STOCKS
Global equities remain mixed. Market seems to be turning cautious ahead of the key central bank meetings. The European Central Bank meeting is due today and the US Federal Reserve meeting is scheduled next week on July 31. The Dow can consolidate in the near term. DAX is heading towards a key resistance. Nikkei has just broken above its key resistance and looks bullish in the near term. Shanghai seems to lack strength and is vulnerable to decline again. Sensex and Nifty have declined below their key supports and are bearish to fall further.
Dow (27269.97, -79.22, -0.29%) can consolidate between 27000 and 27500 for some time. As mentioned yesterday, it has to rise past 27500 to gain bullish momentum. Else, it will continue to remain vulnerable to break below 27000 and fall to 26600.
DAX (12522.89, +32.15, +0.26%) is bullish to test 12600. Inability to breach 12600 can drag it lower to 12400 levels again in the coming weeks.
Nikkei (21770.70, +61.13, +0.28%) has risen above the key resistance level of 21750. If it manages to sustain above 21750 a rise to 22000 and 22200 can be seen in the coming days.
Shanghai (2919.70, -3.58, -0.12%), though is managing to sustain above 2900 seems to lack strength. As mentioned yesterday, it has to surpass 2950 to gain bullish momentum. While below 2950 it is vulnerable to break 2900 again and fall to 2850. We will have to wait and see.
Sensex (37847.65, -135.09, -0.36%) had declined below 37900 and is bearish to test 37500 and even 37000 on the downside in the coming days.
Nifty (11271.30, -59.75, -0.53%) has broken below 11300 and can now test 11100-11000 on the downside in the coming days.
COMMODITIES
The EIA weekly inventory data reported a draw of 10.835 mln barrels for the week ended 19th July. But this has not much affected the Crude prices indicating that the draw of this figure was priced in after the release of a similar figure yesterday by the API.
Brent (63.34) and Nymex WTI (56.09) are slightly lower today but have some scope of testing resistances near 62 and 54 before falling off from there in the medium term.
Gold (1423.70) has been stuck near 1420 for the last 2-3 sessions. On the daily candles there is scope for a fall towards 1400 in the near term and looks more likely. On the contrary a short bounce from here if seen May take it back towards 1440 (looks less likely)
Silver (16.58) has risen to test resistance near 16.60 from where a rejection is possible that could push prices back towards 16.00.
The Gold-Silver ratio (85.87) is trading near trend support and could soon rise in the near term towards 90-95 levels. This could indicate that the recent outperformance of Silver could come to a pause.
Copper (2.7090) has risen slightly contrary to our expectation of a fall. Although in the longer run there is scope of falling towards 2.68/66, on the daily candles we see a short term support near 2.70 which could produce a short bounce towards 2.78 in the near term before resuming the fall later on. A bounce from current levels would negate a test of 2.68 on the downside.
FOREX
Overall currency pairs look mixed. The US Dollar continues to remain strong. Euro could test crucial support near 1.11 from where it can rise back in the near term. Aussie, Yen, Yuan and Pound could strengthen a bit. Rupee is likely to remain stable near 69 level. Markets await the ECB meeting due today which could trigger some movement in the Euro.
Dollar Index (97.72) could head towards 98.0-98.50 from where a rejection is possible that could push the index back towards 97.0-96.5 in the medium term. Immediate view is bullish for Dollar Index with near term resistance coming up near 98.50.
Euro (1.1135) is coming down as suggested and could rise from 1.1125-1.1100 in the near term. Note that 1.11 is an important support.
Dollar-Yen (108.14) is stable and while immediate resistance near 108.50 holds, a short dip is possible towards 107.50 on the daily candles. Near term could see some consolidation within 107.50-108.50 before the currency pair moves up sharply in the longer run.
Euro-Yen (120.43) has crucial supports coming up near 120 and 119 from where a bounce back towards 122-123 looks likely. Only on a sustained break below 118.82, we would consider an indication of medium term bearishness and revisit our current view. Till then, a possible bounce back is possible from anywhere between 118.82-120 region in the near term.
Aussie (0.6980) is stable while Pound (1.2480) has risen slightly. Aussie has support at 0.6950 from where a short term bounce to 0.705-0.710 is possible in the near term before again coming back to current levels. Pound on the other hand could be capped near 1.250 on the upside while there is scope of falling towards 1.2350 in the near term.
USDCNY (6.8747) has been trading in a very narrow range and is unable to move above 6.90 just now. While 6.90 holds, we could see an eventual fall in the currency pair that could take it down towards 6.85-6.80.
USDINR (68.9850) continues to hover around 69 yesterday. Unless a fall below 68.90 is seen and sustains, we keep chances of testing 69.25 intact from where a sharp pull back is possible towards 69.0 and lower in the longer run.
INTEREST RATES
The US Treasury yields have dipped again and can continue to trade subdued ahead of the Federal Reserve meeting next week. The German yields keep our bearish view intact as all eyes are on the European Central Bank (ECB) meeting today. Market will be looking for any kind of stimulus from the ECB today which if it happens can drag the yields further lower. The Indian 10Yr GoI can dip further as the news on the government’s first tranche of Foreign Sovereign Bond sale might continue to weigh on it.
The bounce in the US Treasury yields witnessed on Tuesday was short-lived. The yields have dipped again across tenors yesterday. The 2Yr (1.81%) and 5Yr (1.81%) were down 2 bps each while the 10Yr (2.05%) and 30Yr (2.58%) were down 3 bps each. The 10Yr has to surpass 2.10% to turn the outlook positive. While below 2.10%, a dip to 2% is possible. The 30Yr has failed to sustain above 2.60% and can test 2.53% on the downside.
The German yields dipped across tenors. The 2Yr (-0.80%), 5Yr (-0.70%) and the 10Yr (-0.38%) were down 2 bps each while the 30Yr (0.20%) dipped little sharply by 4 bps. Our bearish view is intact. The 2Yr can test -0.85% and the 10Yr can dip to -0.40% in the near term.
The 10Yr GoI (6.4373%) can remain subdued and test 6.40% and 6.35% on the downside. The region between 6.50% and 6.55% can restrict the upside at the moment.
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