STOCKS
Dow (24831.17, +0.37%) is rising and could test 25000-25200 on the upside in the coming sessions. 25200 could act as an immediate resistance as seen on the daily charts. A break above 25200, if seen could indicate further bullishness for the medium term.
Dax (13001.24, -0.17%) is almost near 10300 as expected and looks bullish for the near term. While the index manages to break above 13300, it could head towards 13600 levels in the medium term.
Upside possibilities for Nikkei (22810.87, +0.23%) could well be 23400 or higher looking at the 3-day charts. The recent break above 22600 indicates strong bullishness for the coming sessions.
Shanghai (3182.88, +0.62%) could test resistance near 3200 and may come off from there. Immediate upside over today and tomorrow could take it to 3200 followed by a sharp fall towards 3150 or lower in the medium term.
Nifty (10806.50, +0.84%) has scope of moving up while support near 10600 holds. Today if the index remains above 10800, it may inch up towards 10850. Near term looks bullish.
COMMODITIES
Brent (76.75) and Nymex WTI (70.47) are taking a pause after the sharp rise seen in the last few sessions. WTI could test support near 69.5-70.0 before again trying to move up while Brent could come off towards 76.0-75.50 levels in the near term. A couple of sessions of consolidation or a dip is likely before the prices again start to move up.
Gold (1320.70) could find some respite this week from the otherwise trap in the 1320-1300 region for the last few sessions. If the price manages to break above 1320, there could be some scope of rising towards 1330 or higher; else a fall towards 1300 and lower towards 1280 looks more likely.
Copper (3.1155, +0.13%) has some room on the upside towards 3.16 from where a dip back towards 3.07-3.05 levels could be possible.
FOREX
Dollar index (92.43) as per expectation, has dipped to test the 13 days moving average line near 92.45, where it could get some support. If it dips below 92.4-92.3, it could test the 21 days moving average near 91.6 and then move up from there. It could resume its broader uptrend towards the medium term target of 94-95 later this week.
Euro (1.1962) as predicted is currently trading in the 1.1960-1.1990 resistance zone (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). Above the 13 days MA, it could even test the 21 days MA near 1.209, after which it could dip to continue its broader downmove.
Dollar Yen (109.33) has broken support on daily candles but is yet to do so on the 3 day candles. While it stays above 109, a rise back towards 110.5-111.0 in this week is still possible. If it breaks below 109.2, it could turn bearish for the medium term.
Euro Yen (130.76) had stayed above support on weekly candles near 129.3-129.2 last week. This week there could be some upmove in Euro Yen towards 132 (seen as resistance on daily candles) as the Euro possibly rises towards 1.200-1.205. However, both Euro and Dollar Yen are expected to turn bearish in the next 1-2 weeks, which should then take Euro Yen below 129.
Pound (1.3567): We had said on Friday that if Pound rises above 1.354 again, it could test levels near 1.36-1.37 in the near term. It is currently trading near 1.3567 and hence could move up this week towards 1.37, after which the broader downmove could resume.
Dollar Rupee (67.33): Support at 67.10 held on Friday. Now we need to see if 67.50 is broken over today-tomorrow or not.
INTEREST RATES
The US CPI data release last week had come 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 led to the 10 Year yield coming off from the 3% level.
Bond markets are still waiting for an appropriate trigger which could take the 10 Year yield beyond 3% decisively. The 10 year yield has tested 3% twice over the past few weeks 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 (3.10%), 5 Yr (2.83%), 2 Yr (2.53%):
We had said on Friday that 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%. The 30 Year has indeed dipped and we could see the dip play out for the other yields as well over the next couple of sessions.
The German 10 Year – US 10 Year yield spread (-2.4) is near support on medium term chart and could see a rise towards -2.3. This could correspond with German 10 year yield rising from support near 0.5% on short term and medium term charts towards resistance near 0.9%.
0.9% on German 10 year yield and -2.3% on the German-US spread gives a target of 3.2% for the US 10 year which syncs well with our above mentioned medium term targets.
