STOCKS
Equities are under pressure as the sell-off in the US Crude Oil Futures weigh on the market sentiment. The global indices have come closer to their crucial support which will need a close watch. The indices have to hold above their respective supports in order to keep our near-term bullish view alive. In case of a strong break below the immediate supports, the fresh leg of fall (that we had anticipated after a near-term rise) can happen from here itself. Dow has supports at 23000-22500 and DAX has at 10100. For Nikkei the support is at 19000, Sensex at 30000-29500 and Nifty at 8800-8750. Shanghai looks relatively better among the lot and can consolidate sideways in the near-term.
Dow (23018.88, −631.56, -2.67%) declined sharply yesterday and has an immediate support at 23000. As mentioned yesterday, a strong break below 23000 will reduce the chances of seeing a rise to 24500-25000 that we had been mentioning for some time. A subsequent fall below 22500 will confirm the bearishness and open doors for a revisit of 20000-19000 levels.
DAX (10249.85, −426.05, -3.99%) has important supports at 10200-10100 which needs to hold and will need a close watch in the coming days. A strong break below 10100 will negate our bullish view of seeing 11000-11300 on the upside. Such a break will then drag the DAX lower to 9500-9400 going forward.
Nikkei (19050.33, −230.45, -1.20%) has declined further and is hovering above the crucial support level of 19000. A close below 19000 today will be bearish to see a fall to 17800. It will also negate ourbullish view of seeing 20300-20500 on the upside.
Shanghai (2826.36, −0.66, -0.02%) is managing to hold above 2800. As mentioned yesterday, a sideways consolidation between 2800 and 2850 is possible before our preferred rise to 2870-2880 and 2900 happens. In case of a break below 2800, a fall to 2750 can then be seen first which in turn will delay the expected rise.
Nifty (8981.45, -280.40, -3.03%) fell sharply towards 9000 as expected. A test of 8800-8750 support zone is possible now and will have to see if it can manage to bounce-back from there. Inability to bounce from the 8800-8750 support zone can drag the Nifty lower to 8500-8250 again in the coming days. We will be watching closely the price action in the 8800-8750 region.
Sensex (30636.71, -1011.29, -3.20%) on the other hand has important support in the 30000-29500 region which can be tested today. The price action in this support zone will need close watch. A break below 29500 can drag the Sensex lower to 28000-27500 again.
COMMODITIES
Following the sharp historic fall in May’20 futures a day before its expiry, the June futures also face panic sell off seen in the last 2- sessions, dragging down Crude prices to fresh lows below our expected levels. We might now have to account for further lows for the remaining sessions of the week although projecting a floor would be difficult just now. However, while Crude prices look bearish just now, the fall is likely to be short lived with a potential bounce likely within the next couple of weeks.
Gold has risen too but needs to rise above two important levels to move further up from here. Silver and Copper looks bearish.
Brent (18.60, June futures) has broken below our mentioned $20 and could now fall towards $15 or even $10 as long as panic selling continues. It would be difficult to point out a target for the near term but the fall is likely to be short lived with a potential bounce to be seen soon. We would wait and watch for now.
Nymex WTI (12.67, June futures) has also fallen sharply below our expected $17. We would suggest wait and watch for now to see how far the decline persists. The current fall is likely to be short lived.
Gold (1711.00) has risen from 1680 bouncing back to 1700+. In the very near term, a break above 1720 is needed to take the prices higher towards 1740 within the current move from where a rejection could be expected. Note 1720 initially and higher level of 1740 are crucial barriers to restrict any sharp upmove from here. A rejection from here could take prices back to 1680 or lower.
Silver (14.95) fell even before testing 16 on the upside but has fallen as mentioned in yesterday’s edition. A further dip to 14.5-14.0 could be expected in the medium term. View is bearish while below 16.
Copper (2.2285) looks intrinsically weak. Although resistance near 2.35/40 is holding and keeping prices low for now, we may not negate a further fall towards 2.10-2.00 in the near to medium term. Looking at a longer picture we might even see a break below 2. For now watch for a fall towards 2.10-2.00. View is bearish.
FOREX
Currency pairs are mixed. Dollar Index is stable but could be bullish for the near term. Euro needs to fall below 1.0820 to turn bearish. USDJPY needs to rise above 108 to move up further; else could see a sharp fall from here. Rupee and Yuan looks weak along with Aussie and Pound.
Dollar Index (100.23) is stable just now. A rise towards 101 looks possible in the near term before falling off from there back towards 99. Near term looks bullish.
Euro (1.0851) has risen slightly. While below immediate resistance near 1.09, we may expect a gradual fall towards 1.08-1.0750 in the near term.
Dollar-Yen (107.73) is slightly up but needs to rise sharply from here to reduce chances of a further fall towards 107 or lower in the near term. A rise above 108-108.50 is needed to turn bullish for the near term. Else we may expect a fall back towards 107.
EURJPY (116.94) has bounced well from 116 negating a possible fall towards 114. While 116 holds, we may expect a rise to 117-118 in the near to medium term.
Aussie (0.6316) has dipped a bit and could fall towards 0.62 as mentioned yesterday. Near term looks weak.
Pound (1.2291) has fallen in line with our expectation and could continue to head lower towards 1.22-1.20 in the near term. View is bearish.
USDCNY (7.0829) has dipped but while it continues to hold above 7.08, we may not negate a rise to 7.10/12 in the near term. View is bullish while above 7.06/07.
USDINR (76.8450) has higher scope to rise towards 76.90/77.00 rather than to fall towards 76.50 or lower. An immediate fall below 76.50 needs to be seen and sustained to negate a further rise from here and bring back bearish possibilities but that looks less likely just now. We may have to consider a rise towards 77 over the coming sessions this week if USDINR manages to rise above 76.85.
INTEREST RATES
Weakness in equities following the sharp sell-off in the US Crude Oil keeps the US Treasury Yields under pressure. The Treasury yields have come down sharply and keep our bearish view intact of seeing further fall. The German yields also remain lower and continue to remain bearish. The German yields can also fall further in the coming days. The 10Yr GoI will now have resistance at 6.30% and have room to test 6.10% and even 6%-5.95% on the downside.
The US 2Yr (0.20%) Treasury yield remains stable while the 5Yr (0.32%), 10Yr (0.57%) and 30Yr (1.16%) declined further sharply. Our bearish view remains intact. The 10Yr has dipped just below our first preferred target of 0.58%. It can now extend the fall to 0.40% while it sustains below 0.60%. The 30Yr on the other hand has declined below 1.20% and can now head towards 1.1% in line with our expectation.
The German 2Yr (-0.72%), 5Yr (-0.67%), 10Yr (-0.48%) and 30Yr (-0.08%) yields have reversed lower again after seeing a slight uptick on Monday. This keeps our bearish view intact. The 10Yr can fall to -0.55% and -0.60% while it remains below -0.40%. The 30Yr can move down to -0.20% it sustains below 0%.
The 10Yr GoI (6.2116%) hovered around 6.20% yesterday. The view is bearish to see 6.10% and even 6%-5.95% on the downside. 6.30% will act as a good resistance and cap the upside.
