STOCKS
Almost all the global indices have fallen sharply and could test decent support below current levels. We would have to wait for confirmation if the indices would bounce back next week or continue to extend the downward correction for a few more days.
Dow (21287.03, -0.78%) has not surprised us by facing sharp rejection from the long term crucial resistance near 21500. To break above 21500 would be difficult just now and while that holds, we may look for sideways movement if not a further fall towards 21000 in the coming week. Some support near 21170 may keep it sideways and narrow ranged but we expect a fall in the medium term.
Dax (12416.19, -1.83%) came down to test 12400 in line with our expectation and could face a decent support near current levels. Dax could possibly rise in the early sessions next week but in case 12400 breaks, the fall could extend towards 12000 levels in the medium term.
Shanghai (3174.52, -0.42%) is almost stable and could test 3150 next week before again rising back towards 3200. Movement in the 3150-3200 region may continue for some more sessions.
Nikkei (20000.88, -1.09%) is headed towards 21000, a crucial medium term resistance which could produce some corrective dip back to 19000 in the coming sessions.
While Nifty (9504.10, +0.14%) is below 9600, there is scope of testing 9400-9380 on the downside. Narrow and stable movement is possible next week. The 9600 level is acting as an immediate resistance and while that holds the index looks sideways to bearish for the coming sessions.
COMMODITIES
Gold (1245) and Silver (16.60) keep trading in the narrow range of 1233-1248 and 16.30-17.10 respectively. If the 95 support hold for Dollar Index (95.25) then it could bounce back towards 97, limiting upside for bullion. Thus bullion may test the supports of 1230 and 16.30 where the price action may determine the near to medium term path.
Copper (2.68) moved higher in line with our expectation and trading within a range of 2.65-78. In the medium term 2.55-57 are going to be a strong support and we will remain bullish while it is trading above those levels.
Brent (47.80) and WTI (45.23) closed higher and trading as per our recommended levels. Both Brent and WTI may test the strong resistance of 48 and 46 today but it remains to be seen if it manages to rise above it to open the door for 50 and 48 or not. A rejection from 48 (Brent) and 46 (WTI) may push it down strongly towards 46 and 43 once again.
FOREX
Although the Euro (1.1440) continues to be strong, remain aware of Resistance in the 1.1450-1550 region on the Euro Weekly Candles. We would not want to get too excited about strength beyond 1.1550 while the German 30Yr (1.225%) remains below long-term trendline Resistance at 1.25%.
The Pound (1.3017) might be able to rise further towards 1.32 in the near term, but paradoxically, the Pound-Rupee (84.25) has an important Resistance near the current level. This might suggest Rupee strength. More on that later.
Dollar-Yen (11.85) did rise to 112.93 just after the better than expected US GDP data release yesterday, very close to our target of 113 but has come off sharply from there. This suggests that Dollar-Yen may now be sold on rallies while below 113. The Euro-Yen (127.98) has been unable to sustain yesterday’s high of 128.86, suggesting limited upside for the Euro from here.
The Aussie (0.7698) has moved up well, coming up to the lower end of our target region of 0.7700-7800. It looks like it can advance into the 0.7700-7800 region also.
Good strength has been seen in the Chinese Yuan over the last few days as the USDCNY (6.7668) has fallen from 6.8425 on Tuesday to 6.76 today. This should reduce the scare on Emerging Market currencies.
Dollar-Rupee (64.63) had risen to 64.92 in the offshore market last night but has come off from there to trade near 64.75 on the NDF market just now. We allow for a test of 64.80 in the Onshore market today, but continue to look for sideways range trading overall.
INTEREST RATES
The US yields have risen sharply yesterday after the release of US GDP which came out at 1.42% higher than the market expectation of 1.20%. The 10YR (2.27%) is trading at the exact levels mentioned yesterday. In case it manages to break above 2.27%, we may negate an immediate fall towards 2.20% and focus on higher levels of 2.35%. Else a fall back to 2.20% is possible.
The US 10-5YR (0.42%) has risen sharply and could test channel resistance near 0.45% before again coming off from there.
The German 10Yr (0.45%) and the 30Yr (1.225%) have risen sharply in the last couple of sessions and has come up to test important resistance levels. The 30Yr is just below important resistance at 1.227% and if that holds, the Yield could come down in the near term; else a break above 1.227% could take it higher towards 1.40% next week. The 10Yr is also facing similar resistance near current levels and is probably on the verge of breaking on the upside. This could act as an important cue to identify movement in the Euro. (Refer to FOREX Section above)
