STOCKS
Equities are struggling to gain strength and continue remain subdued as the US-China trade war and the fear of a recession are continuing to weigh on the sentiment. As mentioned yesterday the equity indices can run into a sideways consolidation for some time. However, the broader bias continues to remain negative.
Dow (25777.90, -120.93, -0.47%) failed sustain Monday’s gains and has come-off yesterday. We expect it to consolidate between 25500 and 26500. Within this range the bias is negative for it to break 25500 and fall to 25000-24900. As mentioned yesterday, only a strong break above 26500 will turn the sentiment positive.
DAX (11730.02, +71.98, +0.62%) has moved higher and is heading towards 11800-11850. As mentioned yesterday this move will need a close watch as it is indicating an inverted head and shoulder pattern on the charts. A strong rise past 11850 will then confirm the same and will pave way for a fresh rise to 12000 and even higher levels. DAX has to break below 11550 to turn the view negative and negate the above mentioned rally.
Shanghai (2890.09, -12.1, -0.42%) seems to be struggling to breach 2900 decisively. A strong close above 2900 is needed to turn the sentiment positive and take it further higher towards 2950. We will have to wait and watch.
Nifty (11105.35, +47.50, +0.43%) is facing resistance at 11145. It will have to be seen if it can breach this hurdle and rise to 11200. Key support is at 11000 a break below which will see the Nifty revisiting 10900 and 10800 levels.
Similarly, Sensex (37641.27, +147.15, +0.39%) has to breach 37750 to move further higher to 38000 and 38500 levels. While below 37750, it can break 37500 and fall to 37400 and even 37200.
COMMODITIES
High risk aversion in the market has triggered a sharp rally in gold and silver. Both gold and silver look bullish for further rise. Copper is holding above its support and can move further higher in the near term. Oil has bounced and has room to rise further. The US inventory data will be key in setting the trend for oil going forward.
The support at 1525 on Gold (1543) has held very well. The bullish view remains intact to test 1580-1590. A strong break above 1550 will accelerate the rally.
Silver (18.27) has surged much beyond our expected level of 18.10 and is looking strong. A further rise to 18.70 and even 19 can be seen while it sustains above 18.
Copper (2.55) managed to sustain above 2.52 and tested 2.57 as expected. While above 2.52, a further rise to 2.59 is possible in the near term.
Contrary to our expectation for a fall Brent (59.95) has bounced towards 60 again. It has support now in the 59.6-59.40 region while above which a rise to 61 and 61.50 is possible. A range bound move between 58 and 61.5 looks likely in the near term.
Similarly, WTI (55.45) has supports at 55.20 and 54.90. While above these supports a test of 56 and 56.50 is possible. Only a strong break below 54.90 will bring back the chances of the fall to 53-52 that we were expecting yesterday.
FOREX
Currencies remain stable. Euro has to rise past a key resistance to avoid a fresh fall. Aussie and Pound may consolidate in the near term. Dollar-Yen seems to lose momentum and looks mixed. The Euro-Yen cross is weak and may see a fall in the coming days. USDCNY is nearing a crucial resistance which can hold and trigger a corrective fall. USDINR has declined sharply and has room to fall further in the coming days.
Dollar Index (98.05) remains stable above 98. As mentioned yesterday, it has to breach 98.15 to rise towards 98.5. Else it will be vulnerable to test 97.7 and 97.5 on the downside.
Euro (1.1089) remains below 1.11 and can dip to 1.1060 on a break below 1.1080. A strong break above 1.1115 is needed to negate the fall and bring back the chances of revisiting 1.1140-1.1160 on the upside.
The strong bounce in the Dollar-Yen (105.80) seen on Monday seems to be losing steam. A dip below 105.50 will see the pair testing 105-104.5 on the downside again. We will have to wait and see if the Dollar-Yen manages to gain strength and rise past 106 decisively.
EUR-JPY (117.35) can oscillate between 117 and 118 for some time. Within this range, the bias is negative for it to break 117 and fall to 116. The cross has to breach 118.30 to turn the bias positive.
Aussie (0.6755) is managing to sustain above 0.6750 and has support at 0.6735. While above this support a range bound move between 0.6735 and 0.6800 can be seen in the near term. A break below 0.6735 will only bring back the chances of seeing 0.6700 and lower levels.
Pound (1.2268) is continuing to remain choppy between 1.22 and 1.23 and keeps the near-term outlook mixed. A strong break above 1.23 is needed to resume the upmove towards 1.24. A break below 1.22 on the other hand can take it down to 1.2160.
USDCNY (7.1627) has moved closer to the key resistance level of 7.17 which is strong. We expect this resistance to hold and the pair can see a corrective fall to 7.14 and 7.12 in the coming days.
USDINR (71.4850) has the potential to test 71 on the downside on a strong break below 71.40. However, an intermediate bounce to 71.60 or 71.75-78 cannot be ruled out before we see the fall to 71.
INTEREST RATES
The fear of recession is mounting as the 10Yr US Treasury yield inverted below the 2Yr. The German yields also continue to dip. The broader bearish view on both the US and German yields remain intact and they can extend the fall in the coming days. The 10Yr GoI has a key resistance near current levels and can dip again while it holds below it.
The US Treasury yields at the near end remain relatively stable while those at the far-end have declined sharply. The 2Yr (1.51%), 5Yr (1.39%) were down 1 bps each while the 10Yr (1.48%) and 30Yr (1.94%) were down 3 bps and 5 bps respectively. The 30Yr has declined sharply below 2% and is keeping the bearish view intact to test 1.8% on the downside. Similarly, the 5Yr is moving down in line with our expectation towards 1.3%.
The German yields were down across tenors. The 2Yr (-0.90%) and the 30Yr (-0.19%) were down 2 bps points each. The 5Yr (-0.89%) was down 1 bps and the 10Yr (-0.70%) dipped 3 bps. The broader bearish view is intact. The 10Yr can test -0.80% and even -0.90% on the downside while the 5Yr can fall to -1% on the downside.
The 10Yr GoI (6.5285%) has risen sharply yesterday after testing 6.35% on the downside. A rise past 6.53% can take the yield further higher to 6.55%. But while below 6.53% a test of the crucial support level of 6.45% is possible again.
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