STOCKS
Dow got a breather yesterday but has to surpass a key resistance to turn the outlook positive and avoid further fall. The US non-farm payroll numbers today will be important to watch which can set the trend for the Dow going forward. Nikkei also has a key resistance ahead which has to be breached to turn the outlook positive. Sensex and Nifty remains vulnerable for a fall first before moving higher again. DAX and Shanghai were closed yesterday.
The Dow (26201.04, +122.42, +0.47%) has bounced sharply from the low of 25743.46. However, it has to rise past 26500 decisively in order to negate the danger of seeing 25500 on the downside indicated yesterday. We will have to wait and watch.
Similarly, Nikkei (21321.18, -20.56, -0.10%) has to rise past 21500 to ease the downside pressure and avoid a fall to 21000.
Sensex (38106.87, -198.54, -0.52%) is getting support near 37930 and the Nifty (11314, -45.90, -0.40%) is getting support at 11250. However, both are not showing strength to bounce strongly. Both Sensex and Nifty remain vulnerable to test 37750 and 11100 before we see a fresh rally.
DAX and Shanghai were closed yesterday. Shanghai will remain closed today and Monday as well.
COMMODITIES
Dollar weakness continues to persist and could aid commodities to trade higher or at least keep them stable. Copper fell after US announced tariffs on some European goods yesterday indicating a possible decrease in demand for the metal. While Gold and Silver could come off in the near term, Copper looks bearish. Crude prices could bounce from support levels.
Gold (1514.60) has is trading well above 1500 but could face some rejection near 1520 just now. A break above 1520 could turn medium term bullish for Gold taking it higher towards 1545 again. Preference would be to see a short fall from 1520 just now.
Silver (17.69) could test 18.0-18.2 before coming off from there. A fall in prices could be seen in the early sessions of next week.
Copper (2.5455) fell sharply after US announced to impose tariffs on about $7.5 bln of European exports annually with effect from October 18th. Copper could test 2.50-2.48 in the near term before bouncing from there.
Brent (57.93) has bounced from 56.15 and while the support near 56 holds, Brent could see a short term rise towards 60 before attempting a fall. Very near term is bullish towards 60 while above 56.
WTI (52.68) could get some support from 50.50 which if holds, can potentially aid WTI to rise towards 54 or higher in the medium term. Preference is to see a bounce from 50.50 in the near term.
FOREX
Weak economic data releases from the US this week has been weighing on the Dollar. The non-farm payroll data release today will be watched closely to see if it can provide some support to the dollar index and move it higher. Euro looks positive in the near-term and can inch higher. Dollar-Yen has declined below a key support and can dip further. Pound and Aussie are on a corrective rally. Chinese Yuan has strengthened in the off-shore market and has room to move further higher. Dollar-Rupee has declined sharply and can move further lower. The outcome of the Reserve Bank of India’s monetary policy meeting today will be a key driver.
Dollar Index (98.85) remains subdued and can test 98.60-98.50 again. If it manages to bounce from the 98.60-98.50 support zone, a rise to 99.25-99.40 is possible again. But a break below 98.50 can drag the index lower to 98.30-98.25.
Euro (1.0981) sustains higher as the support in the 1.0955-1.0945 region mentioned yesterday is holding well as expected. Support is now at 1.0960 and while above it the Euro can break 1.10 and rise to 1.1020-1.1030 today. A strong rise past 1.1030 is needed to turn the outlook bullish.
Dollar-Yen (106.81) fell breaking below 106.95 and tested 106.50. The pair is likely to remain lower and revisit 106.50. The possibility of the downmove extending even to 106.20 cannot be ruled out. Resistance is in the 107.10-107.15 reigon which needs to be breached to turn the outlook bullish again.
The support in the 117.10-117 region is holding well on the EUR-JPY (117.30). The near-term outlook is mixed and the cross can remain stuck in a narrow range between 117 and 117.70 for some time.
As expected the corrective rally in the Aussie (0.6759) is happening. The pair has risen much beyond the level of 0.6740 mentioned yesterday. While above 0.6740, the corrective rally can extend upto 0.6775 and 0.6800 in the coming sessions.
Pound (1.2353) has also risen back as expected but is facing resistance at 1.24 in line with our expectation. Strong resistance is in the 1.2400-1.2430 region which we expect to hold and drag the pair lower to 1.22 levels again.
The Chinese Yuan on the off-shore market is gaining strength. The USDCNY (7.1190) has declined sharply below 7.14 and can now test 7.10 on the downside. The preferred rise to 7.16-7.17 seems to have been negated.
As expected, the upside in the Dollar-Rupee (70.8850) was capped and the pair has declined sharply below 70.95. While below 71.05, a further fall to 70.62 and even lower levels is possible in the near term.
INTEREST RATES
The US Treasury yields have declined sharply across tenor as concerns of a slow-down and a recession are continuing to weigh on the bond market. The US yields remain bearish and can fall further. The German yields are bearish at the near-end while those at the far-end are mixed and can consolidate before seeing a fresh fall. On the domestic front, the Reserve Bank of India’s (RBI’s) monetary. policy decision is due today. Market expects a 25 bps rate cut from the RBI. The 10Yr GoI can test 6.53%-6.50% on the downside on a break below 6.60%.
The US 2Yr (1.39%), 5Yr (1.35%), 10Yr (1.54%) and 30Yr (2.04%) have declined across tenors. The bearish outlook is intact. As mentioned yesterday, the 10Yr can fall to 1.45% and the 30Yr can break 2% and test 1.97%-1.95% on the downside.
The German 2Yr (-0.79%), 5Yr (-080%), 10Yr (-0.59%) and 30Yr (-0.09%) remains subdued. The broader picture remains weak. The 10Yr can fall to -0.68% and even -0.73% on a break below -0.60% while the 30Yr can consolidate in the near-term before seeing a fresh fall.
As expected, the 10Yr GoI (6.6129%) fell to test 6.60%. The yield can consolidate between 6.60% and 6.65% for some time. But the broader view remains bearish for it to break 6.60% and fall to 6.53%-6.50% in the short term.
