STOCKS
Dow (21613.43, +0.47%) could be ranged within 21700-21500 for the next couple of sessions. There is some chance of testing 21800 on the upside while immediate support near 21500 holds.
Dax (12264.31, +0.45%) is trying to recover from levels near 12140, and could rise towards 12400 once again in the coming sessions. There is some support visible near 12000 on the 3-day charts coming up from June’16 and while that holds, Dax is likely to recover in the near term with some chances of a dip towards 12000-11870.
Shanghai (3240.27, -0.11%) is almost stable and could either come off or remain sideways from levels near 3260/70. There is room on the downside towards 3200 which is possible before again moving up to current levels.
Nikkei (20048.62, +0.47%) has moved up a bit as Dollar Yen and the US-Japan yield spread has bounced up a bit. Decent support is visible near 19600 and while that holds, the index could move up towards 20500 in the coming weeks.
Nifty (9964.55, -0.02%) opened at 10011 yesterday before coming off sharply to close near 9964. As we have been mentioning, 10000-10050 levels could act as an immediate resistance and while that holds, we may expect some correction in Nifty in the near term.
COMMODITIES
Gold (1247) is trading within the range of 1245-58. It has a crucial Support at 1245. If that holds, we can see a rise towards 1258 and 1270. But, in case the Support at 1245 breaks, there will be a further dip to 1230 and 1210. Silver (16.40) is also within the range of 16.20-16.50.Only a close below 16.20 could open up 15.90 and 15.50 respectively.
Copper (2.83) looks on a firm footing as it sustain the higher levels. We were bullish on copper since 22nd of June 17 and the intraday highes of 2.85-89 were at par to our initial targets. Our next target of 2.95 and 3.00 may be achieved in the rest of the week. Midterm resistance comes at 3.08-12 regions from where we may see some correction due to short term profit taking.
Oil Price rose higher in line with our expectation. Both Brent (50.56) and WTI (46.34) September contacts are trading within the ranges of 49.60-51.30 and 47.60-49.50 respectively. We are bullish on oil since 10th of July 17 onward and there is no reason to change our bullish stance in near term while Brent and WTI are trading above 47.70 and 45.50 on a weekly closing basis. We have U.S weekly crude oil inventory data today at 8:00 p.m IST. If the anticipation of -3.3 M Barrel of shortage will match the actual outcome, we might see further rally toward 51.50 (Brent) and 49.70 (WTI). A weekly close above those levels might confirm the end of the midterm bearish trend too.
FOREX
The FOMC policy statement tonight may dictate the near term path for the majors, especially if there is any specific hints regarding normalization of the Fed balance sheet.
A rise in German business confidence at 116.00 against the expectations of a drop to 114.90 had pushed Euro (1.1650) above 1.17 but it was rejected exactly at the resistance of 1.1712 we have been following. Unless we see a weekly closing above 1.1712, this latest phase of the rise remains a bit suspect as it remains in the most overbought state since 2008.
Dollar Index (94.06) remains almost unchanged with the trend firmly down. Only a bounce above 94.65 can give initial hints about a recovery but till then, the downside target of 93.00 remains a strong possibility.
Dollar Yen (111.89) has bounced back sharply as expected and now if it manages a break above 112.10, the bounce may extend higher to 112.55 and 113.00. Immediate support comes at 111.50-15.
Aussie (0.7914) continues its consolidation with the larger trend up. With Copper (2.88) surging to a fresh 26-month high (Check Commodities section), the probability of further rise towards 0.80+ levels in the coming sessions strengthens considerably.
It was a day for mute price action for Dollar-Rupee (64.38) as expected but the range boundaries of 64.28-60 may be tested in the next couple of sessions . Bias neutral at this point.
INTEREST RATES
Market awaits the FOMC meeting tonight. Although the rates are likely to remain unchanged the market would look for firmer statements on the timings to start the effort on reducing the balance sheet. The probability of a rate hike in September has risen to 91.6%.
The US yields have risen sharply ahead of the FED meet tonight and could re-test the medium term resistance in the coming sessions. The 30Yr (2.91%) is trading close to the medium term resistance of 3% and while that holds, not much room is available on the upside just now. Unless the 30YR breaks above 3%, medium to long term looks bearish for the US yields.
The US 10YR (2.33%) has risen as expected breaking above our expected 2.28% mentioned yesterday. It could possibly move up faster as compared to the 5Yr (1.89%) as indicated by a rising 10-5Yr differential (0.44%) which could now move up towards 0.45-0.46%.
The US-Japan 10YR (2.25%) has bounced from support levels as expected and while it continues to move up, it could pull up both Dollar Yen and Nikkei in the coming sessions. The yield spread could test 2.3% in the near term.
The German-US 10Yr (-1.76%) and the German-Us 2Yr (-2.06%) have come off sharply and are testing decent supports near current levels. If the supports hold, we could see a bounce back else we could see a fall in the next few sessions before the yield spreads pause. Euro could come off a bit, if the yield spreads continue to fall.
