STOCKS
Dow and DAX have tested their crucial resistances and come-off sharply last week. They will need a close watch to see if they sustain above their near-term supports and see one more leg of upmove before a fresh fall or will resume the downmove from here itself. On domestic front, Nifty has risen past its crucial resistance contrary to our expectation. But the sharp fall in SGX Nifty (9358, +43, +0.46%) on Friday can drag the Nifty and Sensex lower today. Nikkei is closed for three days this week (up to Wednesday) and will resume trading from Thursday (07-May-20). Shanghai is closed today and tomorrow and will resume trading from Wednesday (06-May-20).
Dow (23723.69, −622.03, -2.55%) has come-off sharply after testing 24700 last week. It will have to sustain above 23000 in order to keep the chances alive of seeing one more leg of upmove to test 25000 before we see a fresh fall. But a strong break below 23000 will increase the chances of seeing a fall straight-away from here towards 22000-21500 without a rise to 25000. We will have to wait and watch.
DAX (10861.64, −246.10, -2.22%) has also come-off from 11235 last week. It has an important support at 10700 which has to hold in order to take it higher to the resistance at 11300-11350 and then see a fresh fall. But a strong break below 10700 will increase the chances of seeing a fall to 10250 and even lower from here itself.
Nikkei (19619.35, −574.34, -2.84%) is closed for three days (till Wednesday) this week on account of public holidays. The trading will resume from Thursday.
Shanghai (2860.08, +37.64, +1.33%) is closed today and tomorrow for public holidays. The trading will resume from Wednesday.
Contrary to our expectation to see a fall from 9700, Nifty (9859.90, +306.55, +3.21%) has surged above 9700 last week. But the sharp fall in SGX Nifty (9358, +43, +0.46%) on Friday can drag it lower today to test 9000 levels again.
Sensex (33717.62, +997.46, +3.05%) has risen further and is heading towards 34000-34500 in line with our expectation. 33000 is an important support now, a break below (more likely following the fall in SGX Nifty on Friday) can drag it lower to 32000-31000 again.
COMMODITIES
Commodities trade lower today and look weak for the near term. Crude prices may recover to trade higher soon while Gold and Silver looks stable. Copper may test support below current levels and bounce from there in the next few sessions.
Brent (25.95) and Nymex WTI (18.54) have fallen from 26.33 and 19.53 respectively. While above $20, Brent could soon rise towards $30-32.50 while WTI also looks bullish towards $26 while above $14.
Gold (1708.20) has fallen below 1720 contrary to our expectation of a rise to 1760/80. While Gold chooses to remain below 1720, it is bearish in the near term towards 1680/1660. With a lack of any sharp movement, Gold may remain in the 1740-1680 region for some time.
Silver (15.01) is trading at the lower end of the sideways range seen in the 15-16 region. A bounce from here would be needed to keep the sideways consolidation intact. Failure to bounce from 15 could take it down to 14 in the near term. Watch price action near 15.
Copper (2.2960) is falling and could test 2.25 before rising again from there. Immediate support is seen at 2.25 below current levels.
FOREX
Dollar Index is trading lower but has room for further fall. Euro has fallen after testing 117+ on Thursday last week. USDJPY has fallen too but while below immediate resistance, there could be room for a further fall from here. EURJPY, Pound and Aussie too trade lower just now and could fall some more while below important respective resistances. Yuan and Rupee looks weak just now.
Dollar Index (99.29) has dipped well and could test 99.00-98.50 from where a short bounce looks possible. The broad range of 98.50-101.00 remains intact while the index is now at the lower end. A break below 98.50 would be needed to trigger fresh fall and break the sideways consolidation. Else we may have to look at another bounce back towards 101. Watch for a bounce or break from 98.50.
Euro (1.0946) rose to test 1.1019 on Thursday but has currently fallen from there. 1.09 looks like a decent support (earlier resistance that was broken to the upside) below current levels and while that holds, we may expect a rise back towards 1.10-1.1050 in the near term. It would be important to watch price action on Dollar Index near 99.0-98.5 in the near term. If the index falls lower, Euro could see a bounce in the next few sessions.
Dollar-Yen (106.70) is stable and has been slowly inching down while below 107.50. If the pair continues to trade below 107.50, the lower target of 106 and even 104 can be seen in the near to medium term. View looks weak while below 107.50.
EURJPY (116.78) has risen well on Euro strength, tested a high of 117.17 before falling from there. If the cross is unable to bounce back above 117 again, we may see a fall back towards 116 or lower in the near term.
Aussie (0.6392) fell sharply from 0.6570 on 30th April and has been falling since then. Some interim support is possible near 0.6350-0.6300 below current levels which if hold, could push the exchange rate back towards 0.64-0.65 in the medium term. But failure to bounce back from 0.6350/0.6300 could make Aussie vulnerable to a sharper fall towards 0.62 and lower. While we do not negate our earlier view of testing 0.67/0.68 just now, we would watch price action near 0.6350/00 to decide on further direction.
Pound (1.2461) has dipped from levels below 1.27. A sideways range of 1.27-1.23 is likely to remain intact. Near term looks bearish towards 1.23 from where a bounce looks likely.
USDCNY (7.0601) is holding well below 7.10 and has room for a fall towards 7.03/01 in the near term before a bounce back to 7.10 is seen. Stable movement in the 7.01-7.10 region is likely to hold for some more sessions.
USDINR (75.12) fell sharply as expected on Thursday but bounced back above 75 to close slightly higher. Friday saw a test of 75.50 on the offshore markets. While we do not negate our expected test of 74.60, it could be delayed if the pair opens higher today and moves up towards 75.50/70 during the day. In that case, 75.85 and 76 would be crucial resistances to watch for.
INTEREST RATES
The US Treasury yields remains stable in a narrow range over the last couple of weeks. We expect it to dip in the short-term before witnessing a sustained bounce. The German yields have come-down in line with our expectation. The bearish outlook is intact but the pace of fall seems to be much faster that we had anticipated. The 10Yr GoI is stuck in a narrow range. We expect it to see a test of its crucial support on the downside first and then reverse higher.
The US 2Yr (0.19%), 5Yr (0.35%), 10Yr (0.61%) and 30Yr (1.25%) Treasury yields remain stable and has been consolidating in a narrow range over the last couple of weeks. We still prefer the yields to see a dip to 0.50%-0.40% (10Yr) and 1.10% (30Yr) first before we see a strong and sustained bounce. As we had mentioned earlier, a strong rise past 0.75% on the 10Yr and 1.30% on the 30Yr is needed to negate the chances of a dip and move up straight away from here.
The German 2Yr (-0.79%), 5Yr (-0.78%), 10Yr (-0.59%) and 30Yr (-0.19%) have declined sharply across tenors in line with our expectation. The bearish outlook is intact. As we had been mentioning last week, the 10Yr can fall to -0.70% and the 30Yr can test -0.30% on the downside in the coming weeks. However, the pace of fall seems to be happening at a much faster pace that we had anticipated.
The 10Yr GoI (6.1104%) has been stuck in between 6.10% and 6.15% over the last three trading days. Our view remains the same. We expect the 10Yr GoI to dip to 6%-5.95% and then reverse higher. We retain our bearish view of seeing 6%-5.95% on the downside first before we see bounce again.
