STOCKS
The US Federal Reserve stating that the a faster pace of rate cuts, as being expected by the market, is not on their radar has triggered a sharp sell-off in equities. The Dow has declined below 27000 and can fall further. DAX can break its key support and decline today. The bounce in the Sensex and Nifty yesterday can halt today and the indices can resume their downtrend taking cues from the global markets.
As expected, Dow (26864.27, -333.75, -1.23%) has broken the range below 27000 and has turned bearish to test 26600 on the downside. This downmove which has begun now has the potential to drag the Dow to 26000 on the downside in the coming weeks.
As expected, the DAX (12189.04, +41.80, +0.34%) has bounced yesterday but has to be seen if it can sustain above 12100 today following the outcome of the Fed meeting over night. A break beow 12100 can drag it to 12000 and even 11800 in the coming days.
Nikkei (21547.46, +25.93, +0.12%) has bounced above 21500 again. It can test the key resistance level of 21750 again while it remains above 21500. As mentioned earlier, a strong break above 21750 is needed to boost the bullish momentum which can then take the index higher to 22000 and 22250.
Shanghai (2923.19, -9.32, -0.32%) has dipped to test its support at 2920. A break below it can drag the index lower to 2900 and 2880. But a bounce from current levels can see a revisit of 2950 and will keep the bias positive to breach 2950 eventually.
Nifty (11118, +32.60, +0.29%) and Sensex (37481.12, +83.88, +0.22%)have bounced yesterday but might fall-back today following the sell-off in the global equities. Nifty can test 10900 on a break below 11000 and can bounce there after. Sensex can test 37000 on the downside. A break below 37000, if seen, can see the fall extending to 36500.
COMMODITIES
A sharp rise in the US dollar has dragged the commodity prices lower. We will have to wait and watch for a few sessions to see how the commodity prices settle down to get a cue for the move going forward. Gold has to sustain above 1400 to avoid further fall. Silver looks weak and can dip further. Copper can dip to test its key support. Oil prices also looks vulnerable to dip in the near term.
Gold (1409) has fallen sharply reducing the chances of a rise to 1460 mentioned yesterday and is oscillating near 1400. It will have to be seen if it can sustain above 1400 in the coming sessions. A break below 1400 can drag it to 1390 and 1380. Near-term resistance is at 1420.
Contrary to our expectation for a rise to 16.60, Silver (16.16) has declined sharply. Resistance is in the 16.35-16.40 region. While below this resistance, silver looks weak to test 16 and even 15.75 on the downside.
Copper (2.66) has dipped to test 2.66 as expected. The near-term view is negative and the fall can extend to 2.64 – a key long-term support which will need a close watch. A bounce from 2.64 to 2.68 cannot be ruled out..
Brent (64.22) has tumbled and has resistance at 64.75 now. While below this resistance it looks vulnerable to break the support at 63.5 and fall to 62.7 and 62.5 in the near term.
Nymex WTI (57.85) on the other hand can fall to 57 and 56.80 in the near term while it trades below 58.
FOREX
The outcome of the US Federal Reserve meeting yesterday has boosted the US dollar. The dollar index has surged but is coming closer to a key resistance which will need a close watch. The Euro has tumbled below 1.11 and can test 1.10. The Dollar-Yen has risen above 109 and looks bullish in the near term. The Euro-Yen cross has a key support which can limit the downside. Aussie has room to dip in the near-term before seeing a bounce. Pound has to sustain above 1.21 to avoid further fall. Dollar-Rupee can test 69.10 and even 69.25 on the upside on the back of the broader strength in the dollar.
Dollar Index (98.80) is coming closer to the key resistance level of 99. A pull-back from 99 can drag the index lower to 98 in the coming days.
Euro (1.1046) has tumbled below 1.11 and can now test 1.10-1.0980 from where a bounce is possible. Resistance is now in the 1.1060-1.1080 region and then at 1.11.
Dollar-Yen (109.15) has risen past the key resistance level of 109 and can now test 109.65 – the next important resistance. While above 109, the view is positive and a rise to 110 or even 111 looks possible in the coming weeks. We will have to see if the pair manages to sustain above 109 or not.
Euro-Yen (120.60) has declined below 121 and can test 120 in the near-term. The level of 120 is a strong support which can limit the downside. A bounce to 121 and 121.5 can be seen after testing 120.
Aussie (0.6854) has dipped further and keeps the bearish view intact for a test of 0.68. As mentioned yesterday, 0.68 is a good support from where a bounce to 0.6880-0.6900 is possible.
Pound (1.2129) dipped to test 1.21 and has bounced slightly. The support at 1.21 is holding well as expected for now. While above 1.21, a bounce to 1.23 is possible. But a break below 1.21 will see the current fall extending to 1.20.
USDCNY (6.8994) is trading near a key resistance level of 6.90. A break above it can see a rise to 6.92-6.93. But a pull back from 6.90 can take it lower again to 6.88 in the near term.
USDINR (68.87) can rise to test the resistance at 69.10. A break above 69.10 if seen can take it further higher to 69.25.
INTEREST RATES
Market’s expectation for an aggressive rate cuts from the US Federal Reserve was dashed yesterday. The Fed Chairman Jerome Powell saying that he is not seeing the rate cuts going on for a long time and this is just a mid-cycle adjustment had sent a clear message to the market that the central bank is not going to be aggressive, at least for now. The US Treasury Yields surged at the near-end while the far-end has declined after the outcome of the Fed meeting. The German yields have tumbled across tenors and keeps our bearish view intact. The Indian 10Yr GoI may bounce-back taking cues from the global market.
The 2Yr (1.89%) and 5Yr (1.86%) Treasury yields were up 5 bps and 3 bps respectively while the 10Yr (2.04%) and 30Yr (2.54%) were down 1 bps and 4 bps respectively. As expected the 2Yr and 5Yr are heading towards 1.93%-1.95%. The 30Yr can test 2.50% in the near-term while it remains below 2.50%. The 10Yr looks mixed in the near-term and can oscillate between 2% and 2.10% for some time.
The German yields remain under pressure. The 2Yr (-0.79%) and 5Yr (-0.72%) were down 3 bps and 4 bps respectively while the 10Yr (-0.44%) and 30Yr (0.12%) tumbled 5 bps each. As expected the 30Yr is heading towards -0.10%. The 10Yr has declined below -0.40% and can now target -0.50% on the downside.
The 10Yr GoI (6.3698%) fell to test 6.35% on the downside as expected but may see a bounce to 6.45% today taking cues from the global market. It has to break below 6.35% in order to extend the downmove to 6.30% which might be less probable today.
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