STOCKS
Dow has broken the range on the upside. While this break sustains, a further rise is possible. DAX continues to trade below its resistance and remains vulnerable for a fall. Nikkei is struggling to gain momentum to move up towards the upper end of its range. Inability to rise from current levels can drag it lower. Shanghai can fall in the coming days within our preferred range. Sensex and Nifty may remain sideways in a narrow range before moving up sharply.
The Dow (27201.52, +373.05, +1.39%) has risen past the key hurdle of 27000. While this break sustains, a further rise to 27600 can be seen in the near-term. A break above 27600 will then pave way to 28200 on the upside.
DAX (12660.25, +59.38, +0.47%) continues to trade below 12800 and seems to lack momentum to rise past 12800. Our view remains the same. A strong break above 12800 is needed to ease the downside pressure. While below 12800 DAX will be vulnerable for a fall to 12000 and 11500 even.
Nikkei (22425.80, −89.05, -0.40%) remains stable and does not seem to get a follow-through rise above 22500. As mentioned yesterday we will have to wait and watch to see if the Nikkei manages to move up to 22700-23000 from here or falls back to 22000. Broadly we look to see a range of 21500-23000 on the Nikkei and a fall to 22000 from here will increase the chances of seeing 21500 (lower end of the range) on the downside.
Shanghai (3346.69, −30.87, -0.91%) tested 3400 but has come-down again failing to break above it As mentioned yesterday, a strong close below 3350 will be bearish to see fall to 3300-3250 in the coming days. We reiterate that broadly, Shanghai can remain in the range of 3180-3450 for a few weeks.
Nifty (11101.65, +6.40, +0.06%) rose to test 11200 as expected but has come-off from the high of 11225 to close on a flat note. A narrow range-bound move between 11000 and 11200 looks like a possibility in the near-term. While above 11000, our broader bullish view of seeing 11400-11600 levels on the upside will remain intact.
Similarly, Sensex (37663.33, −24.58, -0.07%) can remain in the range of 37000-38200 for a sometime. Eventually we expect the Sensex to break above 38200 and move up to 39500-40000 over the medium-term. This bullish view will get delayed in case if the index declines below 37000 (less preferred).
COMMODITIES
Crude prices rise after the EIA reported a fall in inventories by 7.4mln barrels for week ended 31st July, compared to analyst expectation of a 3-mln barrel drop. Gold and Silver continue to rally and could be headed to fresh highs within the current upmove. Copper is stable within the broad 2.80-3.00 range and unless a break on either side is seen, there is lack of clarity on further direction from here.
Brent (45.24) and WTI (42.16) have risen on higher than expected crude inventory draws. Brent has come up to test 45.27, the immediate upper resistance that we have been mentioning for quite some time now. It would be important to see if Brent manages to break above 45.27 and sustain higher in order to indicate further bullishness towards $48-50; else a dip back to $43-42 could be seen in the coming week. WTI on the other hand has risen slightly but has scope for a test of 43.50-44 on the upside. A break above that would turn bullish for the coming week.
Gold (2053.40) and Silver(27.02) continue to rally as US Dollar extends its weakness (refer to Dollar index in the Forex section below). As mentioned yesterday, we may target a rise to $2100-2200 in Gold and towards $30 in Silver in the coming sessions. View is bullish unless we see any reversal signs from higher levels.
Copper (2.9030) continues to trade around 2.90 and needs to break on either side of the 2.80.00 region to indicate further direction. For now, we expect trade around 2.90 to continue for the rest of the sessions this week.
FOREX
Dollar Index trades lower while Euro, Aussie, Pound and EURJPY heads towards crucial resistances/previous seen highs from where a possible corrective dip could be expected. While most currencies trade strong against the US Dollar, we would be cautious to see a turnaround signal anytime soon. USDCNY has bounced from fresh lows within the current movement and could now rise a bit in the next 1-2 sessions. Dollar-Rupee needs to sustain below 75 to remain stable within 74.80-75.00 region just now before again rising back to 75+ levels.
Dollar Index (92.80) has broken below 93 and while that sustains, there is scope for further fall towards 92 in the near term. But within this falling spree, we would be cautious to see any reversal signal that could impact the otherwise strong currencies and precious metals negatively.
Euro (1.1868) has been rising since the last 2-3 sessions after a brief test of 1.17. We may expect a re-test of 1.19 or even a break on the upside targeting 1.20 in the coming week. Watch for a possible rejection from 1.19 that may limit further rise from here. We would wait for further confirmation on seeing price action near 1.19 over the next 1-2 sessions.
EURJPY (125.23) has risen well and looks bullish for a rise towards 126-127 in the near term.
Dollar-Yen (105.2) is stable but looks bearish for a fall to 105 just now. Watch for a bounce from 105 which if fails could again drag the pair towards 104. Overall view looks bearish.
Aussie (0.7197) looks bullish towards 0.7350 which could be seen if the Aussie breaks above 0.72 today. Overall view is bullish on the charts with scope for further rise from current levels.
Pound (1.3128) is up in line with the strength in other currencies. We expect a test of 1.32 on the upside, a break above which, if seen could be further bullish for Pound, taking it higher towards 1.34. But we caution for a possible rejection from 1.32,that could drag the exchange back towards 1.30.
USDCNY (6.9467) trades below 6.95 just now but having tested an intra-day low of 6.9321, we may expect a bounce back towards 6.97 in the near term.
USDINR (74.9450) traded below 74.95 yesterday closing near the session high yesterday. While it remains below 75, we may expect a re-test of 74.85/80 on the downside while trade in the 74.80-75.00 zone could be seen for the day. Only a break above 75 if seen again would re-initiate a rise towards 75.15/20 or higher in the medium term.
INTEREST RATES
The US Treasury yields (10Yr and 30Yr) have inched higher from their key intermediate support. If they mangage to move up further from here a corrective rise can be seen in the near-term before the overall downtrend resume. The German Yields have bounced-back sharply but will have resistances ahead that can cap the upside and keep the broader downtrend intact. The 10Yr GoI seems to lack momentum to break above the resistance. It can fall in the near-term within our preferred range.
The US 2Yr (0.12%), 5Yr (0.21%), 10Yr (0.54%) and the 30Yr (1.21%) have recovered across tenors. The support at 0.50% on the 10Yr and 1.18% on the 30Yr seems to be holding for now. It will have to be seen if the yields can see follow-through rise from here. In that case the 10Yr and 30Yr can see a corrective bounce to 0.60%-0.65% and 1.25%-1.30% respectively and then can resume the downtrend. Failure to see further rise in the coming sessions will see the downtrend resuming from here itself breaking below 0.50% (10Yr) and 1.18% (30Yr).
The German 2Yr (-0.71%), 5Yr (-0.70%), 10Yr (-0.51%) and the 30Yr (-0.10) German yields have bounced back sharply from levels seen yesterday. However, the upside is likely to be capped at -0.45% on the 10Yr and -0.05% on the 30Yr. The broader outlook will continue to remain bearish and our view of seeing a fall to -0.60% (10Yr) and -0.20% (30Yr) will remain intact.
The 10Yr GoI (5.8283%)has dipped further yesterday. The expected break above 5.85% and a rise to 5.90%-5.92% that we have been mentioning seems to be not happening. In turn the 10Yr GoI looks likely to break below 5.82% and fall to 5.80% in the near-term. We can look for a range of 5.80%-5.85% for some time.
