STOCKS
Dow (24768.93, 0.25%) saw a low near 24629 yesterday after having come off from resistance on daily candles, and could continue dipping for few more sessions towards 24500-24250. Downside could be restricted till 21 DMA near 24380.
Dax (12996.33, 0.20%) saw an upmove yesterday after closing near 12916 on Tuesday. It could see a slight downmove over the next 1-2 sessions towards 12950-12900 (seen as support on daily candles), after which it should rise again. We repeat that the medium term outlook for Dax remains bullish.
Support for Nikkei (22817.88, 0.44%) on daily candles near 22700 held yesterday and it rose towards 22800. It could now rise further towards 23000+ in the coming sessions.
Shanghai (3159.88, -0.31%) is seeing a dip from resistance on daily and 3 day candles near 3180-3200 and looks bearish towards 3100 in the near to medium term.
Nifty (10741.10, -0.56%) after having seen a high near 10930 after the Karnataka election results has broken channel support on daily candles and saw a low of 10699 yesterday. If this break persists, we might see Nifty coming off towards 10600 in the near term.
COMMODITIES
Brent (79.39) and Nymex WTI (71.76) have both moved up and could test levels near 80 and 73 respectively over the next couple of sessions. 80 is seen as resistance for Brent on daily and 3 day candles while 73 is seen as resistance for WTI on 3 day candles. We don’t expect these resistances to be breached in the near term. Instead there might be a dip from those levels.
Gold (1292.73) is testing crucial support on 3 day candles and weekly candles near current levels and could rise in the near term towards 1320.
FOREX
Dollar index (93.12) had moved up sharply day before yesterday as the US 10 Year yield rose past 3% decisively. As we predicted, it is seeing a slight dip after testing levels near 93.6 yesterday. It could dip further towards support on daily candles near 93 before resuming its uptrend. It should target levels near 94-95 in this month.
Euro (1.1831) dipped to a low of 1.1763 yesterday and is very near to the 55 weeks moving average currently. It could be seeing some upward correction towards channel resistance on daily candles near 1.185. However, as the Dollar Index tests levels near 94-95, Euro could test levels near 1.17-1.16.
Dollar Yen (110.14) is currently trading in the 110.0-110.5 zone. There is decent likelihood of it going up further till 111 and then turning bearish after that for the medium term.
Euro Yen (130.30) saw a low near 129.5 yesterday as Euro dipped to 1.1763 and thereby tested support on 3 day candles. It might now range between 131-129.5 for some time as the Dollar Yen stays close to 110-111 and the Euro slowly moves down towards 1.17.
Pound (1.3563): Pound tested support on daily and 3 day candles near 1.345 yesterday and has risen from there. It could now range between 1.345 and 1.37 for few days before resuming its downtrend.
Dollar Rupee (67.7975): Good Support at 67.50. May see 68+ again next week.
INTEREST RATES
Repeating yesterday’s comment about US Retail Sales:
US Retail Sales grew 0.3% in April and the March growth figures were revised upward from 0.6% to 0.8%. Sentiment around US economic growth received a boost by these numbers, with the 2nd quarter of 2018 expected to see higher consumption as compared to the mild consumption figures in the 1st quarter. This data release (as we had anticipated), turned out to be the trigger which has made the US 10 Year yield breach the 3% level decisively (high near 3.11%). We can now expect US yields to move towards their medium term targets, which are as below:
3.2%-3.3% (10 Year), 3.4%-3.5% (30 Year), 3.15% (5 Year) and 2.75% (2 Year)
As the expected rate hike in the June Fed meeting starts getting factored later this month, the rally in yields could continue till the above mentioned targets are reached. We also expect some more yield curve flattening in this month followed by steepening after that, as yields bounce from long term supports.
US 10 Yr Yield (3.10%), 30 Yr (3.22%), 5 Yr (2.94%), 2 Yr (2.58%): The 30 year yield and 5 year yield as per our expectation have moved past resistances near 3.2% and 2.9% on medium term charts and could now move further up towards their above mentioned medium term targets.
The German 10 Year – US 10 Year yield spread (-2.49) has broken below immediate support on medium term and long term charts as the US 10 year rose further to 3.1% while the German 10 year yield dipped towards 0.61%. If this break persists, we might revisit our prediction of a rise in the spread towards -2.3%. In that case, the spread might turn bearish towards long term channel support near -2.75%.
