STOCKS
Equities continue to remain bearish. All the major indices like the Dow, DAX and Nikkei have room to fall further in the near term. Shanghai looks mixed in the near term. Sensex and Nifty, with lack of upside momentum, can resume their downtrend.
Dow (25579.39, +99.97, +0.39%) has declined sharply below 26000 to test 25500 as expected. We continue to remain bearish and expect the Dow to extend the fall towards 25000-24900 in the coming days while it remains below 26000.
DAX (11412.67, -79.99, -0.70%) tested its intermediate support at 10270 and has bounced from there. However, the broader picture is bearish and the DAX can break 10270 and fall to 11000-10820 eventually in the coming weeks. Resistances are at 11580 and 11620.
Nikkei (20402.86, -2.79, -0.01%) looks mixed and range bound between 20100 and 20800. However, within this range the bias is negative for it to break 20100 and test 20000-19900 on the downside in the near term.
Shanghai (2822.88, +7.08, +0.25%) is struggling to gain momentum and sustain above 2800. However, the bias is positive for it to test 2860 on the upside while it remains above the near-term support level of 2770.
Sensex (37311.53, +353.37, +0.96%) has to surpass 37750 decisively to reduce the chances of a further fall to 36500 and 36000. On the charts the bias is still negative and the chances are high for the Sensex to test 36500 and 36000 on the downside in the coming days.
Similarly, Nifty (11029.40, +103.55, +0.95%) is likely to revisit 10800 and 10700 levels on the downside while it remain below the 11100-11200 resistance zone.
COMMODITIES
Brent (58.61) and Nymex WTI (54.92) both fell sharply from respective levels as mentioned. Brent has held well below 62 and could possibly trade within 62-58 region for a few sessions. WTI on the other hand has also held well below 58 and has scope of testing 52 on the downside. Near term could witness trade slightly tilted to the downside. A break above 62 and 58 respectively is needed to turn bullish for Crude prices in the medium term.
Gold (1532.20) has moved up again and 1520 is an important interim support just now that is likely to hold and keep prices above 1520 for now. While above 1520, gold could rise towards 1550 again. We may loo for a test of 1586 on the upside within the current move before Gold attempts to fall in the medium term.
Silver (17.22) has risen and could test resistance at 17.60 before facing a short rejection from there. Note that 17.60-17.75 is a crucial resistance zone and could hold in the near term pushing back prices below 17.
Copper (2.5955) has held below 2.65 as expected and could test 2.55 on the downside before bouncing back fro there.
FOREX
Dollar Index (98.22) rose after an ECB member said that the ECB stimulus package in September might beat expectations. The current rise if manages to break above 98.37, could take prices towards 99 which is an important resistance. 99-100 is a crucial resistance zone that is likely to hold in the medium term.
Euro (1.1099) may test 1.10 before bouncing back from there. Near term looks bearish.
Dollar-Yen (106.17) is trading within 105-107 region and is unable to decide which direction to take. Sideways trade within the mentioned range may hold just now. We prefer an eventual rise past 107 to test 108.50-109 in the medium term.
EUR-JPY (117.84) could test support near 117-116 in the coming week if it remains below 118 fro where a bounce back towards 120 looks possible. Only on a break below 116, we would look for further bearishness on the EURO-YEN.
Aussie (0.6794) is almost stable. The sideways consolidation between 0.6850 and 0.6700 may continue for some more time but thereafter we would prefer an upmove towards 0.69/70 in the longer run.
Pound (1.2086) is also holding above support at 1.20 and while that holds, the currency has soe scope of rising towards 1.22-1.23 in the near term. Above 1.20, Pound looks bullish.
USDCNY (7.0382) has risen slightly and could re-test 7.05/06 levels in the near term.
USDINR (71.28) has resistance near 71.38-71.54 and while that holds, upside could be capped for the day. But the sharp rise in Dollar Index and fall in Euro could trigger an upmove in Dollar Rupee today taking it higher from current levels. We would be cautious of a rise past 71.54 in the near term.
INTEREST RATES
Yields continue to fall as mounting fear of recession is weighing on the bond market. The US Treasury yields are on a strong downtrend and have room to fall further. The German yields also retain their downtrend and continue to remain bearish. The 10Yr GoI has risen breaking above a key resistance and can move higher to test the next 6.68%-6.70% resistance zone from a where a pull-back is possible.
The US 2Yr (1.50%) and 5Yr (1.42%) were down 5 bps each while the 10Yr (1.53%) and 30Yr (1.98%) were down 2 bps and 1 bps respectively. The 30Yr Treasury yield falling below 2% and the 10Yr declining below the 2Yr yield (intraday) are continuing to retain the downside pressure. The 30Yr has an immediate support at 1.92%. A strong break below it will see the 30Yr yield tumbling towards 1.73% in the coming weeks. The 5Yr and the 10Yr yields have crucial supports near 1.30% which we expect to hold and produce a bounce going forward.
The German yields have declined sharply across tenors. The 2Yr (-0.93%) was down 6 bps, 5Yr (-0.91%) was down 5bps, 20Yr (-0.72%) was down 7bps and the 30Yr (-0.28%) yield was down 9 bps. The downtrend is intact and as we have been mentioning the 10Yr can move down to test the key support level of -0.83% from where a bounce is possible.
The 10Yr GoI (6.6276%) has surged breaking above the key resistance level of 6.56% to test 6.62% as expected. Now, while above 6.56%, a further rise to 6.68%-6.70% is possible in the coming sessions from where a pull-back to 6.56% can be seen again.
