STOCKS
Equities seem to lack momentum to see our preferred rise first before a fresh fall happens. As such we would expect the global indices to oscillate in a sideways range for some time. A breakout of this range will then decide whether the indices will see one more leg of rise before reversing lower or will fall straight away from here itself. Dow, DAX and Nikkei are likely to trade sideways. Sensex and Nifty looks mixed and remains vulnerable to see a dip still. Shanghai remains relatively stronger among the lot and can move higher.
Dow (23664.64, −218.45, -0.91%) seems to be struggling to gather momentum. The short-term outlook is mixed. Dow could oscillate in the 23000-25000 range for some time. Within this range, we prefer the index to break below 23000 eventually and fall to 22000-21500 in the coming weeks. Whether this fall will happen from here itself or after one more rise to 24700-25000 remains a question which is unclear now.
DAX (10606.20, −123.26, -1.15%) has failed to sustain above 10700. The index can remain stuck in between 10400 and 10800 for some time. A break out of this range will then decide whether the DAX will move up to 11000-11350 again or fall to 10200. The level of 10200 is very important as a break below it will turn the outlook bearish to see 10000 and 9500 on the downside.
Nikkei (19586.37, −32.98, -0.17%) has re-opened on a stable note after being closed since the beginning of the week. The index is back into its 19000-20000 range is closed today. The near-term outlook is mixed as the index is poised at the middle of the range. We will have to wait for the range breakout to get a clear idea on whether Nikkei will move up to 20500-21000 or fall to 18000-17500.
Shanghai (2874.68, −3.46, -0.12%) has moved up and keeps our bullish view intact of seeing 2900-2910 on the upside. 2850 can be a good intermediate support now. From a medium-term perspective, Shanghai has the potential to target 3050 on the upside in the coming weeks while it sustains above the 2800-2780 support zone.
Nifty (9270.90, +65.30, +0.71%) fell below 9200 as expected yesterday but had recovered well from the low of 9116. The fall did not extend upto our preferred level of 9000. However, while below 9400, the fall to 9000 can still happen in the coming sessions. 9000 is an important support which will need a close watch. A strong rise past 9400 is needed to move up to 9600-9700 again.
Similarly, Sensex (31685.75, +232.24, +0.74%) will have to rise past 32000 decisively to ease the danger of falling below 31000 and move up to 33000-34000 again. As mentioned yesterday, Sensex will come under pressure to fall towards 30000-29000 in case if it breaks below 31000. As such we will have to watch the level of 31000 very closely.
COMMODITIES
Precious metals look weak for the near term while Dollar remains strong and on expectations that gold supplies will grow as refineries resume operations. Copper could bounce back and rise towards long term resistance above current levels and Crude is trading in a ranged fashion but could see some dip within a medium term potential uptrend.
Brent (29.84) and Nymex WTI (24.23) have dipped a bit but there is room to rise in the near term. As mentioned yesterday we would look for a test of $35 and $30 on Brent and WTI respectively before a decline is seen again. Overall, we may now start looking for recovery and gradual upmove while a low has been established.
Gold (1694.60) has finally managed to fall below 1700 on Dollar strength and could test 1680-1660 in the near term from where a bounce could be possible. Break below 1660 is needed to bring in bearishness for medium term and to look for lower levels.
Silver (15.08) has dipped towards 15 again. It would be important to see if it breaks below 15 to re-attempt a fall towards 14.5-14.0 in the near to medium term.
Copper (2.3440) has risen while support near 2.30 seems to be holding well. A re-test of 2.40 is on the cards for the near term. A break above 2.40 would be needed to take Copper higher. Else, a dip back towards 2.25 cannot be negated.
FOREX
Dollar trades higher while Euro is trading near support levels. Aussie may have some room to rise while Pound looks bearish for the near term. USDJPY could test support below current levels. EURJPY, Yuan and Rupee look weak for the near term.
Dollar Index (100.15) has managed to rise above 100 and could now hold firm, inching up towards 101 in the near term. The sideways range of 98.50-101.00 remains intact and is likely to hold for the near term.
Euro (1.0800) tested 1.0782 before bouncing back from there. The currency has important support near 1.0780 as mentioned yesterday below which there is support near 1.0750 and 1.07. The initial support at 1.0780 has held well and Euro has bounced back but while the Dollar Index trades higher, Euro could dip back towards 1.0780-1.0750 or even to see 1.07 in the near term.
Dollar-Yen (106.19) is likely to test 106 now but it would be important to see if a sustained break below 106 is seen to take it lower towards 104. Immediate supports are seen near 106 and lower at 104. While preference for the medium term would be to see a fall to 104, we may expect a bounce from 106 initially.
EURJPY (114.69) tested 114.40 in line with our expectation of a fall towards 114 that we have been looking for quite sometime now. The cross now looks bearish and could fall towards 112 before seeing a decent bounce from there.
Aussie (0.6414) is stuck around 0.64. Immediate downside is limited to 0.6350 while there is enough room for a rise from here towards 0.67-0.68 in the long term. Some stability could be seen in the next few sessions before Aussie attempts to move up. Overall trend looks bullish for the near to medium term.
Pound (1.2325) fallen towards the lower end of the 1.23-1.27 region mentioned yesterday. A break below 1.23, if seen may drag it down to 1.21 before a pullback is seen towards 1.25/27/30 in the near term.
USDCNY (7.0936) has moved up and could be seen heading towards 7.10/12 in the near term. Near term looks weak for Yuan. A further weakness in Yuan if seen over today and tomorrow could lead to a gap up opening on USDINR tomorrow.
USDINR (75.7650) may continue to trade in the 75.50-76.0 region for the near term. Note that the Indian forex market is closed today for Buddha Purnima. We may expect continuation of trade within the mentioned region tomorrow. We would continue to look at resistance near 76 to hold this week.
INTEREST RATES
The US Treasury has announced yesterday to launch 20Yr bond to fund their borrowing programme. The auction for this will happen on 20-May-20 for a quantum of $20 billion. The Treasury yields have moved up further sharply following the announcement and keeps our short-term bullish view mentioned yesterday. The German yields have moved up and can rise further in the near-term before resuming the overall downtrend. The 10Yr GoI is moving down in line with our expectation to test its crucial supports. The Indian bond markets are closed today.
The US 2Yr (0.17%) and 5Yr (0.36%) Treasury yields have dipped slightly compared to the levels seen in early Asian sessions yesterday. However, the yields at the far-end, the 10Yr (0.69%) and 30Yr (1.38%) have moved up further sharply in line with our expectation. As mentioned yesterday our bearish view has been negated and the outlook has turned positive. The 30Yr can test 1.43%-1.45% – the next important resistance. The 10Yr on the other hand can rise to 0.80%.
The German 2Yr (-0.77%), 5Yr (-0.77%), 10Yr (-0.51%) and 30Yr (-0.07%) have risen sharply contrary to our expectation to fall further. While the yields manage to sustain higher, a further rise to -0.45% and -0.40% on the 10Yr and a test of 0% on the 30Yr is possible first before our preferred fall resumes.
The 10Yr GoI (6.0282%) has dipped further and has been moving down to test the 6%-5.95% support zone in line with our expectation. We expect the 10Yr GoI to bounce from the 6%-5.95% support zone to 6.10%-6.20% again. The Indian bond markets are closed today.
