STOCKS
Asians are trading in red as Trump’s threat to increase the tariffs further on China if the trade deal is not done is weighing on equities. Nikkei is on a corrective fall and has more room the downside. Shanghai has to sustain above the key level of 2920 to avoid a fresh fall. Sensex and Nifty are moving higher within their sideways range. DAX continues to consolidate within its uptrend. Dow can dip further on a failure to bounce from current levels.
Dow (27934.02, -102.2, -0.36%) seems to lack strong follow-through buyers above 28000. A dip to 27750-27600 is likely while it remains below 28000. This could delay our preferred rise to 28250-28400.
DAX (13221.12, +14.11, +0.11%) spiked to a high of 13374 but has come back into its 13100-13300 range again. The view remains the same. DAX can consolidate sideways between 13100-13300 for some more time before resuming its broader uptrend towards 13400-13500.
Nikkei (23111.62, -181.03, -0.78%) has declined sharply and is confirming that a corrective fall is in place. As mentioned yesterday, a fall to 22800-22600 looks likely after which the overall uptrend can resume.
Shanghai (2926.79, -7.2, -0.25%) has risen above 2920 and needs to be seen if it can sustain above it. While above 2920, a rise to 3000 can be seen again which will then negate the bearish view of testing 2870-2865 on the downside. We will have to wait and see.
Nifty (11940.10, +55.60, +0.47%) and Sensex (40469.70, +185.51, +0.46%) are trying to move higher within their 11800-12050 and 40000-40750 range respectively. While above 11900, Nifty can test 12000-12050. Sensex on the other hand can move up to 40750 while it sustains above 40250. Broadly we retain our bias bullish on the Sensex and Nifty to break their ranges on the upside and move higher eventually.
COMMODITIES
Crude prices dropped sharply after the American Petroleum Institute (API) estimated an inventory build of 5.954mln barrels for week ended 15th Nov compared to analyst expectation of 1.543mln barrel build. On the other hand, Gold, Silver and Copper have risen from yesterday’s levels and may have some more room on the upside just now.
Brent (60.94) and Nymex WTI (55.45) have dropped sharply. As mentioned yesterday the drop in Brent from 64 has pulled down WTI prices too. There could be scope of falling further towards 59-58 for Brent and 55-54 levels for WTI in the near term.
Gold (1473.90) has risen back again but is likely to trade within 1440-1480 levels just now. A break on either side would throw some clarity on further direction.
Silver (17.13) has risen above 17 and may test resistance near 17.5 on the upside. A fall towards 16.50 cannot be negated for the near term while Silver trades below 17.5.
Copper (2.6510) has risen well. While support at 2.60 holds, Copper could rise towards 2.6750.
FOREX
Dollar index trades higher against major currencies. Hopes of a deal between Beijing and Washington came to a doubt as news reported that China was pessimistic about agreeing to a deal.
Dollar Index (97.88) has important support at 97.50 and while that holds, the index could rise towards 98+ levels in the near term.
Euro (1.1074) has higher chances of holding below 1.1094 just now slowly moving down towards 1.1050 or lower by next week. We do not look at a rise above 1.11 in the near term.
Dollar-Yen (108.50) has been dragged lower by the sharp fall in Nikkei. We could see trade in the 108.00-109.50 region for the near term. It would be crucial to see if Dollar Yen bounces back from 108.00 or breaks lower eventually.
EUR-JPY (120.16) has bounced from crucial trend support at 119 and while that holds, it could potentially take the cross towards 122 in the near term before the pair comes off from there again towards current levels.
Pound (1.2914) is stuck in the 1.30-1.28 region as we have been mentioning for the last few days. We would wait to see a break on either side of the mentioned range to get clarity on further direction.
Aussie (0.6818) has moved up sharply above 0.68 contrary to our expectation of a fall towards 0.6750-0.6725 mentioned yesterday. Upside is likely to be limited to 0.6850.
USDCNY (7.0292) has risen slightly and could test 7.04/05 on the upside before pausing.
Dollar-Rupee (70.71) held well below 72 yesterday. The earlier mentioned 50p range of 71.50-72 remains intact for now. Within this range, while below interim resistances at 71.85, there is a strong likelihood of seeing a fall to 71.60 and 71.50.
INTEREST RATES
The increasing uncertainty on the US-China trade front continues to weigh on the yields. The latest on that is the threat from Trump to increase the tariffs further if the trade deal is not done. The US Treasury yields have declined sharply and can move down further. The German yields look mixed. The 10Yr GoI has room to dip further.
The US 2Yr (1.57%), 5Yr (1.58%), 10Yr (1.75%) and 30Yr (2.22%) have declined sharply across tenors and keeps our near-term bearish view intact. The 30Yr has declined breaking below its support at 2.28% as expected and is heading towards 2.20% now. The 10Yr is at a key support level now a break below which can drag it to 1.70% and even 1.65% in the coming days.
The German 2Yr (-0.65%), 5Yr (-0.58%) and 10Yr (-0.34%) dipped 2 bps each while the 30Yr (0.18%) moved up 2 bps. As mentioned yesterday, the 30Yr can move up to 0.25%-0.27% again while it sustains above 0.14%. The 10Yr on the other hand has room to test -0.40% on the downside before reversing higher.
The 10Yr (07.26 GS 2029) GOI (6.6297%) remains weak and is likely to test 6.60% in line with our expectation. Whether the yield manages to bounce from 6.60% or not will be key in deciding the next move.
The 10Yr (06.45 GS 2029) GoI (6.4782%) has to bounce above 6.48% decisively from current levels to avoid further fall. While below 6.48% the possibility of the yield falling to 6.44% and 6.42% cannot be ruled out in the near term.
