STOCKS
Strong surge in the equities the US-China phase 1 deal is ready to be signed which includes the delay of new tariffs on China that is scheduled to kick-off this weekend. The bullishness is back into the picture and the indices are set to move further higher in the coming weeks. Sensex and Nifty which have been trading weak so far can get a boost from the recent developments on the US-China trade front.
Dow (28132.05, +220.75, +0.79%) has surged above 2800 thereby reducing the danger of seeing 27650 on the downside. While above 28000 the outlook is bullish to test 28400 initially and then 28800 – a crucial resistance which will need a close watch in the coming weeks.
DAX (13221.64, +74.90, +0.57%) has risen above 13200. A further rise above 13300 will confirm the bullishness andl take it higher to 13450-13500 in the coming days. While 13300 holds, the index can continue to trade sideways between 13000 and 13300 for some more time.
As expected, Nikkei (23990.08, +565.27, +2.41%) has broken its consolidation phase above 23600 and has surged towards 24000. The region between 23600 and 23500 will now serve as a strong support. The outlook is bullish to test 24500 and even 24800-25000 in the coming weeks.
Shanghai (2919.43, -4.99, -0.17%) has also risen sharply and is heading towards 2970-2980 in line with our expectation. The current move may have the potential to take the index to 3050 level again.
Sensex (40581.71, +169.14, +0.42%) and Nifty (11971.80, +61.65, +0.52%)can also surge following the global markets. Nifty can target 12100-12200 while the Sensex can test 41000 and even higher levels.
COMMODITIES
The US-China getting closer to a deal which will delay the new tariffs that was set to come into effect this weekend has pushed the oil prices higher from yesterday’s low. But there are key resistances ahead which can cap the upside in oil and drag it lower again. Gold and silver consolidates sideways with a bearish bias. Copper can move further higher to test its key resistance.
Brent (64.59) has bounced sharply but remains well within its 63-65 range. Cluster of resistances are poised in between 65 and 66. Though a test of 66 on the upside cannot be ruled out in the near-term, we expect the Brent to reverse lower again towards 64-63 and even lower levels thereafter.
WTI (59.48) has bounced within its 58-60 range and need to see if it can manage to break above 60 or not. However, the upside could be capped at 61 even on a break above 60 and the WTI is likely to reverse lower again.
Gold (1469) has been consolidating between 1450 and 1500 for a prolonged period of time. The broader bias remains bearish and we expect the yellow metal to break this consolidation below 1450 and fall to 1440 and 1420 in the coming days.
Silver (16.92) has failed to sustain the break above 17 yesterday. Though there is room on the upside to test 17.20-17.30 on the upside, we expect Silver to reverse lower again targeting 16.50-16.25 going forward.
Copper (2.81) has moved up further. There is room on the upside to test 2.83-2.85 from where a pull-back to 2.80-2.78 is possible.
FOREX
The White House has reached a “deal in principle” with Beijing to resolve the US-China trade war and is expected to make an announcement on next Thursday according to news sources. The US negotiators seem to have offered to cut existing tariffs on Chinese goods by as much as 50% and suspend new tariffs that were scheduled to be implemented on Sunday. US Dollar trades weak against most currencies and has induced strong rise in most of them. The exit poll in UK indicates a majority of 86seats for the Conservative thereby further boosting a rise in the Pound. Overall currencies are trading strong across the globe.
Dollar Index (96.77) has clearly broken below our expected support at 97 indicating bearishness for the near to medium term. While below 97, Dollar Index could remain bearish with a possible fall towards 96.50-96.
Euro (1.1178) has risen sharply as US Dollar weakened further against most currencies. While above 1.1150, it could rise towards 1.12.
Dollar-Yen (109.55) has risen sharply after trading sideways above 108.5 for quite a few sessions. Note that 110 is an immediate resistance and may hold in the near term pushing the pair down towards 108.50 again. Only a sustained rise above 110 would indicate bullishness towards 111-112 in the longer run. Watch price action near 110.
EUR-JPY (122.44) has shot up sharply breaking above immediate resistance near 121 mentioned yesterday. But we had also mentioned a possible test of 123 on a break above 121 which seems to be holding well for now. Note that 123-124 is a possible resistance zone that may hold next week.
Pound (1.3479) has shot up above 1.34 after the exit poll predicts the Conservative majority of 86 seats. With the sizeable majority, people expect that Johnson would be able to push Brexit deal through the parliament by end of January and move on to trade talks with the European Union. On the charts, while above 1.34, there is scope for a rise towards 1.38.
Aussie (0.6919) has risen sharply to test 0.6925 as mentioned yesterday. The rise is accompanied by a sharp rally in Copper prices and on hopes that the US would delay imposition of scheduled tariffs on the 15th Dec. On confirmation of news over the weekend, we may possibly get a further rise in Aussie towards 0.6975-0.70 in the coming sessions. Near term looks bullish.
USDCNY (6.9745) dropped sharply after the news of possible postponement of tariffs this Sunday came in. A fall towards 6.93/90 could be likely in the near term.
Dollar-Rupee (70.84) could possibly try to re-attempt a test of 70.70/50 today on positive news from the US-China front despite seeing a bounce yesterday as RBI seemed to have intervened to buy Dollars near yesterday’s lows below 70.70. We would watch to see if the pair breaks below 70.70 again today but may expect intervention by the Central bank if a fall in USDINR is seen.
INTEREST RATES
Increased risk appetite coming back into the market as the US-China trade deal is all set to get done has taken the US Treasury yields sharply higher. However, the yields are coming closer to their crucial resistances which will need a close watch. The German Yields have also risen and are keeping our bullish view intact. The 10Yr GoI has moved further higher in line with our expectation but is coming closer to a key resistance zone which needs a close watch.
The US 2Yr (1.67%), 5Yr (1.75%), 10Yr (1.91%) and 30Yr (2.33%) have surged across tenors. While the 10Yr has room on the upside to test 1.98% and 2%, the 30Yr has an immediate and a very crucial resistance at 2.35% which will need a watch. A strong rise past 2.35 will be a bullish signal indicating a trend reversal. Similarly, the 2Yr also has a very important resistance in the 1.68%-1.70% region. We will have to wait and see.
The German 2Yr (-0.64%) yield remains stable while the 5Yr (-0.54%), 10Yr (-0.27%) and 30Yr (0.25%) have risen sharply. The 30Yr risen above 0.22% – a level which was capping the upside for some time. While above the 0.22%-0.20% support zone, the 30Yr will now have the potential to target 0.40% on the upside in the coming weeks. The 10Yr is bouncing as expected from the -0.40% support and can test -0.20% and even -0.10% in the coming weeks.
The Indian 10Yr GoI (6.7757) rose further to test 6.80% in line with our expectation. As mentioned yesterday. We see strong resistance in the 6.80%-6.85% region which is likely to halt the current upmove. The 10Yr GoI is can reverse lower in the coming days targeting 6.70% on the downside.
