STOCKS
Dow has failed to sustain the early gains yesterday. But still, we would want to closely watch it to see if it sustains the fall below 27000 which is needed to negate our view of seeing a strong bounce. DAX has recovered sharply from the day’s low yesterday and need to be seen if it can sustain higher and breach the upcoming resistance to give a confirmation of a reversal. Nikkei has room to fall further and might see a strong bounce may be next week. Shanghai can consolidate sideways before resuming its upmove. Sensex and Nifty have declined below their crucial supports and are vulnerable to fall further in the near-term before we see a reversal.
Dow (26957.59, −123.77, -0.46%) failed to sustain the bounce on early trades yesterday. Though it has closed just below the crucial level of 27000 we would want to wait and see if this break sustains and negate our view of seeing a bounce-back move to 27700-28000 that we had mentioned yesterday. The danger of seeing 26000 and lower levels will come into picture if the Dow falls further from current levels (less preferred). But for now we prefer to see a bounce-back move above 27000 again.
DAX (12774.88, −15.61, -0.12%) has recovered sharply from the low of 12368 yesterday and need to be seen if it sustains higher today. . We may have to watch the price action over the next few days to confirm if the fall is over or is still due to test 12400 and even 12200 again. A strong rise past 13000 is needed to negate completely the chances of seeing any further fall.
Nikkei (22029.96, −396.23, -1.77%) has declined further and keeps our bearish view intact. As mentioned yesterday, a fall to 21800-21500 and even 21200 can be seen now. However, we expect the Nikkei to reverse higher again anywhere from the 21500-21200 (revised lower from 21800-21500 mentioned yesterday) region.
Shanghai (2996.54, +8.61, +0.29%) is oscillating around 3000 and seems to lack fresh momentum. As mentioned yesterday, a sideways consolidation between 2950 and 3050 can be seen for sometime before we see an eventual break above 3050 and a rise to 3100-3150.
Nifty (11678.50, -119.40, -1.01%) has declined sharply below the crucial level of 11800 yesterday. A test of 11600-11500 is likely now. 11500 is a strong support from where we expect the Nifty to recover. The price action around 11500 will need a close watch to confirm the same.
Sensex (39888.96, -392.24, -0.97%) has broken below 40000 yesterday thereby negating the chances of a bounce-back move to 41000-41400 that we had mentioned yesterday. The index can now test 39500 and even 39000 while it remains below the 40000-40200 support-turned-resistance zone. Thereafter we expect the Sensex to reverse higher again.
COMMODITIES
Crude prices sink as Coronavirus spreads in the oil producing Middle East countries taking the total number of countries affected to about 30 now. While markets expect demand to stabilize eventually, we could see some more dip in the near term. Gold and Silver are stable just now. Copper is likely to test support below current levels but the bounce from there could be short lived within the longer term downtrend.
Brent (52.65) and Nymex WTI (47.99) have fallen contrary to our expectation of a rise from near term support levels as Coronavirus spreads rapidly to Middle East countries. Brent has broken below crucial support in the 54.0-53.50 region and could test 50 in the near term while WTI on the other hand has broken below 50 and could now fall further towards 45-44 levels in the coming sessions. Near term looks bearish for Crude prices.
Gold (1651.10) is trading above immediate support near 1640 but is likely to fall in the near term towards 1620-1600.
Silver (18.04) trades above immediate support near 17.75 and while that holds, we may expect trade within 17.75-18.50 in the near term.
Copper (2.5690) has immediate support near 2.55 but while other commodities dip, it would be important to see if Copper would sustain a rise above 2.55 or continue to dip towards 2.50 or lower in the medium to long term. Watch price action near 2.55.
FOREX
US Dollar Index continues to fall pulling up Euro to 1.09+ levels. USDJPY and EURJPY looks bearish too. Yuan and Pound looks stable while Aussie could fall some more from current levels. Rupee could fall towards support near 71.50.
Important data to watch today: US GDP and Durable Goods
Euro (1.0908) has risen above 1.09 as the Dollar Index (98.96) breaks below 99. If the Index continues to fall towards 98.50, we may see some more rise in Euro in the next few sessions. Failure to fall from current levels could take Euro higher towards 1.10.
Dollar-Yen (110.26) has broken below immediate support at 110.50 contrary to our expectation of a bounce from there. The fall is in line with the weakness in US dollar index. While below 110.50, USDJPY could test 110.0-109.50 in the near term before bouncing from there.
EURJPY (120.27) is trading slightly higher but while below 121.50, view is bearish for a fall towards 119.50-119.00.
Aussie (0.6556) has dipped further and could test 0.65 as mentioned yesterday. Failure to bounce from 0.65 could take it lower towards 0.64 in the next few weeks. Medium to long term view is bearish.
Pound (1.2921) could see some sideways movement in the 1.31-1.28 region before breaking on either side of the range.
USDCNY (7.0171) is stable just now holding within the 6.99-7.04 region mentioned yesterday. Consolidation within the said region may continue for some more sessions.
USDINR (71.6775) fell below 71.75/70 to test 71.5850 yesterday before bouncing to close higher. Today we may expect trade in the 71.50-71.80 region with 71.80 being an immediate resistance now which
INTEREST RATES
The US Treasury yields have declined further sharply at the near-end (2Yr and 5Yr) while the downmove at far-end (10Yr and 30Yr) seem to lose pace. As we have been mentioning over the last few days, the Treasury yields are coming closer to their crucial support that can halt the current fall. We expect the yields to reverse higher from their respective supports. The German yields continue to move lower and keep the bearish view intact. The 10Yr GoI has dipped below a key support and is now bearish to test 6.30%-6.28% on the downside from where a reversal is possible again.
The US 2Yr (1.14%), 5Yr (1.12%) Treasury yields have tumbled further in line with our expectation. The yields at the far-end, the 10Yr (1.32%) and 30Yr (1.81%) have also declined but at a much slower pace that those at the near-end. The 2Yr has room to test 1% from where a bounce is possible. The 10Yr and 30Yr on the other hand as mentioned yesterday can move down to 1.25% and 1.73% respectively. Thereafter the US Treasury yields are likely to reverse higher again.
The German 2Yr (-0.71%), 5Yr (-0.70%), 10Yr (-0.51%) and 30Yr (-0.02%) yields continue o trade lower and keeps our bearish view intact. As mentioned yesterday, while below -0.50%, the 10Yr can fall to -0.60% and even -0.70%. The 30Yr can test -0.10% – an important level to watch on the downside. A break below it will drag the 30Yr further lower to -0.30% over the medium-term.
The 10Yr GoI (6.3462%) fell and has also closed below 6.35% yesterday. The outlook is bearish while below 6.35%. A test of 6.30%-6.28% is likely now from where a bounce-back move to 6.35% and even 6.40% can be seen again.
