STOCKS
Equities get a boost as the US and China reached an initial deal last week. The deal includes the removal of additional tariffs on Chinese goods that were to come into effect this week and agreement to purchase agricultural products by China. Dow and the DAX can surge further if they manage to sustain above their key near-term supports. Shanghai continues to remain more bullish than others and is making a bullish pattern on the charts. Sensex and Nifty can get a boost from the rise in global equities and move higher today. The US and Japanese markets are closed today.
Dow (26816.59, +319.92, +1.21%) has risen past 26500. The outlook is bullish to test 27250-27300 and even 27500 in the short-term while it remains above 26500. A strong break above 27000 can accelerate the rally. The US markets are closed today.
DAX (12511.65, +347.45, +2.86%) has surged break above the 12200-12225 resistance region. It will have to be seen if it can sustain above 12400 now. While above 12400 the outlook is bullish to test 13000 and 13200 in the coming days and it will negate our bearish view of seeing 11800-11600 on the downside.
Shanghai (3017.14, +43.48, +1.46%) has risen above 3000 and is heading towards 3050. As mentioned on Friday an inverted head and shoulder is on the making which will get confirmed on a strong rise past 3050. In such a scenario, Shanghai can target 3150 and 3200 over the medium term.
The surge in global equities can help the Indian indices move higher today. As such, Nifty (11305.05, +70.50, +0.63%) can breach 11400 and test 11600 in the near term.
Sensex (38127.08, +246.68, +0.65%) on the other hand is likely to break above 38500 and target 39000-39250 in the short term.
Nikkei is closed today.
COMMODITIES
Crude oil trades higher. WTI looks bullish but we watch price action near 61.30 on Brent before turning further bullish. Copper, Gold and Silver have come off from respective resistances and look bearish for the near term.
Brent (60.16) and WTI (54.38) have risen well from respective supports at 56 and 51 as expected last week. Brent has decent resistance near 61.30 which if holds could produce a short corrective dip in price. A break above 61 would open up chances of a rise towards 64-66 in the medium term. We would keep a close watch on price action near 61.30. Nymex WTI on the other hand has room to rise towards 58 as seen on the 3-day candles. Near term looks bullish for Crude prices.
Gold (1490.60) has fallen as expected while Silver (17.59) is stable. Gold may come down towards 1480-1460 as mentioned last week where the metal could find some support in the near term. A bounce from 1460 looks possible in the next few sessions. Silver is also trading below resistance at 18 and while that holds, Silver price could come off towards 17.0-16.5 in the near term.
Copper (2.6220) tested 2.6385 on Friday, below our expected resistance at 2.65. Note that the daily trend resistance at 2.65 is crucial and while that holds, Copper could come off from there towards 2.55 in the near term. Only on a sustained break above 2.65, we may have to look for a fresh upmove towards 2.70. For now, preference is for a fall towards 2.55 while below 2.65.
FOREX
High volatility in Pound is expected this week as markets watch if a Brexit deal is struck between EU and UK in the EU Council Summit on 17-18th Oct. Dollar Index could come down a bit to test support levels that could pull up Euro in the near term. Most other currency pairs are near crucial resistances and needs to see a sustained break of those levels to rise further.
Dollar Index (98.43) tested an intra-day low of 98.20 on Friday before bouncing back slightly from there. On the 3-day candles there is scope of testing support near 98.0-97.60 before bouncing back from there.
Euro (1.1026) could be limited to 1.11-1.1125 within the current rise before falling from there. The next few sessions could see a rising attempt towards 1.11-1.1125.
Dollar-Yen (108.31) has moved up. It needs to see a sustained rise above 108.5 to continue rising towards 110. Else while 108.50 holds, we may see sideways trade within 106.50-1.8.50 for another week. We watch price action near current levels to decide on further bullishness. A break above 108.50 looks more likely though.
EUR-JPY (119.43) has broken above our mentioned resistance at 119 to test higher resistance at 120. A break above 120 if seen and sustains could pull up the pair towards 121-123 levels in the near term. Watch price action near 120 just now.
Aussie (0.6787) is trading higher. Aussie has come off from 0.6811 and while below Friday’s high Aussie could come off in the near term towards 0.67. A sustained rise above 0.6811 is needed to pull up Aussie towards 0.69.
Pound (1.2592) has shot up in the last 2-sessions on hopes of Brexit deal agreement between the EU and the UK. We may expect volatility in the currency this week as markets watch EU Council summit scheduled from Thursday 17th to Friday 18th to see whether a Brexit deal can be struck between the EU and UK. If no deal is struck, Pound is likely to give back some of its gains seen over the last 1-2 sessions. Volatility is expected to remain high this week.
The USDCNY (7.0563) has come down as expected. The pair could get some support near 7.01/02 which if holds, could pull back USDCNY to higher levels in the near term. Next 2-3 sessions could see a fall towards 7.01/02.
Dollar-Rupee (71.03) is likely to hold below 71.10} and eventually test 70.75 on the downside. Near term looks sideways to bearish targeting 70.75.
INTEREST RATES
Market turning highly risk averse after the US and China reached an initial deal has taken the bond yields sharply higher. Both the US Treasury and the German yields have risen well last week and can move further higher in the short-term. The 10Yr (07.26 GS 2029) GoI has risen above a key resistance and is bullish to rise further in the coming days.
The US 2Yr (1.59%), 5Yr (1.56%), 10Yr (1.73%) and 30Yr (2.20%) have surged about 20 bps each across tenors last week. As mentioned on Friday, the 10Yr and 30Yr can test 1.75% and 2.25% respectively. A strong break above 1.75% will pave way for further rise to 1.85%-1.87% on the 10Yr. The 30Yr on the other hand will have room to test 2.30% and 2.35% on a strong break above 2.25%.
The German 2Yr (-0.74%) and 5Yr (-0.70%) were up 4 bps and 9 bps respectively last week which those at the far had surged much higher. The 10Yr (-0.45%) and the 30Yr (0.09%) were up 14 bps and 19 bps respectively. The 10Yr and 30Yr have risen above their resistance levels of -0.40% and 0.06%. The both have room to test -0.33% (10Yr) and 0.3% (30Yr) on the upside in the short term.
The 10Yr (07.26 GS 2029) GOI (6.7344%) has risen past 6.70%. The outlook will be bullish to test 6.80% while it sustains above 6.70%.
The Indian 10Yr (06.45 GS 2029) GoI has closed at 6.51%% on Friday.
