STOCKS
Dow (23930.15, +0.022%) came down to test as low as 23500 before rising back sharply to close at 23930. The bulls do not look strong just now but there is buying pressure near 23500-23750 levels. The narrow range of 23500-24000 may continue today also before a sharp breakout on either side is expected next week.
Dax (12690.15, -0.88%) is stable in the 12600-12800 region. The break above 12600 needs to sustain to take the index higher towards 13000.
Shanghai (3096.71, -0.13%) is also likely to show some sharp movement next week either breaking below 3050 or above 3150 to decide on further directional course.
It would be important to see if Nifty (10679.65, -0.36%) remains below 10800 in the near term and heads towards 10600-10500. A fall from current levels would indicate some bearishness for Nifty in the coming week.
COMMODITIES
72 on Brent (73.60, -0.03%) and 66 on Nymex WTI (68.43, -0.01%) could be immediate supports that may hold and push the prices back to higher levels. While 72 and 66 holds, the prices could either stabilize and move sideways or rally up towards 74-75 and 69-70 respectively.
Gold (1313.90, +0.09%) is trying to recover from levels near 1300 and could soon move up to 1320/30.
Copper (3.0910, +0.37%) could be stuck in the 3.15-3.05 region for a few sessions. A break below 3.05 could take it down towards 2.95.
FOREX
Dollar index (92.38) saw highs near 92.8 in the last couple of days after the US Fed expressed positivity regarding future inflation in its 2nd May meeting. If it dips below 92.3 today, it could then move down further towards 92.0-91.5, after which it should again resume its uptrend. The next target on the upside in the medium term could be 94-95 (which corresponds to the 5th wave starting point of the downmove since Dec ’16). It is also seen on daily line chart as resistance on trendline coming down from Jan ’17 and could be tested in the next 2 weeks.
Euro (1.1991) as per our expectation is moving up towards 1.20. If it moves above 1.201, it could then go up till 1.205-1.210 before resuming its downtrend again in the medium term. The medium term target would be levels near 1.16-1.17 (which is the 5th wave starting point of the Euro’s upmove since Dec ’16). This downside target is also seen as support on trendline in the daily line chart.
Dollar Yen (108.99) : As per expectation, Dollar Yen has dipped to 109 after testing highs near 110.04 day before yesterday. It could dip further to test support on daily candles near 108.75 and then move higher again towards 110.5-110.75. The broader uptrend looks capped till 110.50-110.75 in the medium term, after which Dollar Yen could turn bearish.
Euro Yen (130.72) : Against our expectation, Euro Yen has broken below support near 131 on weekly candles. There is lower support on weekly candles near 130.00-129.75, which looks unlikely to be broken next week as we expect both Dollar Yen and Euro to move up towards 110 and 1.200-1.210 respectively. In case both Dollar Yen and Euro turn bearish, Euro Yen could break the support near 130.00-129.75.
Pound (1.3585) is continuing to move down towards its next downside target of 1.35-1.345 (seen on daily candles), which could possibly be tested next week. It broke below crucial long term support level near 1.385 on weekly line chart earlier this week, which would possibly lead to medium term bearishness for the Pound.
Dollar Rupee (66.6475) may test 66.50/45 in the next couple of sessions (medium term target of 66.30/25 remains while below 66.60).
INTEREST RATES
The Fed maintained status quo on 2nd May but expressed positivity regarding rising inflation. This hawkish component had taken the US 10 year yield towards 2.99% but the yield has continued to dip after that towards 2.93%.
Repeating yesterday’s comment: The medium term targets for US yields in our Apr ’18 US Treasury report (available on demand) are as follows: 3.2%-3.3% (10 Year), 3.4%-3.5% (30 Year), 3.15% (5 Year) and 2.75% (2 Year). A breach of the 3% level by the 10 year yield would be vital for these targets to be achieved by June. A rate hike is expected in the June Fed meeting, which might start getting factored later this month and could henceforth lead to a rally in yields towards these medium term targets. We also expect some more yield curve flattening in the next month followed by steepening after that, as yields bounce from long term supports.
US 10 Yr Yield (2.95%), 30 Yr (3.12%), 5 Yr (2.78%), 2 Yr (2.48%):
The US 2 year yield (2.48) after having tested the psychologically important 2.5% level might now continue to move down till 2.45%.
There could be some support for the 10 Year yield (2.95%) near 2.93% on the short term chart, which it tested yesterday. If this support holds, it should again start moving up towards 3%. A rise back above 3% could happen later this month as the June Fed rate hike starts getting factored by traders.
