STOCKS
Strong sell-off in the US equities overnight and in the Asians early morning as concerns of the trade deal getting delayed has increased after Trump stating that he would like to wait until 2020 elections. The Dow, DAX and Nikkei have room to fall further. Sensex and Nifty can take cues from the global markets and can see a sharp fall today. Interestingly, Shanghai, though looks weak from a big picture, has been staying stable over the last few days amid the sell-off in other markets. The index will need a close watch.
Dow (27502.81, -280.23, -1.01%) opened with a wide gap-down and tumbled to a low of 27325.13 yesterday. 27600-27620 can be a good resistance region now which can keep the index pressured on the downside. While below this resistance zone a further fall to 27200-27000 is possible in the coming days.
DAX (12989.29, +24.61, +0.19%) has resistance at 13100 which has to be broken to bring back the bullishness. As mentioned yesterday, while below 13100 the outlook is bearish to see 12700 on the downside.
As expected Nikkei (23090.44, -289.37, -1.24%) has declined further and is heading towards 23000. The current fall can extend upto 22850-22800 – a crucial support zone which will need a close watch. A bounce from this support zone cannot be ruled out.
Shanghai (2878.20, -6.5, -0.23%) is stuck in between 2850 and 2890 over the last few days. A strong rise past 2900 is needed to turn the outlook positive and trigger a rise. While below 2900, a fall to 2800 cannot be ruled out in the coming days.
Nifty (11994.20, -54, -0.45%) has a crucial support at 11970 which needs to hold in order to keep the chances alive of seeing one more leg of rise to 12200-12300. A break below 11970 will be bearish and can drag the index lower to 11900-11800 and even 11700 in the coming weeks straight away from here.
Sensex (40675.45, -126.72, -0.31%) on the other hand has support in the 40525-40500 region which has to hold to see a rise-back to 4100-41200 again. A break below 40500 will be bearish to see 40000 and even lower levels on the downside again.
COMMODITIES
Weakness in the Dollar weighs upon precious metals taking them higher. Gold and Silver has some room on the upside while Copper tests support below current levels and could turn bullish for the near term. Crude prices could remain stable for the day.
Brent (61.11) and WTI (56.38) are stable for now. Our earlier mentioned trade range of 59.50-65 for Brent and 55-60 for WTI remains intact.
Gold (1483.60) has risen on weak Dollar. While above 1480, there is scope to test 1495/1500 in the near term before dipping back towards current levels.
Silver (17.22) has risen higher contrary to our expectations but could face rejection from 17.50 on the upside. Our view of a fall towards 16 could be delayed for now.
Copper (2.6295) has immediate support at 2.6250 which if holds could push Copper higher towards 2.70 in the near term. While above 2.6250, Copper is bullish.
FOREX
Markets have been volatile since President Donald Trump announced the “phase-one” deal between the U.S. and China in October. But when the U.S. president said yesterday that it might be better to wait until after the United States’ 2020 election to strike a deal with Beijing, it is difficult to think of any positive outcome out of this trade deal any sooner. Dollar continues to trade weak against other currencies. Pound trades near crucial resistance while Aussie faced stiff rejection. Yuan trades weak against the Dollar and could pull up USDINR too in today’s session.
Dollar Index (97.72) is trading lower today. It could face immediate daily trend support near 97.50 or lower support at 97 seen in the weekly charts before a bounce is seen. Note that the 97.0-97.50 is an important region, a break below which would indicate long term bearishness for the index. But for now we may not see such a break and prefer to see a bounce from 97.50-97.00 region in the near term taking the index back towards 98.
Euro (1.1079) rose sharply yesterday but is likely to remain below 1.11 in the near term from where a rejection seems possible. Overall range of 1.0990-1.11 is likely to hold for some more time.
Dollar-Yen (108.52) has broken below immediate support near 109 and could be headed towards 108 in the near term before seeing a bounce from there. Near term looks bearish towards 108.
EUR-JPY (120.25) is trading lower and is likely to come off towards 119.50-119.00 in the near term before a bounce is seen.
Pound (1.2998) has risen to crucial resistance at 1.30. It would now be important to see if Pound manages to break on the upside to initiate a fresh rally towards 1.34 or comes down from here towards 1.28/26. Our preferred view would be to see a rejection from current levels while 1.30 holds.
Aussie (0.6830) has come off as expected while immediate resistance at 0.6875 holds. While below 0.69-0.6875, Aussie is likely to remain bearish.
USDCNY (7.0673) has shot up on the back of comments from Trump that he would like to wait until the elections in 2020 to proceed with a trade deal. 7.10 could be a near term resistance above current levels. We expect volatility to continue in the Yuan movement through December.
Dollar-Rupee (71.6725) came down towards 71.50 in the first half of the session but rose back after comments from Trump for a delay in striking a deal with China. While the Yuan effect impacts Rupee, we may expect a weak trade for Rupee against the Dollar today. However, we may look for the 71.50-71.85 range to hold for the day.
INTEREST RATES
Renewed worries on a delay in the US-China trade deal after Trump said that he would wait until the 2020 elections has triggered sharp sell-off in equities yesterday. As a result, the US Treasury yields have declined sharply on high risk aversion. The Treasury yields have room to fall further. The German yields have also declined but has key supports coming up which will need a close watch. The 10Yr GoI can dip in the near-term before reversing higher again.
The US 2Yr (1.55%), 5Yr (1.56%), 10Yr (1.73%) and 30Yr (2.18%) Treasury yields have declined sharply across tenors. The 10Yr has dipped below 1.75% and has room to test 1.65% on the downside after which a bounce is possible. The 30Yr on the other hand has a crucial support near current levels at 2.15%. A break below this support will be bearish to see 2.05% and even 2% on the downside.
Contrary to our expectation for a rise the German yields have reversed lower again. The 2Yr (-0.65%), 5Yr (-0.59%), 10Yr (-0.35%) and 30Yr (0.16%) have declined sharply. While below 0.20%, the 30Yr can dip to test 0.10% again. The 10Yr on the other hand has a key support at -0.40% which can be tested again and will need a close watch.
The 10Yr GoI (6.4665%) remained above 6.45% but seems to lack strength to breach 6.50% immediately. This keeps the possibilities alive of the yield declining below 6.45% to test 6.40% on the downside and then reverse higher to breach 6.50% eventually and target 6.60% and 6.70 in the coming weeks.
