STOCKS
The US Federal Reserve indicating after the 25bps cut yesterday that the rates could be put on hold and will not be hiked until it sees a significant increase in the inflation seems to be giving support only to the Dow. Others like the DAX and Nikkei looks vulnerable for a corrective fall in the near term before resuming their uptrend. Shanghai is weak and can dip further. Sensex and Nifty holds higher and are bullish.
Dow (27186.69, +115.27, +0.43%) seems to be gaining strength slowly. We retain our bullish view on the Dow to see 27250 and 27600 on the upside while it sustains above 27000 in the coming sessions.
The psychological resistance at 13000 on the DAX (12910.23, -29.39, -0.23%) seems to be holding well. As mentioned yesterday, while below 13000, a corrective fall 12800-12700 can be seen before the uptrend resumes.
Similarly for the Nikkei (22889.22, +46.10, +0.20%) the level of 23000 is holding well for now. The index has to breach 23000 decisively to bring back the bullishness and target 24000 on the upside. While below 23000, a corrective fall to 22700-22600 can be seen first.
As expected Shanghai (2935.14, -4.18, -0.14%) is moving down towards 2930-2920. A test of 2900 looks possible now in the near term. Whether the index manages to bounce from 2900 or not will be key in determining the next move. We will have to wait and watch.
Sensex (40051.87, +220.03, +0.55%) and Nifty (11844.10, +57.25, +0.49%)have moved further higher and keeps our bullish view intact. As mentioned yesterday, the Sensex can test 40200-40300 and the Nifty can move up to 12000-12100 in the coming days.
COMMODITIES
Precious metals trade high as Dollar weakens after the FED cut rates by 25bps but the rise could be limited to the next few sessions. Copper is trading slightly lower today but could rise in the next few sessions before coming off in the medium term. Crude prices also fell as US stock inventory saw a build of 5.7mln barrels.
Gold (1500.10) has moved up again from levels near 1490. Gold has not been able to sustain a fall below 1490 in the many attempts that it is trying to make in the last 1-mnth. Range trade between 1480 and 1520 is likely to continue with 1490 being an interim support. While longer term charts show a possibility of a fall below 1480, Gold may spend some more time within the above mentioned range before moving sharply. Note that only if Dollar Index manages to take support near 96.89, we may see a fall in Gold prices in the near term. As such while Dollar Index tests 96.89, Gold could rise towards 1520 again.
Silver (17.93) has moved up too and has scope of rising above 18 in the near term. Support at 17.68 seems to be holding well for now. Immediate target could be 18.50-18.75 in the next few sessions.
Copper (2.6790) has dipped from 2.70. There is higher resistance at 2.7250 which is likely to be tested in the near term before a sharp fall is seen towards 2.65. Watch price action near resistance at 2.7250.
US stock inventory data released by the EIA stated a build of 5.7mln barrels against an expectation of 494000-barrel. Crude stocks at the Cushing, Oklahoma, delivery hub for U.S. crude futures rose, gaining 1.6 million barrels last week dragging crude prices lower.
Brent (60.42) and WTI (55.18) are trading lower. We continue to look at a fall towards 60 and 54 respectively for Brent and WTI in the near term.
FOREX
Dollar weakened sharply after the FED cut rates by 25bps. Euro could test previous high before falling from there. Aussie and Pound have moved up sharply and could test resistances which could produce sharp fall in the coming sessions. USDCNY has broken below immediate support and looks bearish. Rupee could strengthen.
Dollar Index (97.33) has fallen sharply and has scope of falling towards support near 97.00-96.89 before bouncing back from there. Near term looks bearish just now.
Euro (1.1165) has risen on fresh Dollar weakness and could re-test previous high of 1.11795 seen on 21st Oct’19. We would watch price action near 97 on Dollar Index; a fall towards 96.89 if seen could trigger further rise in Euro towards 1.12. We do not expect a rise above 1.12 within the current rise. Medium term outlook continues to remain bearish.
Dollar-Yen (108.68) tested 109.286 on the upside before coming off from there. 108.50 and 108.26 are respective supports below current levels.
EUR-JPY (121.35) rose amidst volatility in major currencies but has remained below 121.50. While below 121.50, EUR-JPY is likely to trade sideways within 121.50-120.50. Medium term is bearish for break below 120.50.
Pound (1.2925) has moved up to test 1.30 and while that holds, Pound looks bearish in the medium term towards 1.26. there is also a fair possibility of ranged movement between 1.20-1.30 in the near term.
Aussie (0.6922) has risen sharply heading towards higher resistance at 0.6940 from where a dip is expected in the next few sessions. For today, the currency may continue to rise towards 0.6940.
The USDCNY (7.0439) has broken below support at 7.05 and while the fall sustains, the pair could come down towards 7.
Dollar-Rupee (70.89) is likely to re-test 70.60 today. It would be crucial to watch if the pair bounces back from there towards 70.90-71.06/08 or breaches on the downside. While the other currencies trade strong against the Dollar, we may expect strength in Rupee also today.
INTEREST RATES
The US Federal Reserve cut rates by 25bps in line with the market expectation. The central bank has also signaled that it will stay on hold at these levels for some time to monitor situation before beginning the rate hike cycle again. The US Treasury yields have dipped following the Fed outcome and have key supports coming up which will need a close watch. The German yields remain broadly stable within their overall uptrend. The 10Yr GoI (07.26 GS 2029) can dip to test its supports before reversing higher again.
The US 2Yr (1.61) and 5Yr (1.61%) Treasury yields dipped 3bps and 4bps respectively while the 10Yr (1.78%) and 30Yr (2.26%) were down 5bps and 6bps respectively. 2.25% on the 30Yr and 1.75% on the 10Yr are key supports to watch. A strong close below these levels this week will negate our bullish view and drag the yields lower to 2.15%-2.05% (30Yr) and 1.65%-1.55% (10Yr) in the short term.
The German 2Yr (-0.64%), 5Yr (-0.59%) and 10Yr (-0.36%) yields dipped marginally by 1bps each while at the far-end the 30Yr (0.17%) inched higher by 3 bps. The 30Yr remains bullish to test 2.25%-2.28% on the upside. A break above 2.20% will accelerate the rally. The 10Yr on the other hand is facing at -0.35% which has to be broken for it to move higher towards -0.28%. Support for it is at -0.40%.
The 10Yr (07.26 GS 2029) GOI (6.6723%) dipped yesterday. While below 6.70%, the yield can dip to 6.65%-6.60% and then reverse higher to target 6.75%-6.80% on the upside.
The 10Yr (06.45 GS 2029) GOI has closed lower at 6.4948% yesterday as compared to 6.5184% on Tuesday.
