STOCKS
Equities ended a little subdued on Friday, in line with expectation, and might even dip some more in the early part of the week. That said, weaker Gold and Crude could be positive for Equities.
Accordingly, the Dow (26820.25, -70.87, -0.26%) may have Support in the 26500-400 region. The Nikkei (21780.20, -98.70, -0.45%) may have Support near 21377.
However, the DAX (12380.94, +92.40, +0.75%) and KOSPI (2056.89, +6.96, +0.34%) have Resistances overhead near 12450 and 2100-2150 respectively. So, these two are not as bullish the Dow or the Nikkei.
The Nifty (11512.40, -58.80, -0.51) and Sensex (38822.57, -167.17, -0.43%) appear ranged between 11400-11700 and 38500-39250 respectively for the initial part of the week at least. Perhaps they may try to break above Resistances at 11700 and 39500 respectively next week.
COMMODITIES
In commodities space, gold, silver and copper looks weak. Gold has a crucial support coming up which needs a close watch in the coming days. Silver looks weaker than gold and has room to dip in the near term. Copper remain bearish. Oil on the other hand looks mixed and could remain in a sideways range for some time.
As expected Gold (1494) declined to test 1485 on Friday and is managing to hold above it. 1480 is a very crucial support and a break below it (most preferred) will see gold tumbling towards 1450-1430 going forward. But while 1480 holds, a bounce to 1525 can be seen in the coming days.
A fall in Silver (17.40) to 17.40 has happened in line with our expectation. The outlook is bearish and a further fall to17.10-17 is possible in the near term.
Copper (2.60) is getting intermediate support at 2.57 and has bounced. But the broader picture remains bearish to test 2.53 on the downside. The resistance in the 2.62-2.63 region can cap the upside in the near term.
Brent (61.88) continues to remain mixed. As we has mentioned last week a range bound move between 61(revised slightly lower from 61.20 mentioned on Friday) and 63.50 for some time. A breakout on either side of 61 or 63.50 will decide the next move.
WTI (56.01) remains between 55 and 57 in line with our expectation. Within this range the bias is bearish to see a break below 55 and fall to 54 and 52.50 in the coming days.
FOREX
Dollar Index remains higher but needs to breach a key resistance to move up further. The Euro is managing to hold above 1.09 and it has to be seen if it can sustain above it and avoid a fall to 1.08. Dollar-Yen remains bullish. Aussie is consolidating within its downtrend. Pound has declined further in line with our expectation and remains bearish. USDCNY is stuck in a narrow range and a strong rise past 7.14 is needed to take if higher towards 7.15-7.16. Dollar-Rupee tumbled on Friday and remains bearish to test 70.34. We remain cautious on the pair to see a bounce from anywhere in the 70.34-70.24 region in the coming days.
The resistance at 99.30 on the Dollar Index (99.15) mentioned on Friday is holding well. It will have to be seen if the Dollar Index can sustain above 99 and breach 99.30 to test 99.80-100 on the upside. A fall below 99 can drag the index to 99.70 and 99.50.
Euro (1.0934) is holding above 1.09 and witnessed a bounce as expected on Friday. While it sustains above 1.09, a range bound move between 1.09 and 1.0970 is possible for some time A strong break above 1.0970 will ease the pressure and pave way for 1.10 and even 1.1050. As mentioned on Friday, a strong break below 1.09 will be bearish to test 1.08 on the downside.
Dollar-Yen (107.92) remains bullish to test 108.50 and 109 on the upside. 107.80 and 107.50 are the important supports which can limit the downside.
The EUR-JPY (117.58) cross has bounced and the support at 117.30 mentioned on Friday seems to be holding well. A rise to 118.50 and 119 looks possible while above 117.50. A strong rise past 119 is needed to turn the outlook bullish.
Aussie (0.6765) is stuck between 0.6740 and 0.6780 over the last couple of days. The broader view remains bearish to test 0.6720 and even 0.6700 in the short term.
Pound (1.2288) has tumbled further breaking below 1.23 on Friday and keeps our bearish view intact to test 1.2200. The possibility of the pair even revisiting 1.20 on the downside cannot be ruled out while it remains below 1.24 now.
USDCNY (7.1274) has been stuck in between 7.12 and 7.14 over the last few days. We retain our bullish view on the pair to test 7.15-7.16 on the upside.
The fall in the Dollar-Rupee (70.5650) to 70.55-70.50 (our first target) has happened much faster than anticipated. A further fall to 70.34 is on the cards now while it remains below 70.68. However, we will be looking for a reversal in the pair from anywhere in the 70.34-70.24 region in the coming days.
INTEREST RATES
The US Treasury yields have come-off well last week and keeps the bearish view intact. The German yields also remain subdued and bearish. The 10Yr GoI looks mixed and can remain range bound in the near term.
The US 2Yr (1.63%) and 10Yr (1.69%) fell 4 bps each while the 5Yr (1.57%) and 30Yr (2.13%) were down 3 bps each last week. We continue to remain bearish on the yields. We expect the 10Yr to remain below 2% and fall to 1.57%. The 30Yr can test 2% on the downside while it remains below 2.25%.
The German yields 2Yr (-0.78%), 5Yr (-0.78%), 10Yr (-0.58%) and 30Yr (-0.09%) remains subdued and keeps our bearish view intact. As we have been mentioning for some time we expect the 10Yr to test -0.68% and the 30Yr to fall to -0.20% in the short term.
The 10Yr GoI (6.7357%) remained stable on Friday and looks mixed in the near-term. The yield can consolidate between 6.70% and 6.80% for some time. A breakout on either side of 6.70% or 6.80% will then decide whether the 10Yr GoI is going up to 6.85% or fall to 6.64%-6.60%.
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