STOCKS
Dow (24739.53, +0.80%) further rose, breaking the range of 24000-23500, turning to the upside. This rise could turn out to be a strong break and the index could move higher towards 25500 in the next few sessions. A sharp upward rally is on the cards for the medium term.
Dax (13022.87, +0.62%) looks bullish for the coming sessions. Near term rise towards 13200-13300 is possible.
Nikkei (22699.76, +0.90%) broke above the 22400 resistance contrary to our expectation that it would hold. This could indicate some weakness in the Yen too in the coming sessions. While above 22600, Nikkei could move up towards 23000-23400 in the medium term. View is bullish.
Shanghai (3177.01, +0.082%) moved up as expected and is likely to soon head towards 3200-3250 as mentioned yesterday.
Nifty (10716.55, -0.23%) dipped from 10785 but closed above 10700 yesterday. While above 10700, there is still some chances of testing 10800 (or max 10850) on the upside. If the index closes above 10800 today, upside chances would open up for the next week. Watch price action near 10800 today. Sensex (35246.27, -0.21%) is likely to move up towards 35500-35750 levels as mentioned yesterday.
COMMODITIES
Brent (77.31) and Nymex WTI (71.30) could take some pause after the recent upmove. But some more upside seems to be coming up in the near term. 78 and 72 are important resistances for Brent and WTI respectively and while they hold a short dip can be expected in the next couple of sessions.
Gold (1320, -0.17%) faces some resistance near 1325 and while that holds, it could come off towards 1315-1300 levels. A break below 1325 is needed to again take the index higher towards 1330-1350 region.
Copper (3.1055, -0.14%) has moved up as mentioned yesterday. But the upside could be limited to 3.12-3.15 just now. A fall back towards 3.08-3.07 could be seen in the coming sessions.
FOREX
US CPI data released yesterday, reflecting slower than expected growth in inflation in April. This has led to some interim Dollar weakness.
Dollar index (92.72) as per expectation, saw a dip yesterday (seeing a low of 92.54). The 13 days moving average line near 92.37 should give it support in the near term. 92.43 is also seen as an important retracement level of the rise from 89.2 to 93.4 and could provide support. If it breaks below 92.4, there would be some support in the 91.8-91.5 region as well. We believe that this dip could continue for 2-3 sessions, after which the Dollar Index could again move up towards its medium term target of 94-95.
Euro (1.1916) rose much more than our expected rise to 1.19 by seeing a high near 1.1947. A crucial resistance zone for the Euro on the upside could be 1.1960-1.1990 (1.1960 is a crucial retracement level of the downmove from 1.24 to 1.182 and 1.199 is seen as the 13 day moving average). While the Euro stays above the crucial 1.1895 level, it could go on to test the 1.196-1.199 zone again. Max extension could be till 1.205, after which, the Euro should dip again. Its current broader downmove should be restricted till 1.160-1.158 in the next couple of weeks.
Dollar Yen (109.39) saw a high of 110.02 yesterday but has dipped from there once again and tested support on daily candles near 109.2. We prefer a rise back towards 110.5-111.0 in the coming week. But if it breaks below 109.2, it could turn bearish for the medium term. Lets wait and watch.
Euro Yen (130.38) as per our expectation, is continuing to respect support on weekly candles near 129.3-129.2. The next week could see Euro move up towards 1.196 and the Dollar Yen re attempting a test of 110-111. That should take the Euro Yen back up towards 132 (seen as resistance on daily candles). But after that, a bearish Dollar Yen and Euro could imply Euro Yen breaking below support on weekly candles ultimately.
Pound (1.3528): As per our expectation, Pound again saw a high near 1.36 (1.3618) yesterday. If it rises above 1.354 again, it could again test levels near 1.36-1.37 in the near term, after which a dip could happen. Inability to break above 1.354 would mean the Pound turning bearish next week. Target for the next couple of weeks could be near 1.325.
Dollar Rupee (67.3125): May come off to test 67.15/20 today with a possible rise back to 67.50 next week.
INTEREST RATES
The US CPI data release yesterday came out lower than expected. Headline CPI grew 0.2% m-o-m (against expectation of 0.3%), while Core CPI grew 0.1% m-o-m (against expectation of 0.2% growth). This has led to the 10 Year yield again coming off from the 3% level. The bond markets are still waiting for an appropriate trigger which leads to a bond selloff such that the 10 Year yield goes beyond 3% decisively. The 10 year yield has tested 3% twice over the past few days but the psychologically important level has continued acting as a resistance.
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 (2.96%), 30 Yr (3.11%), 5 Yr (2.83%), 2 Yr (2.53%):
The US 10 Year, 30 Year and 5 Year could all see a dip towards respective supports on short term charts near 2.95%-2.90%, 3.08% and 2.78% in the next few days.
