below 2.25% and can test 2.15% while it remains below 2.25%. Similarly, the 10Yr can test 1.75% and 1.68% while it remains below 1.85%.
The German yields have declined further across tenors. The German 2Yr (-0.74%) was down 3 bps and the 5Yr (-0.73%) dipped 2 bps. The 10Yr (-0.51%) and the 30Yr (0.01%) were down 4 bps each. A sharp fall below 0% on the 30Yr and -0.55% on the 10Yr will prove our bullish view wrong. We will have to wait and watch.
Contrary to our expectation, the 10Yr GoI (6.6236%) has declined sharply below the key support levels of 6.68% and 6.63%. This has negated our bullish view of seeing a rise to 6.80%-6.81. The level of 6.60% is key to watch now. A break below it can drag the 10Yr GoI lower to 6.54%.
