STOCKS
Almost all stock indices except Shanghai are weak globally. A corrective dip is likely in place and may continue for a couple of sessions before recovering.
Dow (24797.78, -0.67%) seems to be holding well below the 21-day MA on the daily line charts as mentioned yesterday. While the downside momentum continues, a test of 24500-24000 looks possible in the coming sessions.
Dax (12470.49, -0.14%) was almost stable yesterday. We look at resistance near 12600 to hold in the medium term. We repeat, trade within 12600-12300 is likely for the coming sessions.
Nikkei (21712.20, -1.18%) could come off a bit in the near term to re-test support near 21200-21000. Overall 21000-22500 region is likely to hold in the medium term before the index tries to move up. Looking at the long term channel support, the index has scope on the upside for the longer run.
Shanghai (3251.35, +1.63%) opened with a gap up today after a week long holiday. Note immediate resistance near 3260-3270 region. A break above 3060-3070 could take it higher towards 3300-3350 in the near term. View is bullish for the coming sessions.
Both Nifty (10397.45, +0.36%) and Sensex (33844.86, +042%) were slightly up yesterday almost trading along the support region. It would be important to see if the indices sustains to remain above the support or breaks sharply on the downside. The next 2-sessions may be spent quietly but going into next week some weakness is likely to come in.
COMMODITIES
WTI (60.99) has come off a bit while Brent (64.85) remains stable at levels seen yesterday. There is some scope on the downside for WTI to test 60-59 again in the coming sessions while resistance near 63 holds. Brent is likely to remain stable but also has some scope of falling towards 64.
Gold (1326) is testing immediate support at current levels. If the price falls below 1325, it could be vulnerable to eventually test 1315-1310 on the downside. Sustenance above 1325 is necessary to keep the possible upside intact for the medium term. Else we may have to start looking at more downside levels for the medium term.
Copper (3.1675) is trading lower but could face some support near 3.12-3.15 region. If that holds, the price could again start moving up from there; else a test of 3.10-3.07 would be the next target on the downside.
FOREX
As expected, the Dollar Index (90.063) is testing resistance on daily candles near 90.1-90.2. Resistance on weekly candles is slightly higher near 90.3-90.4, which might also be tested in the next couple of sessions in the aftermath of heightened inflation expectations and rising yields, triggered by the US Fed minutes release yesterday (see Interest rates below). However, a rise beyond 90.3-90.4 might be difficult and we could see a dip from those levels.
As per expectations, Euro (1.2278) is testing lower support near 1.2275-1.2265 on the daily candles (which is also seen as crucial support on weekly candles). We might see a false break of support on weekly candles towards 1.221-1.223 as was seen in the previous 2 weeks, but a further downmove might be unlikely.
The Dollar-Yen (107.34) saw a high of 107.90 yesterday, just below resistance near 108 on the daily candles and is now seeing a slight dip. On previous 2 instances when support on weekly candles was tested, the Dollar Yen saw 4 consecutive weeks of upmoves. We are almost through the 1st week of upmove after the most recent test of support – it would be interesting to see if the previous pattern is again followed next week.
The Euro-Yen (131.80) against our expectations has broken below 132 but might now find support near 131.5 on the daily candles – since chances of Euro breaking below 1.221-1.223 are low and the Dollar Yen might just see a bullish week again, the Euro yen could stay above 131.50.
Pound (1.3909) as per earlier expectation is now testing immediate support near 1.39 on the daily candles. A further dip to lower support near 1.38 on daily and 3 day candles might now happen next week.
Dollar-Rupee (64.76): Likely to test support near 64.60/50 before again bouncing back towards 65 or higher in the medium term.
INTEREST RATES
Yesterday’s US Fed minutes have reinforced the market’s belief of 3 to 4 rate hikes this year, which in turn has further pushed US yields up. The ongoing treasury auctions are also adding to the supply of US debt and putting upward pressure on yields.
US 10 Year Yield (2.9335), US 30 year Yield (3.2028), US 5 year yield (2.6566), US 2 year yield (2.258) : After the auction of US 2 Year notes (fetching yield rates near 2.255%) pushed up the 2 year yield yesterday, the 10 year and 30 year yields have risen by 4 to 5 bps after the release of the Fed minutes. The 30 year yield is hovering around our earlier mentioned long term resistance level of 3.20% while the 10 year yield saw a record high (2.95%) above the resistance level (2.9%) and is currently trading around 2.93-2.94%.It had risen to 2.93% last week as well, post which it dipped below 2.9% again.
However, given that there is further auctioning slated in this week for the 5 year notes, we could expect some more volatility for the 10 year above 2.9%. However, as mentioned previously as well, there is a strong possibility of high yield levels attracting investors towards US debt and thereby pushing down yields from current levels. After this week’s volatility, we might well see another few sessions of consolidation next week..
(Long term resistance levels for the 4 yields earlier mentioned are as follows: 2.85-2.90, 3.20, 2.7 and 2.2 respectively – we have been expecting these levels to hold in this month.)
 is testing immediate support at current levels. If the price falls below 1325, it could be vulnerable to eventually test 1315-1310 on the downside. Sustenance above 1325 is necessary to keep the possible upside intact for the medium term. Else we may have to start looking at more downside levels for the medium term. ){kind=link}