STOCKS
Dow (23400.86, +0.31%) could remain stable above 23250, eventually trying to attempt a rise towards 23750. On the longer term, 23750-24000 levels could be an immediate top for the index.
Dax (13133.28, +1.39%) surged higher breaking above the 13100 levels possibly inviting the bulls to take the index up in the near term. While it trades above 13100, we may look for a 100-300points upward rally in the coming sessions with some corrective dips. View remains bullish.
Nikkei (21952.35, +0.98%) is maintaining its upward rally and could test 22250 in the coming sessions. Target for the longer term (say 2-3 weeks) would be 22666. Some interim rejection is possible from 22250 levels. Near to medium term looks bullish.
Shanghai (3419.67, +0.36%) has tested our 3420 target and could continue to move up in the near term. A small dip is possible from 3425 before resuming the rally towards 3450 in the medium term.
Nifty (10343.80, +0.47%) tested decent resistance at 10355, which if holds could bring the index down towards 10250-10200 in the next couple of sessions. But in case the index rises further today, it could test 10400 on the upside.
COMMODITIES
Gold (1267.40) is trading below 1275 and could possibly test 1260/50 in the coming sessions. While the US Dollar Index (94.77) moves above 95, there is scope for weakness in Gold in the near to medium term. Silver (16.74) could test 16.50-16.25 levels in the near term. View likely to be bearish.
Brent (59.34) is rising as expected, heading towards 60-61 levels in the near term. Near term looks bullish with the target of 60-61 levels intact. WTI (52.64) has some scope of rising towards 55 in the near to medium term while it manages to break above 53. Immediate resistance on the weekly charts seem to be breaking on the upside, opening up further upside of 54-55 levels for the medium term.
Copper (3.1465) could come off towards 3.10 or lower in the medium term. A stable consolidation in the 3.25-3.10 region is possible for some time.
FOREX
All round Dollar strength today.
Quite a bearish turn for the Euro (1.1638) with Draghi being seen as dovish yesterday despite halving the AAP (asset purchase programme) from EUR 60 bln p.m. to EUR 30 bln p.m. See Interest Rates section below. With the Euro now firmly below 1.1700-1670, the focus will now be on 1.1510 on the downside, maybe even 1.1415.
The Euro’s weakness has pushed Dollar Index (94.76) well past the earlier resistance at 94.00 and brings 96 onto the radar, although immediate Channel Resistance is seen at 95.00.
The fresh Dollar strength is also reflected in the rise in Dollar-Yen (114.15). Although the Resistance at 114.50 holds as of now, there are increased chances of further rise to 115.00 as well. Tempering the rise in Dollar-Yen would be Euro-Yen (132.83) which has been pulled down rudely by the decline in the Euro and is trading just below important trendline at 133 which might act as Resistance now. Need to watch this.
All of Pound’s (1.3127) gains on Wednesday were erased by weak UK Retail Sales data yesterday, which again reversed the sentiment on a possible rate hike next week. With both Bulls and Bears having been trapped in the last two days, the Pound may now trade sideways between 1.31-33 for some days.
As feared, the Aussie (0.7649) has fallen further to and below 0.7655. This is quite a letdown for the Aussie as most of the gains from July have been erased, making the Aussie vulnerable to further decline towards 0.7520.
Dollar-Yuan (USDCNY = 6.6521) has also risen and should see 6.67+ soon. Dollar-Rupee (64.82/83) could well rise past 65.00 today.
INTEREST RATES
Draghi’s statement that the APP (asset purchase programme) is "open ended" and is well likely to continue even after Sep ’18, has been seen as pushing an interest rate hike out into mid 2019. Thus, the interest rate advantage is given over to the Dollar. This works well enough for Draghi as the ECB had started becoming concerned about Euro strength and he would like Europe to continue to benefit from export growth also.
The German-US 10 Yr Yield Spread (-2.03%) has fallen well below -1.95%, leading to the weakness in the Euro. This is largely due to dip in the German 10Yr yield from 0.486% on Wednesday to 0.418% now. But, Support is possible near 0.40% as well.
Eyes on the BOJ meeting next week (Tuesday, 31st Oct), FOMC meeting (Wednesday, 1st Nov) and BOE meeeting (Thursday, 2nd Nov).
On US yields, there is Resistance at 3.00% on the 30Yr (currently 2.96%), at 2.50% on the 10Yr (currently 2.45%) and near 2.15-20% on the 5Yr (currently 2.07%). The market clearly does not anticipate a rate hike next week, Wednesday. But, a lot of volatility will take place if the Fed surprises the market and raises rates. Chances are less, of course, but let us see.
