STOCKS
Stock indices are all mixed. While Dow is likely to remain stable, Dax and Shanghai has some more room on the downside. Nifty and Nikkei looks bullish after bouncing from support levels recently.
Dow (25916.54, -0.31%) has been trading in the narrow and sideways range without any major movement for the last 3-4 sessions and could possibly continue this for some more time. Support near 25750 may hold this week, eventually pushing the index to higher levels near 26250.
Dax (11959.63, +0.037%) has scope of testing 11600 on the downside although we could see some interim upward corrections from 11900 or 11800 levels. Near term looks bearish.
Nikkei (22314.48, +0.033%) has tested support at 22200 and while that holds, the index is likely to bounce back towards 22800-23000 in the near term. This 22200-23000 range needs to break in the longer run to indicate further directional movement. A rise in Nikkei could lead to some Yen weakness this week.
Shanghai (2677.03, -0.94%) has also been trading quietly in the narrow 2650-2750 region. Weekly candles indicate bearishness towards 2650-2600 for the near term while the trend resistance holds.
11400 is a decent near term support for Nifty and while that holds, Nifty (11589.10, +0.45%) could continue to move up towards 11700 or higher. Only a fall below 11400, if seen would bring in some weakness in Nifty over the longer run.
COMMODITIES
Brent (77.36) and WTI (68.23) have risen higher contrary to our expectation of a fall. While WTI trades above 67, could possibly head higher towards 72 in the medium term. The support on the WTI 3-day and weekly charts indicate medium term bullishness for WTI Crude. Brent has also risen a bit but resistance near 78 is still a concern of whether the support on the WTI charts will be able to support a rise in Brent as well. While below 78, we may consider another leg of fall in the next couple of sessions. A break above 78, if seen and sustains would confirm medium term bullishness.
Resistance near 1210 looks strong just now on the Gold (1199.80) 3-day candle chart and while that holds, there are some chances of a fall in prices in this week and the next. 1190-1180 can be re-tested with a possible bounce thereafter. Only a sustained break above 1210 would negate bearishness and bring in some upside hope.
Similar resistance to Shanghai and Gold is seen in Copper (2.6365) 3-day candle chart too and while the trend resistance holds, copper looks bearish for the medium term towards 2.55-2.50. Or it is also likely that copper trades sideways in the 2.55-2.75 region in the near term. But also note crucial long term weekly support could prevent further fall below 2.55/50 and rather keep prices stable before a sharp bounce is seen.
FOREX
With Euro looking like it could break below 1.155 in this week and Dollar Yuan already having breached above 6.85, we could be staring at some Dollar strength in this week.
Euro (1.1548) broke below support near 1.16 on Friday and is currently testing the crucial 21 days MA support near 1.155. A break below 1.155 (currently preferred) could be bearish, leading to a downmove towards support near 1.14 by next week. Look out for the ECB meet this week.
Dollar Index (95.43): Resistance near 95.5 is holding for the Dollar Index currently. A breach above 95.5 could happen in this week, which would then make it bullish towards 96.0-96.5 in the next week.
Dollar Yen (110.97) has been broadly trading in the 110-112 zone for the past 6-7 weeks. It is currently respecting immediate Support near 110.8-110.5 and has resistance near 111.25. Preference is tilted towards the support holding and a rise towards 112.0-112.5 taking place in the next 1-2 weeks.
Euro Yen (128.15) should stay below resistance near 130 – infact it looks bearish in the near term towards 127-126. In this week, with our preference being bearish on Euro-Dollar and slightly bullish on Dollar-Yen, we might see Euro Yen ranged around 129-128.
Pound (1.2917) is trading just below resistance near 1.295 on daily candles and looks like it could stay below this resistance level in this week. It might have some support near 1.28, which would have to break for lower levels to be tested in the coming weeks.
Dollar Yuan (6.859) has broken above 6.85 and now, might just become bullish towards 6.88-89 in the near term.
Dollar Rupee (71.735): With Euro’s weakening towards 1.155 on Friday, Dollar Rupee in the offshore NDF market was trading near 72.10 on Friday night. So, there are chances of a gap up opening near 72 today. Resistance near 72.10 could push it down towards 71.60 (1st support). Below 71.60, there is crucial support in the 71.40-20 zone.
INTEREST RATES
India 10 year bond yield (8.0305%) has come off from important resistance near 8.11% in the last couple of sessions. It could come down further towards 8% in the next couple of sessions.
Following news points are currently important in context of US Yields:
On Friday, US non farm payroll data beat expectations and the average hourly earnings also came out strong. This has led to a rise in US Yields.
Earlier in the week, US manufacturing data had also reflected improvement – another reason for yields to be bullish.
Meanwhile the US-China trade conflict continues to intensify with Trump reportedly saying that tariffs might be imposed on all Chinese imports to USA (ie on $467 bn worth of goods) – if that happens, risk aversion would prevent any significant rise in yields. This is one of the major reason why we believe that the May high of 3.125% for the US 10 year yield might have been the year’s top.
US 10 Year Yield (2.94%) has breached the 2.9% resistance level and could rise some more towards the 3% barrier before coming off from there once again. A break above 3% is not preferred.
German 10 year yield (0.39%) has immediate resistance @ 0.40% . Looking at the German 5 Year yield (-0.17%), which has breached above the resistance near -0.20% and the German 30 Year yield (1.06%) which has enough to room to go up towards 1.10%-1.15%, there is a slight chance that the German 10 Year yield could go above 0.4% in the near term – moreover horizontal support near 0.3% on medium term chart has been holding very well.
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