STOCKS
Blood bath across the global equities as the spreading of coronavirus is weighing high on the market sentiment. Shanghai has tumbled over 7% today on reopening after the extended New Year holidays and is bearish to further fall. All other major indices are also looking bearish. Dow and Nikkei have declined below their key supports and are bearish to fall further. DAX is poised at a crucial level which needs to hold to avoid further fall. Sensex and Nifty have been beaten down badly on Saturday as the Union Budget failed to cheer the markets. Both Sensex and Nifty are bearish and have room to fall further.
Dow (28256.03, -603.41, -2.09%) has declined sharply on Friday breaking below the intermediate support level of 28450. The outlook is bearish and a test of 28000-27700 is likely now. The level of 27700 is a crucial support to watch now. A break below it will increase the danger of the fall extending to 27500 and even 27000.
As expected DAX (12981.97, -175.15, -1.33%) has fallen to 12980 – a crucial support level. It will have to be seen if it manages to bounce-back from this support or not. A bounce from here and a subsequent break above 13200 will take the index back to 13500. But a further fall from current levels can drag it to 12700.
Nikkei (22946.34, -258.84, -1.12%) failed to break above 23400 on Friday and has declined below 23000 again today. While below 23400 the index is vulnerable to see a fall to 22000-21500 in the coming weeks.
Shanghai (2753.93, -222.6, -7.48%) is under pressure and can test 2600 on the downside while it remains below 2800 now.
Sensex (39735.53, -987.96, -2.43%) and Nifty (11661.85, -300.25, -2.51%) have plunged on Saturday after the Union Budget and are bearish now. The Sensex can fall to 39000 and even 38000 while it remains below 41000 in the coming months. Nifty on the other hand has room to test 11200-11000 on the downside while it trades below 12000.
COMMODITIES
Crude prices seem highly oversold at current levels and an immediate bounce could soon indicate a reversal of the falling prices seen through Jan’20. Gold and Silver seem to be stuck near the upper levels and does not seem to break on either side of the range just now. We may have to allow for some more of sideways trade before a sharp movement comes in. Copper has fallen through Jan’20 and could see some recovery in the near term.
Although Brent (56.20) has broken below 56, it could get some bounce from horizontal support near 55 which may help Crude prices to recover in the near term. However, a sustained fall below 55 could be sharply bearish for crude prices for Feb’20 making it vulnerable to fall further. While near term supports have broken, we may look for a final bounce or break from 55 before we turn further bearish on crude.
For Nymex WTI (51.38), 50 is crucial level to watch to turn further bearish for the medium term. A bounce from 50 could be expected just now before crude prices fall again in the longer run.
Gold (1587.20) could spend some time in the 1560-1600 region but looks less likely to break above 16500 just now. A fall in the near term below 1560 is preferred.
Silver (17.89) is stuck between the broad 17.40-18.65 region and is likely to trade within this region for some more time. In the longer term, view is bullish while above 16.
Copper (2.5505) is likely to get support from 2.50-2.45 region that could take the price to higher levels of 2.60-2.70 in the medium term. A fall below 2.45 looks less likely in the near term (revised from 2.50 mentioned earlier)
FOREX
Chinese markets open for the first session of the lunar year. While the PBOC set the onshore rate at 6.9249, the Yuan continued to weaken to 7 absorbing in the weakness in the other markets that the currency pair missed during the last week of Jan’20. However, we may expect the Yuan weakness to be limited to a few sessions before fresh recovery comes in. The rise in USDCNY could possibly keep EM currencies weak today. Dollar Index looks weak and could keep Euro higher for the near term. USDJPY and EURJPY has room for further decline. Aussie could soon bounce from crucial support levels. A 1.2 trln yuan reverse repo operation is due today. But note that the net effect is not a 1.2 trln yuan injection due to slightly over 1 trln yuan of funds maturing today. Hence, the net injection is in the order of 150bln yuan.
USDCNY (7.0067) is trading sharply higher but has immediate resistances near 7.02 and higher at 7.04 which could cap the upside for the near term bringing in a recovery fall towards 6.94 or lower in the near to medium term.
USDINR (71.35) closed slightly lower on Friday not sustaining the earlier trade above 71.50. But the sharp rise in the Yuan could possibly push USDINR to open at levels near 71.50. Watch price movement closely today as a trade above 71.50 again today could eventually take it higher towards 71.80 before it slides back towards current levels.
Dollar Index (97.48) has fallen below 98 and while that sustains, a test of 96.50 looks likely for the near term.
Euro (1.1083) rose sharply from levels near 1.10 but may face some rejection at 1.11 from where a dip looks likely. Failure to dip from 1.11 could extend its rise towards 1.12 again in the medium term.
Dollar-Yen (108.49) has moved lower as expected. We may look for a further fall to 108 before bouncing back again from there in the medium term.
EURJPY (120.23) is trading sideways in the 120.50-119.75 region but is likely to fall further down from here targeti119 or lower in the medium term.
Pound (1.3167) has finally moved up towards 1.32. There is scope for a further rise to 1.3284 before a dip is seen.
Aussie (0.6690) has fallen sharply and could test the previous low near 0.6670 seen on 2nd Oct’19 before bouncing back from there soon. Near term looks bearish with a possible reversal to be expected soon.
INTEREST RATES
The US Treasury Yields have tumbled on Friday and keeps our bearish view intact. They have room on the downside to dip further but are coming closer to crucial supports. A close watch is needed this week. The German yields have declined further in line with our expectation and keeps our bearish view intact. The 10Yr GoI has bounced on Friday and need to see if it can sustain the gains today or not.
The US 2Yr (1.34%) and 5Yr (1.34%) Treasury yields have tumbled while the 10Yr (1.53%) and 30Yr (2.02%) have also fallen but not as sharply as the near-end yields. The 10Yr is heading towards 1.50% and the 30% towards 2%-1.9% in line with our expectations. 1.50% on the 10Yr and 1.9% on the 30Yr are crucial support that will need a cloe watch. A strong break below these support will pave way for further fall. We will have to wait and watch.
The German 2Yr (-0.68%), 5Yr (-0.65%), 10Yr (-0.44%) and 30Yr (0.06%) yields have declined further across tenors in line with our expectation. . The bearish outlook is intact. The 30Yr has declined below 0.07% and can now test 0% while it remains below it. The 10Yr is heading towards -0.50% as expected.
The Indian 10Yr GoI (6.6011) has moved up on Friday and it will have to be seen if it can sustain above 6.60% or not. While above 6.60% a further rise to 6.625% is possible. A further rise beyond 6.625% will then pave way for 6.70% on the upside. We will have to wait and watch.
