STOCKS
Most markets, except for India (which rose) and the USA (which was closed), have been a little bearish over yesterday and today. This is within the overall indecisive range that most markets are in currently.
The DAX (12863, -74.55, -0.58%) fell a bit on Italian election jitters, but needs to break below 12800 to acquire more bearishness.
Although the Nikkei (22274, -206, -0.92%) saw a small uptick yesterday, it trades appreciably lower today, pulled down by the decline in Dollar-Yen to 109.00. A break below 22200 (possible) will take the Nikkei down to 21900.
The Shanghai (3136, +0.03%) trades relatively flat today, but may dip towards 3100 in the course of the week.
We had pointed 10600-700 as an important Resistance for the Nifty (10688.65) which peeked above 10700 during the day but then closed below it. We are unclear whether it sees further upward extension today or runs into profit taking.
The Dow (24753.09) will open today after a holiday yesterday. We have to wait and watch to see when and how it breaks out of the “No Man’s Land” of 24600-25100.
COMMODITIES
WTI (66.88) is trading above near term support at 65.50 and while that holds, there could be chances of a bounce back to levels above 67.50. A break below 65.50 is seen could take the price lower towards 63.75 in the coming weeks.
Decent support in the 73.50-73.70 zone is visible on the Brent (75.71) which may hold for the coming sessions producing a bounce towards 77 soon. Only on a break below 73.50 would we focus on lower levels.
The Brent-WTI spread has shot up to 8.75, breaking the trend resistance of 7.75 but could pause near 9.00-9.30 levels before coming off towards 7.75 again in the coming sessions. This could indicate a near term rise in the crude prices.
The 21-day Ma on the Gold (1298.21) daily line chart seems to have acted as a decent resistance pushing off the Gold price to levels below 1300 again. There is scope of falling towards 1280-1270 on the downside in the medium term. But, also watch interim support near 1290.
Copper (3.0809) has been moving sideways without any major movement just now. It could continue to see range-trade within 3.02-3.15 region for the coming sessions. Unless we see a clear break on either side, it would be difficult to project further direction. Failure to sustain above 3.02, could take it down to 2.95 in the medium term.
FOREX
Dollar index (94.347), as we expected, did test support on daily candles yesterday (near 93.86) and then rose back to a high of 94.50, thereby testing resistance trendline. It could see a slight downmove towards 94.10-94.20 in today’s session and then again rise towards 94.6 tomorrow. In case it breaks support near 94.10, the downmove could extend upto 93.6, which should then produce a bounce. 95 could be tested sometime in the 1st half of June. The upside in the next 2 weeks might be capped by 95.00-95.65.
Euro (1.1627), exactly as we had expected, tested a high near 1.173 yesterday and then fell from there to 1.161. In today’s session, it could rise to test resistance near 1.166 on daily candles and then again dip from there towards 1.16. If it breaches resistance, then the upmove could extend till 1.174, but ultimately it should again move down. Euro’s downside target for the next couple of weeks is 1.155-1.145.
Dollar Yen (109.01), contrary to our expectation, did not continue its rise towards 110.5 and has instead dipped towards 109 once again. While above 109, it could again see a rise towards resistance on weekly candles near 111.5-112.0. If it breaks 109, it could still get some support near 108 (21 Weeks MA). A break of 108 could however imply the onset of medium term bearishness.
Euro Yen (126.77): Our expectation of ranging between 129.5-128.0 for this week did not work out as the Euro yen broke support near 128-127 on weekly line chart. It could now downtrend quickly towards 125 (support on weekly candles) by next week.
Pound (1.3317): Pound is staying within the channel on daily candles. As mentioned yesterday, the upside might be capped by 1.335 and levels near 1.32 could be tested later in the week.
Dollar Rupee (67.435) : In short, even though Dollar-Rupee is highly Oversold, a further dip to 66.90 cannot be fully ruled out. Direction is likely to be influenced by Nifty strength + Brent weakness (leading to Rupee strength) or Nifty weakness + Brent strength (leading to Rupee weakness).
INTEREST RATES
Supports on medium term charts are breaking for US yields. If yields don’t see a bounce anytime soon, then we might have to abandon our earlier medium term target of 3.2%-3.3% for the 10 Year yield. An important question now in this context is whether the June rate hike has already been factored in by traders. If that is so, then the current downmove could continue. If not, yields could rise again.
US 10 Yr Yield (2.89%), 30 Yr (3.06%), 5 Yr (2.72%), 2 Yr (2.45%):
The US 30 year and 5 year yields have continued their break below respective supports near 3.11% and 2.80% on medium term chart. Yesterday we said that this could be a false break and the yields could rise back up from here. We would still give some importance to this possibility as the 10 year yield has still not broken medium term support (near 2.85%-2.88% – earlier mentioned as 2.91%). If the 10 Year yield respects this support and rises from there, the 30 year and 5 year yields could follow suit.
The German 10 Year yield (0.34%) has broken crucial support on medium term and long term charts near 0.40%. If it doesn’t turn out to be a false break, this could be an indication that the bearishness in global bond markets might be pausing.
