STOCKS
Asians are trading positive. The way Shanghai Composite index is holding above 2835 is turning the bias positive. Is this an indication to get some positive development on the US-China trade negotiation front? We have to wait and see. Sensex and Nifty remains bullish. The US markets were closed yesterday on account of a public holiday.
DAX (12071.18, +60.14, +0.50%) can consolidate sideways between 12000 and 12200 in the near term. Though there is room on the upside to test even 12400, we prefer DAX to break 12000 eventually and fall to 12800 and 12600.
Nikkei (21272.46, +89.88, +0.42%) has risen further and is heading towards 21450 as expected. We have to wait and see if Nikkei can rise past 21500 or not.
Contrary to our expectation for a fall to 2800, Shanghai (2914.34, +21.96, +0.76%) has bounced again from around 2835 thereby retaining its sideways consolidation. A rise to 2950 – the upper end of the range is possible now. The price action is turning the bias positive for the Shanghai to break the range above 2950 and rise to 3000.
Sensex (39683.29, +248.57, +0.63%) and Nifty (11924.75, +80.65, 0.68%) have risen above their key resistance levels of 39500 and 11900 respectively. The bullish outlook is intact. Sensex can test 40200 and Nifty can move up to 12150
COMMODITIES
Gold, Silver and Copper remain stable and can rise in the near-term before reversing lower. The corrective rally in oil is coming closer to a key resistance which can halt the upmove and trigger a fall again.
Gold (1283.5) can test 1292 while it remains above 1280 and extend its upmove to 1300 on a break above 1292. The 1265-1300 sideways range is likely to remain intact.
Silver (14.55) can test 14.70-14.75 while it remains above 14.5 after. The downtrend can resume thereafter and target 14.25.
The corrective bounce in Copper (2.71) has room to test 2.72 or even 2.75. We expect the downtrend to resume thereafter and target 2.60 in the coming weeks.
Brent (70.14) is heading towards its key resistance at 71 which we expect to hold and keep the downtrend intact. A pull-back from there can take Brent lower to 68-67 initially and then to 66-64 eventally.
Lack of strength in WTI’s (59.21) bounce-back move indicates the inherent weakness in it. The 60-61 resistance region is likely to cap the upside. A pull-back there after will keep the downtrend intact for a test of 56-54.
FOREX
Dollar trades strong just now but in the medium term, we could see the EM currencies strengthen against the US Dollar as the pairs trade near important resistance levels that could possibly hold in the coming sessions. Pound and Aussie is likely to see some range trade in the next 2-3 sessions.
Dollar Index (97.80) has risen well from levels near 97.50 and could attempt a re-test of 98.25/50 on the upside. Near term looks bullish for the Dollar index.
Euro (1.1181) has come down contrary to our expectation of a rise towards 1.1265 mentioned yesterday. Euro came down from 1.1215 itself and while the Dollar Index heads towards 98.25/50, Euro could fall towards 1.11 again.
Euro-Yen (122.42) has dipped slightly and while below 123, the pair could fall towards support near 122.0-121.5.
Dollar Yen (109.48) has support near current levels which could take it higher in the near term back towards 110.50. The rise in Dollar-Yen could get further support from the rise in Nikkei as US-Japan trade relations seem to be getting better. However, there could be some scope of testing 109.0-108.5 on the downside for USDJPY, which if seen would be short lived.
Aussie (0.6922) could see some ranged movement within 0.6850-0.6950 for the very near term.
Pound (1.2674) could spend some time within 1.2750-1.2600 region for the next 2-3 sessions before rising higher above 1.2750.
EM currencies all look for strength against the US Dollar in the medium term as the pairs trade closer to resistance levels. USDZAR(14.4476), USDMYR(4.19), USDBRL(4.0428) , USDRUB(64.429) and USDCNY(6.9046) have resistances near 14.60, 4.20, 4.12, 65.00 and 6.92 respectively which are likely to hold and push the currency pairs to lower levels. Strength in the EM currencies could eventually indicate some strength in Rupee as well going forward.
USDINR (69.5050) rose towards 69.6150 during the session yesterday before coming down to close lower. We could see trade within 69.75-69.25 to continue for a couple of sessions more as mentioned yesterday. A test of 69.70/75 could be likely before a fall back towards 69.50/40 or lower is seen.
INTEREST RATES
The US yields are heading towards near term supports and while that holds we could soon see a corrective bounce in the next 1-2 sessions. The US 30Yr (2.73%) could test 2.72/71%, the 10Yr (2.31%) could test 2.30% and 5Yr (2.12%) could bounce from 2.10% in the near term.
The US-Japan 10YR (2.38%) has dipped by 2bps and could now bounce back towards 2.45/50% in the medium term. View for the spread is bullish.
The Japan yields look bearish in the near term. A fall in the 10YR yield (-0.071%) towards -0.10% looks possible.
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