STOCKS
Dow has recovered sharply back above 23000 yesterday. It can remain in the range of 23000-24500 (narrow) or 22500-25000 (wider) range for a few weeks. DAX looks vulnerable to break below its crucial support and fall further. Nikkei has dipped below its intermediate support and will now have room to decline further in the near-term. The corrective fall in Shanghai is happening as expected. The index can move down to test its supports in the coming days from where it can reverse higher again. Sensex and Nifty have come closer to their crucial support levels of 31000 and 9000 respectively. We expect these supports to hold and keep the indices in a sideways range. The price action today will need a close watch.
Contrary to our expectation the Dow (23625.34, +377.37, +1.62%) has recovered sharply from the low of 22789 yesterday. It has to be seen if it can breach 24000 in order to move higher towards 24500 in the near-term. Broadly we may look for a range of 23000-24500 (narrow) or 22500-25000 (wider) for some time now.
DAX (10337.02, −205.64, -1.95%) fell below the crucial support level of 10200 but has managed to bounce-back. However, on the charts, the bias is negative as the index looks vulnerable to break below 10200. Such a break can drag the DAX lower to 10000 initially and even 9600-9500 eventually. We will have to wait and watch to see if the index manages to hold above 10200 and retain the 10200-11000 range or not.
Nikkei (19849.86, −64.92, -0.33%) has declined below 20000. . While below 20000, a further fall to 19500 and even 19000 is possible in the near-term. The chances of a rise to 21500-22000 that we have been mentioning for some time stands reduced now.
As expected Shanghai (2867.50, −2.84, -0.09%) has declined below 2875. Our view of seeing a corrective fall to 2850 and even lower to 2825 remains intact. We expect the Shanghai to resume its uptrend from around 2825 targeting 2925-2950 eventually. The medium-term bullish view of seeing 3050 on the upside remains intact.
Sensex (31122.89, -885.72, -2.77%) has dipped below 32000 as expected and has now come closer to the crucial support level of 31000. As mentioned yesterday, 31000 is an important support which we expect to hold and keep the index in a range of 31000-33000. A strong break below 31000 (less preferred) can drag it to 30000-29000.
Nifty (9142.75, -240.80, -2.57%) broke below the 9300-9275 support zone that we had expected to hold. A test of 9000 is likely now. Nifty has to necessarily remain above 9000 to keep our preferred 9000-9400/9500 range intact. A break below 9000 (less preferred) can drag it lower to 8500. We need to watch closely the level of 9000 now.
COMMODITIES
IEA’s monthly energy report released yesterday seems to have brought some good news for crude prices that have pulled them up. IEA has revised its demand growth falling by 8.6mln bpd compared to its earlier forecast of 9.2mln bpd; this is because the agency says that it can see signs of possible rebalancing in the oil markets. The agency is also expecting massive production cuts non-OPEC countries where US is likely to fall the most, by about 2.8mln bpd as compared to 2019.
Crude prices trade higher and could soon test our mentioned immediate resistances on the daily candles. Gold and Silver have risen sharply and looks bullish just now. On the other hand, Copper is trading slightly lower and could fall further while resistance at 2.40 holds well.
Brent (31.30) and Nymex WTI (27.85) have moved up after the IEA released its monthly energy report yesterday and continue to trade higher today. In line with our expectation, Brent and WTI both are moving up towards our expected $32.50 and $29 which could be tested in the early sessions next week. Thereafter either we may see a short dip or a break on the upside to indicate further bullishness for the medium term. After initial test of mentioned levels, we would wait to see price action for further confirmation.
Gold (1743.70) has sharply risen and indicates upmove for the near term while it sustains a rise above 1740. A test of 1760/80-1800 would be back on the cards for next week while Gold remains above 1740. Only a sharp fall again back to 1700 could negate further rise from here.
Silver (16.40) has also risen sharply to almost test near term resistance at 16.5. However, we will have to watch price action near 16.50 to see if the price faces rejection from there or manages to move to the upside. A break above 16.50, is seen could initiate fresh rise for Silver.
Copper (2.3645) is holding well below resistance at 2.40 as seen on the 3-day candles. 2.25-2.40 could be the trade for the next 1-2 weeks within which the price needs to decide on further direction from here.
FOREX
Dollar Index trades higher but has pulled up Euro and Dollar-Yen also along. Aussie can move higher while Pound looks weak just now. Yuan has weakened and could try to take USDINR higher too. Overall mixed movements in currency pairs seen now with near term resistances and supports likely to hold well.
Dollar Index (100.33) is up slightly and is headed towards resistance near 100.5. As mentioned earlier, we will have to wait to see if a fall from 100.5 take the index back to 99 again in the coming week.
Euro (1.0802) is looking bullish for the near to medium term while we do not expect a fall below 1.0750 or 1.07 at the maximum. But dollar index shows no sign of weakness, keeping Euro fluctuating in the 1.07-1.09 region broadly. Preference is to see a bullish Euro from here but we will have to wait for price confirmation in the near term.
Dollar-Yen (107.25) moved up contrary to our expectation of a fall towards 106. But while resistance near 100.5 holds on Dollar-Index, we would be cautious to see a dip back to levels below 107 in the coming week. We do not rule out a test of 106 completely but may look for a dip while below 107.50. A fall in Nikkei (refer to equity section above) could also indicate some bearishness for Dollar-Yen in the near term.
EURJPY (115.91) is trading slightly higher and while below 117, there is scope for a test of 114 before a sharp bounce is again seen from there.
Aussie (0.6453) is trading sghtly higher and while the near term support zone of 0.6350-0.64 holds, a bounce from current levels looks likely. Overall broad range of 0.6350-0.66 could hold for the medium term.
Pound (1.2209) is down to test our expected 1.22/21 in the near term. There is scope for a further fall towards 1.21 before a sharp pull back is seen in the medium term.
USDCNY (7.1005) has risen as expected and looks bullish for some more rise to 7.12 in the near term before facing rejection from there.
USDINR (75.5650) traded well within our mentioned range of 75.30-75.60 yesterday, facing rejection from 75.60. Note that while immediate resistance is seen at 75.60, there could be chances of breaking higher especially as Yuan has weakened. However, we would look at resistances near 75.75/80 and higher at 76 to hold for the near term if the pair manages to break above 75.60 today. Medium term looks bearish but before that some sideways range trade is possible.
INTEREST RATES
The US Treasury yields continue to trade lower and keep our bearish view intact. The yields can dip further to test their intermediate supports. While these supports hold, the Treasury yields can remain in a range before we see a fresh leg of fall. The German Yields remain lower and can dip to test their supports in the near-term. Though these supports might hold for now, we expect the yields to decline below those supports eventually. The 10Yr GoI has bounced in line with our expectation after testing the key support zone yesterday. The 10Yr GoI can move up in the coming days.
The US 2Yr (0.11%) and 5Yr (0.31%) Treasury yields remain lower but stable while those at the far-end, the 10Yr (0.62%) and 30Yr (1.31%) have dipped further in line with our expectation. The bearish outlook is intact. The 10Yr is heading towards the 0.60%-0.58% support zone as expected. A break below 0.58% will increase the downside pressure and drag it to 0.40% in the coming days. In case if the 10Yr manages to hold above 0.58%, it can then continue to trade in the sideways range of 0.58%-0.70%. The 30Yr has room to test 1.23%-1.20% in the near-term.
The German 2Yr (-0.76%), 5Yr (-0.75%), 10Yr (-0.55%) and 30Yr (-0.12%) yields continue to trade lower. As mentioned yesterday, the chances of a near-term rise that we had been looking has reduced. We expect the 10Yr low to test -0.60% and the 30Yr to dip to -0.20% from current levels. Whether the yields break below -0.60% (10Yr) and -0.20% (30Yr) or not will determine the next leg of move. We prefer the 10Yr and 30Yr to break below -0.60% and -0.20% eventually, if not immediately.
The 10Yr GoI (6.0565%) fell as expected to test 6% yesterday and has bounced from the low of 5.99%. The 6%-5.95% support zone is likely to limit the downside and we would be looking for a rise to 6.15%-6.20% in the coming days
