STOCKS
Global equities look mixed as the doubts over whether the US will go ahead with new tariffs on China which is set to come into effect from this weekend is weighing on the market. Also market seems to be waiting to see the outcome of the US Federal Reserve meeting tonight. Dow looks vulnerable to dip in the near-term and seems to be wanting for some fresh trigger to move higher. DAX looks weak. Nikkei can be range bound. Shanghai is gaining strength and is bullish to move higher. Sensex and Nifty have declined below their key near-term supports and are bearish to fall further.
Dow (27881.72, -27.88, -0.10%) has dipped further. As mentioned yesterday, while below 28000 a dip to 27650 is possible. Also a strong rise past 28000 will be needed to turn the outlook positive to see a rise to 28250.
DAX (13070.72, -34.89, -0.27%) tumbled to a low of 12886 but has bounce-back sharply from there. We will have to see if yesterday’s bounce-back move gains momentum or not. But broadly, the picture remains weak and the DAX can test 12800-12700 in the coming days while it remains below the 12200-12300 resistance range.
Nikkei (23353.33, -56.86, -0.24%) remains lower and is moving down within the expected 23000-23600 sideways range. As mentioned yesterday, the index can continue to consolidate sideways for some more time before breaking the range above 23600 and moving higher towards 24000.
Shanghai (2923.68, +6.37, 0.22%) has held very well above 2900 and has also risen above 2910. As we have been mentioning for some time, this break above 2910 will now pave way for a fresh rise to 2970-2980. While above the danger of seeing a fall to 2885-2880 stands negated now.
As mentioned yesterday Sensex (40239.88,-247.55, -0.61%) has come down 40250, indeed much below that level. A fall to 40100-40000 looks likely now. A break below the immediate support level of 40215 can accelerate this fall. It will have to be seen if the Sensex manages to bounce from the 40100-40000 zone or not.
Nifty (11856.80, -80.70, -0.68%) has declined below 11885 and can now test 11800 on the downside in line with our expectation. Inability to bounce from 11800 will see the fall extending to 11700 and even lower levels going forward.
COMMODITIES
Crude prices trade slightly lower today after the American Petroleum Institute (API) estimated a crude oil inventory build of 1.41mln barrels for the week ended 4th Dec’19. This was contrary to analyst expectations of a 2.763mln barrel draw in inventory. Gold and Silver look stable for now. Copper is attempting to break above immediate resistance and if that holds could indicate fresh bullishness towards 2.85/90.
Brent (63.90) is holding well below resistance at 65 but could face support at 63 which could possibly keep the price between 63 and 65 for sometime before breaking on either side of the mentioned levels.
Nymex WTI (58.79) has been in a steady uptrend since Oct’19 and the upward channel is holding well for now. Within the upward movement, WTI could trade in the 57-61 region both being channel support and resistance. We may expect a short dip towards 57 followed by a bounce back towards 59+ levels in the near term.
Gold (1468.50) has been steadily trading in the 1460-1480 region mostly just above 1460. We expect a break below 1460 to test 1440 soon. View is sideways within 1460-1480 with a possible extension towards 1440 on the downside.
Silver (16.70) could fall towards 16.50 from where a bounce to 17 is expected. Near term range could be narrow 16.50-17.00 region. The contracting price since Sep’19 could soon come to an end with the price breaking out on either side.
Copper (2.7610) is attempting to break above resistance at 2.75 and if the rise sustains, it is indicative of upcoming bullishness in Copper towards 2.85/90 and eventually towards 3 in the longer run. We would watch for a sustained trade above 2.75 for the next few sessions.
FOREX
Dollar Index (97.51) has dipped slightly trading at immediate support of 97.50. A break below this could take it lower towards 97.00-97.10 from where a bounce looks likely. We do not see a fall below 97 within the current move.
Euro (1.1092) is heading towards channel resistance at 1.11 on the daily candles from where a rejection is expected towards 1.1050.
Dollar-Yen (108.73) is holding above 108.50 but has some scope of testing 108.35/00 in the near term before bouncing back towards 109. We may expect some sideways trade in the 108-109 region for now.
EUR-JPY (120.62) is holding well above 120 just now and could trade in the 120-121 region for the near term. A break below 120 could pull it down towards 119.50 in the near term.
Pound (1.3136) is holding below resistance at 1.32 just now which if holds could push the exchange rate towards 1.30/29 in the near term. Note that above 1.32, crucial resistance is seen at 1.34 which could limit the upside for the medium term.
Aussie (0.6812) is bearish while below 0.6875 and could fall towards 0.6750 in the near term.
USDCNY (7.0370) has dipped slightly and could fall towards 7.02 in the near term before bouncing back towards 7.06.
Dollar-Rupee (70.9275) has closed just around our mentioned support near 70.90 yesterday and has little room on the downside towards 70.80/70 (if it breaks below 70.90) where we may see dollar buying which may not allow further strength in the Rupee in the near term. A maximum test of 70.70 could be expected before a rise back towards 71.25/30 in the medium term.
INTEREST RATES
The US Treasury yields seems to be waiting to take cue from the US Federal Reserve meeting tonight and move either ways from current levels. They could trade sideways ahead of the Fed meeting. The German yields on the near-end (2Yr and 5Yr) have room to dip before moving higher again while at the far-end (10Yr and 30Yr) the yields can stay stable for some time and then move higher. The 10Yr GoI seems to have regained its momentum and can move further higher in the coming days.
The US 2Yr (1.65%) and 5Yr (1.68%) Treasury yields have inched slightly higher while the 10Yr (1.83%) and 30Yr (2.26%) remains stable. The outcome of the Fed meet tonight will be key in deciding whether the yields can go up or down from current levels. Until then the yields can trade in the range of 1.75%-1.85% (10Yr ) and 2.15%-2.30% (30Yr). We will have to wait and watch.
The German 2Yr (-0.65%) and 5Yr (-0.56%) yields have dipped further while the 10Yr (-0.30%) remains stable. As mentioned yesterday, the 2Yr can test -0.68% and then can reverse higher. The 10Yr has to breach -0.26% to gain strength and move further higher towards -0.20% and -0.10%. The 30Yr (0.22) is at a crucial resistance which needs to be broken for it to target 0.35% and 0.40% in the coming weeks.
The 10Yr GoI (6.7085%) has regained momentum and risen to test 6.70% without seeing a dip to 6.62% that we had expected. The bullish view is intact and a rise to 6.80% is possible in the coming days while the yield sustains above 6.70%.
