STOCKS
Dow (24667.78, +1.26%) did not extend to 23750 following the sharp fall seen on Wednesday and instead rose back to 24750. One possibility could be that the index does not come below 24250 for the next few sessions and instead move up to 25000 and beyond (this could validate a possible triangle formation indicating medium term bullishness), initiating a fresh upmove. Else the index could see another fall from 25000 and remain in the sideways range for some more time.
Dax (12783.76, +0.93%) has also moved up instead of moving down towards 12300 or lower. Although there could be some upmove just now, the downside scope remains open for the medium term while below 12900.
Nikkei (22148.01, +0.59%) has also attempted to rise slightly and is trading above 22000. Note immediate resistance near 22400 which if holds could again push the index back to lower levels in the coming sessions.
Shanghai (3064.35, +0.75%) saw a slight bounce from 3045 and if this holds, the index could again head towards 3100-3150 levels in the near term.
Nifty (10614.35, -0.18%) has room on the downside towards 10500 but the index has moved up from levels above 10500. While the rise continues, the index could head higher towards 10700 or higher by next week. We may keep open a possible test of 10500 on the downside.
COMMODITIES
Brent (77.28) has held well above the support at 74.50 and bounced up from there while WTI (68.10) has moved up too. Brent may target 80 soon while WTI could pause near 69 and re-attempt higher levels in the longer run.
Gold (1302.39) is stable just now and could remain sideways ranged in the 1290-1310 region at least for the next 2-sessions. Thereafter a break above 1310 could initiate some bullishness; else the price could re-test 1300 or lower once again.
Copper (3.0652) moved up instead of testing 3.02 on the downside. While the Chinese Stock index moves up, Copper could find some ranged movement with a possible upside towards 3.10-3.12 levels again. In case the china stock index falls sharply in the near term, it could lead to a sharp fall in Copper too to levels below 3.02. Watch for a rise in Copper prices in the next 2-sessions.
FOREX
Dollar index (94.098), after touching 95 on Tuesday, fell to a low of 94.05 yesterday, thereby breaking support on daily candles. It has two important supports at the 13 day and 21 day moving averages near 93.86 and 93.43 respectively. If it breaks 93.43, the Dollar Index might turn bearish for the medium term. However, while above 93.43, it could again rise to test levels near 95. On the 3 day line chart, 96 is seen as a possible resistance level, which might be the maximum upside the Dollar Index sees in the medium term.
Euro (1.1658), after having seen a low near 1.151 on Tuesday, strengthened to a high near 1.1676 yesterday. The 13 day and 21 day moving averages near 1.1718 and 1.1796 are important resistance levels for the Euro in the near term. A rise past 1.182 could make Euro bullish for the medium term. While below 1.179-1.182, Euro could again dip to test levels near 1.15. On the 3 day line chart, 1.135-1.140 is seen as possible support, which could be the maximum medium term downside that the Euro could see. A break of 1.135-1.140 (less preferred currently) would open up possibility of 1.12.
Dollar Yen (108.69) continues to stay above the 21 weeks MA near 108.14. The 13 months MA near 107.8 could also lend some support. While above 107.8-108.0, Dollar Yen could attempt another upmove towards resistance on weekly candles near 110.5-111.0. However, as we have been mentioning, a break of 107.8 could result in a quick downmove to 106-105 (seen as crucial support on weekly candles).
Euro Yen (126.72): Euro Yen has bounced from support on weekly candles near 125. It could respect the support trendline in the downward channel on weekly candles for sometime. In the near term, if Dollar Yen rises to 109 while Euro attempts 1.171, we get a target of 127.6 on Euro Yen. A further rise towards 109.5 and 1.18 would translate into a test of resistance (earlier support) on weekly candles near 129.
Pound (1.33): Pound is trading near resistance in the downward channel on daily candles. It could now dip from here back towards 1.32. We have been expecting it to gradually move lower over the next 1-2 weeks with the next downside target being near 1.30 (support on weekly candles). A break of 1.30 could imply continued bearishness in the medium term.
Dollar Rupee (67.4325) : Dollar-Rupee may bounce from anywhere between 67.30-10, as the market will have become Oversold by that time.
INTEREST RATES
After political instability in Italy led to a dramatic fall in bond yields on Tuesday, there seems to be some respite in bond markets. German yields have risen slightly while the fall in US yields also seems to have paused. Our earlier projection of 3.2%-3.3% for the US 10 Year yield in the medium term (ie next 2-3 months) might now be a target for the long term (ie by 2018 end).
US 10 Yr Yield (2.84%), 30 Yr (3.01%), 5 Yr (2.67%), 2 Yr (2.41%):
As mentioned yesterday, the US 10 year yield might have some horizontal support near 2.75% which is holding for the time being. However, given the earlier break of crucial support trendline near 2.85%, we could see a gradual downmove towards medium term support near 2.55%. Another dip in Brent towards 73-71 might be the trigger for this fall to 2.55%. If that doesn’t happen, the break of 2.85% would have been a false break.
The German 10 Year yield (0.37%) has risen again and is now trading near support on short term chart.
The German – US 10 Year spread (-2.48%) has seen a strong rise from -2.59% and has again entered the downward channel on medium term chart. However, looking at long term chart, the spread still looks bearish towards long term support near -2.7% in the weeks ahead
