STOCKS
Equity indices are witnessing some profit booking as the market turns cautious on the back of the increasing uncertainty over the US-China trade deal. Dow can dip to test its crucial 27600-27500 support zone which needs to hold. DAX looks vulnerable for a fresh corrective fall. Nikkei has declined sharply and has room to fall further. Shanghai is mixed and needs to hold above 2900 to avoid a fall. Sensex and Nifty are poised at their upper end of their range and need to see if they can break range decisively on the upside.
Dow (27821.09, -112.93, -0.40%) sustains below 28000. As mentioned yesterday a dip to 27750-27600 looks likely. The region between 27600 and 27500 is a very crucial support now which has to hold in order to keep alive the possibility of seeing a rise to 28250-28400 that we have been expecting for some time.
DAX (13158.14, -62.98, -0.48%) is turning vulnerable to break 13100 and see a corrective fall to 12800-12700 in the coming days while it remains below 13200. This could negate our preferred rise to 13400-13500 that we have been mentioning for some time.
Nikkei (22770.42, -378.15, -1.63%) has declined further sharply and is heading towards 22600 in line with our expectation. While below 23000, the current corrective fall can extend even up to 22500 and 22400 after which the broader uptrend can resume.
Shanghai (2904.70, -6.35, -0.22%) has come-off below 2920 and needs to be seen if it can sustain above 2900. A break below 2900 can drag it to 2980 again and will bring back the possibilities of testing 2870-2865 on the downside.
Nifty (11999.10, +59.00, +0.49%) and Sensex (40651.64, +181.94, +0.45%) tested their upper end of their respective range of 11800-12050 and 40000-40750 yesterday, but failed to see a decisive breakout. Nifty has to breach 12050 decisively which will pave way for 12200-12300. Sensex on the other hand can rise to 41100 on a strong break above 40750.
COMMODITIES
Overall commodities are expected to see some range trade within below mentioned levels. While Dollar strengthened on fresh threat of tariffs from the Trump, China is said to have backed the democracy protests in Hong Kong. Trade tensions between US and China remains a concern for investors just now.
Brent (62.23) and Nymex WTI (56.90) rose after government report showed domestic crude supplies have risen for week ended 15th Nov but lower than the 6mln barrel as reported by API earlier. Crude prices are likely to be volatile just now wit Brent and WTI possibly to be seen trading in the 59-64 and 54-61 region in the near term.
Gold (1472.40) and Silver (17.09) are stable and could trade in the earlier mentioned range of 1440-1480 and 16.50-17.50 for the near term. Any break on either side could lead to a sharp movement but no major move is expected this week.
Copper (2.6415) trades above support at 2.60 and while that holds, there is scope of rising towards 2.70 in the near term.
FOREX
China is said to have condemned the US bill on Hong Kong rights and has threatened “strong counter measures” as news reports state. While there is no statement to clarify what the counter measures would be, any retaliation from China could worsen the current trade scenario between US and China. Stocks are down and commodities trade in a sideways range while currencies could be expected to remain volatile.
Dollar Index (97.86) is almost stable but while above 97.50, there is scope of rising above 98 in the near term.
Euro (1.1078) has been stable in the last 3-sessions trading below 1.1094. While there is some scope of testing 1.1095-1.1130 in the near term, our view remains tilted to the bearish side for a fall towards 1.10.
Dollar-Yen (108.48) could test 108 while the resistance at 109.50 holds on the longer term charts. The fall in Dollar Yen is accompanied by a sharp fall in Nikkei (refer stock section above).
EUR-JPY (120.18) is almost stable and could have some room for a rise towards 122 while above 119. Near term looks bullish.
Pound (1.2929) could fall towards 1.28/26 while immediate resistance near 1.30/31 holds. Sideways range of 1.30-1.28/26 is likely to continue at least for this week.
Aussie (0.6795) looks bearish while below 0.6850 and could fall back towards 0.6775-0.6750 in the coming sessions.
USDCNY (7.0394) has risen to test immediate resistance near 7.04/05 but would be important to see if it comes off from there or rises further towards 7.09/10.
Dollar-Rupee (70.82) closed slightly higher but is likely to remain ranged within 71.50-72.00 zone. It would be important to see if the weakness in Yuan pulls up Dollar Rupee in the near term back to 72+ levels. For now we would prefer a ranged view in the mentioned 50p range.
INTEREST RATES
Concerns of a possible delay in the US-China trade deal are keeping the market cautious. As a result, the US Treasury yields continue to move lower and can dip further in the near-term. The German yields also look weak in the near term. The 10Yr GoI has dipped below a key support and can fall further.
The US 2Yr (1.54%), 5Yr (1.55%), 10Yr (1.71%) and 30Yr (2.17%) have declined further across tenors. The near-term bearish view is intact. The 30Yr has declined much below our expected level of 2.20% and can now test 2.12% on the downside. The 10Yr is heading towards 1.70% in line with our expectation and has room to extend the fall even to 1.65%.
The German 2Yr (-0.65%), 5Yr (-0.59%) and 10Yr (-0.35%) continues to move lower. As mentioned yesterday, the 10Yr can test -0.40% from where a bounce is possible. The 30Yr (0.17%), though managing to sustain higher, need to surpass 0.20% to gain strength. While below 0.20% a dip to 0.10% cannot be ruled out.
The Indian 10Yr (07.26 GS 2029) GoI (6.6067%) has a crucial support near current levels at 6.60% which has to hold in order to produce a bounce and avoid a fall to 6.55% and 6.50%.
The Indian 10Yr (06.45 GS 2029) GoI (6.4632%) on the other hand look weak and vulnerable for a fall to 6.44% and 6.42% while it remains below 6.48%.
