Although the stock indices have risen sharply in the last few sessions, there are important resistances that need to be breached to establish a firm ground for further rally. We would be cautious at current levels, in spite of the stocks looking bullish in the longer run.
Dow (26656.98, +0.95%) has moved up sharply, breaking above 26500. It is likely that the index could continue its upward rally towards 27000. Also note interim resistance just above current levels on the daily chart.
Dax (12326.48, +0.88%) also moved up sharply and is just below the daily candle resistance near 12400. If the resistance holds, we could see a short dip back towards 12000. But while the other major equity indices look bullish, Dax could also possibly move up in the near term breaking above 12400. Weekly candle chart indicates bullishness towards 12500-12700 in the longer run.
Nikkei (23821.62, +0.62%) is likely to test previous high of 12130 and could see a short dip before resuming its uptrend towards 12130+ levels in the longer run. Near term could see some rejection at current levels.
Shanghai (2726.77, -0.091%) is stable just below 2750 and a failure to sustain a rise would make it vulnerable to a re-test of 2700 or lower in the medium term. Else a rise towards 2800-2850 is on the cards.
Nifty (11234.35, -0.39%) has decent supports at 11200 and 11100 respectively which could hold over today and early next week. A bounce in the coming week is preferred with a rise back towards 11400 and higher.
News states Trump to have called on OPEC to keep oil prices low. OPEC’s meeting in Algiers is due over the weekend to discuss future production policy which could keep crude prices stable today.
Brent (78.71) is trading a bit lower today. Trade in the 78-80 region is possible just now before a sharp move next week. It is important to see if Brent comes off from crucial resistance at 80 or manages to break above it. This would be a trigger for the medium term movement in the Brent prices.
WTI (70.21) would have to break above 72, to ensure a medium term upmove. Else a fall from 72 could take it down towards 68-67 levels again. While there is scope for rise in the crude prices in the longer run, there is a possibility of near term dips while resistances near 80 and 72 holds on Brent and WTI respectively.
Gold (1212.70) has immediate resistance on the upside near 1220. While this holds, we cannot be bullish on Gold just now. A sustained break above 1220 is required to take it higher towards 1240/50 levels in the near term. This could possibly take some time. While below 1220, the ongoing sideways consolidation is likely to continue in the 1220-1190 region.
Copper (2.7605) has moved up slightly. While above support at 2.70, Copper looks bullish for the near to medium term targeting 2.85. However, in the longer term, the price will have to break above 2.85 to ensure further rise.
Dollar looks bearish against the Euro, Pound and Aussie in the near term. Rupee might also derive strength from the global Dollar weakness – if that happens, 72.81 and 72.98 might have been a double top.
Dollar Index (93.905): The break of the 21 weeks MA near 94.48 on weekly line chart makes the Dollar Index look bearish in the weeks ahead. There could be some support near 93.20 in the next week. However, a break below 93.2 could make it bearish towards support near 92.0-91.5 on 3 day line chart. Watch out for the FOMC on 26th Sep – a hawkish view could put a pause to Dollar weakness.
Euro (1.1778): Exactly as expected in our Morning Briefing on 19th Sep, Euro broke above crucial resistance near 1.17 yesterday and could now face some interim resistance between 1.180-1.185. In the next 3-4 weeks, Euro looks bullish towards trendline resistance near 1.200-1.205 on weekly candles.
Dollar Yen (112.64) is breaking resistance on weekly candles near 112.5. It could rise further towards its July ’18 high of 113.18 in the coming week – there could be some resistance in the 113.18-113.75 zone after that. Check out our Sep '18 monthly forecast report on Japanese Yen which discusses the next long term move in the narrowing contraction since 2016 : https://kshitij.com/usdjpy-forecast-payment-details-sep18
Euro Yen (132.67): On Wednesday we had said that Euro Yen could rise to 132 in the near term and a break above 132 would be very bullish. The break of 132 has indeed happened and the next target on the upside for Euro Yen now seems to be 135 (as seen on weekly line chart). A rise to 1.19 on the Euro and towards 113.2 on Dollar Yen could well take Euro Yen towards 1.15.
Pound (1.3265) has breached the 21 weeks MA near 1.3164 and now looks bullish towards 1.34 in the next 1-2 weeks.
Aussie (0.7288) is at resistance near 0.73 on daily and 3 day candles. A break above 0.73 will open up higher resistance near 0.7375-0.7400 (resistance trendline on daily line chart and the 21 weeks MA near 0.7398). It is likely to stay below 0.74 in the next 1-2 weeks.
Dollar Rupee (Closing Spot on 19th Sep: 72.375; Current Offshore NDF: 72.01)
Global Dollar weakness seems to have strengthened the Rupee in the offshore NDF markets. Crucial to see if it opens gap down below support at 72.20 today. The 2 tests of 72.81 and 72.98 point to the possibility that USDINR might have made a double top.
US 10 Year yield (3.07%) almost tested 3.10% yesterday and came off from there. Important upside levels to watch out for are: 3.10%, 3.125% and 3.16%. Our preference is for the yield to not breach 3.16% (800 weeks MA). However, if it does so, then it could be very bullish for yields.
The 10 Year German-US spread (-2.59%) is close to support near -2.6%. Either it could bounce from here or else, if the support breaks, then it could target lower support on long term chart near -2.70% to -2.80%.
Meanwhile, the German 10 year yield (0.47%) looks like it could rise towards 0.6% if it crosses above 0.5%. On the long term chart, there is room for a rise till 0.75% for the German 10 year yield.
Combining the views from the long term chart of the German-US 10 year spread and the German 10 year yield, a rise to -2.75% and to 0.75% on them respectively is possible – which thereby suggests that we should not rule out a possibility of a rise in the US 10 year yield towards 3.50% in the next 2-3 months.
However, as mentioned above, the current preference in for 3.16% to hold.
Meanwhile, keep a watch on the FOMC on 26th Sep – a rate hike is almost certain.
23:30 5:00 JP CPI
...Kshitij Expn 0.94 % ...Expected 0.90 % ...Previous 0.90 % ...Actual 0.90 %
12:30 18:00 CA Inflation Y/Y
...Kshitij Expn 3.1 % ...Expected 2.9 % ...Previous 3.0 %
...Expected -0.75 % ...Previous -0.75 % ...Actual -0.75 %
US Philifed Index
...Kshitij Expn 10.85 ...Expected 16.3 ...Previous 11.90 ...Actual 22.90
US Existing Home Sales
...Kshitij Expn 5360 K ...Expected 5390 K ...Previous 5340 K ...Actual 5340 K