STOCKS
Dow (24360.21, +0.012%) is almost stable and is trading just below immediate trend resistance near 24500. While that holds, the index could again come off towards 23750-23500. A break above 24500 is needed to indicate some bullishness in the medium term.
Dax (12912.21, -0.28%) looks bullish and could target 13200-13400 in the medium term. Near term trend is up.
Nikkei (22400.50, -0.48%) is stuck at same levels for the last 4-5 sessions unable to decide which direction to move. Immediate resistance near 22600 continues to hold for now. It would be important to watch price action at current levels. A rejection would take it down to 22000 and lower while a break above 22600, if seen could turn bullish for the medium term.
Shanghai (3154.06, -0.24%) has moved up and may attempt to test 3200 in the near term. While above 3150, near term trend is up.
Nifty (10717.80, +0.021%) is trading below 10800. It would be important to see if the index is able to break above 10800 in the coming sessions. A rejection from 10800 could drag the index down to 10600-10500 levels again but a break above 10800, if seen would be bullish for the coming weeks.
COMMODITIES
Trump announced the withdrawal of the US-Iran 2015 nuclear deal. The Crude prices started to move up after the much awaited Iran decision. Brent (76.69) is trading higher after testing intra-day lows of 73.10 yesterday. Similarly Nymex WTI (70.63) is up from 67.64. While the rising momentum is strong Brent could head towards 78 in the near term while WTI could head towards 71-72 levels. Note there are immediate resistances just above current levels and we could soon see some dip by the early next week.
Gold (1310.81) is down to 1310. Lack of bull strength is visible just now and the price could eventually move down to test 1300 or even 1280 in the near to medium term.
Copper (3.056) could come down to test 3.0 in the next couple of sessions. Near term looks bearish.
FOREX
Dollar index (93.18), against our expectation, didn’t see a dip towards 92.4-92.5 yesterday; instead it rose to a high near 93.28 and is currently trading near 93.2. Looking at the 1 hour chart, the Dollar Index could be in the last leg of its 5 wave upmove from 89.23 (17th Apr onwards). This last leg could possibly end near 93.70-94.50. Our projection of the Dollar Index coming close to its medium term target of 94-95 in the next 1-2 weeks might well come out to be true. (the level 94-95 corresponds to the 5th wave starting point of the downmove since Dec ’16).
Euro (1.1852), against our expectation, did not rise towards 1.1950-1.1975 yesterday; instead it saw a low of 1.1838 and is currently trading near 1.185. Corresponding to the Dollar Index’s upmove towards 93.70-94.50, the Euro could have its current downmove restricted till 1.1775-1.1655, after which it could again start rising. If the Dollar Index tests 95, Euro could simultaneously test 1.160-1.158.
Dollar Yen (109.54), in line with our expectation, has risen after testing support on the upward trendline on daily candles near 108.76. This current upmove could now take it higher towards 110.0-110.5-110.75 in the near term. The broader uptrend looks capped till 110.50-110.75 in the medium term, after which Dollar Yen could turn bearish.
Euro Yen (129.83) tested support (on weekly candles) near 129.3 (earlier mentioned as 129.75) yesterday. It could respect this support for a few days, but is then likely to break it when the Dollar Yen turns bearish after testing 110.00-110.75 and the Euro continues its downmove till 1.16.
Pound (1.3534): As we had predicted, Pound did rise to 1.359 yesterday but has again dipped after that. If it again rises above 1.354-1.355, it might possibly see some further near term upmove till 1.36 (even 1.37). However, if it moves down to 1.35, the current downmove might well extend till 1.325.
Dollar Rupee (67.0825): Immediate Support at 67.00. May see test of 67.30-35. Medium term Support at 66.80-50.
INTEREST RATES
Trump’s withdrawal from the Iran deal could possibly take crude prices higher in the near term. This in turn could lead to a rally in yields as well (the 10 Year has already risen from 2.95% to 2.99%). This development is yet another reason why bearishness in global bonds is likely to continue this year. The Fed last week had also expressed some hawkishness in its stance. In the near term, we are expecting US yields to start rising towards their medium term targets (see below) as the June Fed meeting comes closer (where a rate hike is widely expected).
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 (2.99%), 30 Yr (3.14%), 5 Yr (2.82%), 2 Yr (2.52%):
The US 30 year yield (3.14%) didn’t dip towards support on short term chart near 3.08% but has risen and could now move up towards its important resistance level of 3.2% .
The 2 year yield didn’t dip to 2.45% as we had been expecting and has continued to rise above 2.5% to 2.52%. Our medium target of 2.75% could be tested later this month or in min June.
