STOCKS
The news of positive outcome of the phase one test on Cornona Virus vaccine has triggered a strong surge in equities. While there is room on the upside for the major indices like the Dow, DAX and Nikkei, crucial resistances are coming up for them which will need a close watch. 24700-25000 on Dow, 11200-11350 on DAX, 21500-22000 on Nikkie are important levels that have to be surpassed in order to become more bullish. Else the indices can fall-back again and retain their broad sideways move. Sensex and Nifty can bounce-back today following the global markets. However, it will have to be seen if they can hold on to their gains and close decisively above 31000 (Sensex) and 9000 (Nifty) now. SGX Nifty has risen back and is quoting at 8980 (+194.50, +2.21%).
Dow (24597.37, +911.95, +3.85%) has surged above 24000 and is coming closer to its crucial resistances. 24700 and 25000 are important levels (the upper end of the 22500-25000 range that we had been mentioning so far) to watch now. A strong rise past 25000 is needed to become more bullish to see further rise towards 26000. Support will now be at 24000. Inability to breach 25000 can drag the index lower again and continue to keep it in the 22500-25000 range.
DAX (11058.87, +593.70, +5.67%) has risen past 10800 decisively thereby negating the chances of breaking below 10200 that we had been mentioning cautiously. 11200 and 11350 are important resistances to watch which can be tested now. A strong rise past 11350 is needed to pave way for further rise to 11500 and higher levels. Else a pull-back to 10800-10700 and even lower levels cannot be ruled out again.
As expected Nikkei (20517.42, +383.69, +1.91%) has risen towards 20500 and can now target 20800. . . A strong rise past 20800 will the pave way for a further rise to 21000. It will also increase the chances of seeing 21500-22000 eventually in the coming days. Immediate support is at 20500 and then the next one is at 20000.
Shanghai (2889.60, +14.18, +0.49%) has risen back towards 2900. However a strong rise past 2900 is needed to take it further higher to 2925-2950. Such a break will confirm the resumption of the uptrend and will negate the chances of seeing 2850-2825 on the downside that we had been expecting.
Contrary to our expectation Nifty (8823.25, -313.60, -3.43%) declined below 9000 yesterday. However a strong bounce is possible today following the rally in the global markets. However, it needs to be seen if Nifty can move back and close strongly above 9000 or not which will important to gauge whether the fall to 8500 mentioned in the Evening Comments yesterday can be completely negated or not. We will have to wait and watch.
Similarly, Sensex (30028.98, −1068.75, -3.44%) will have to be seen if it can bounce-back above 31000 today or not. Also a subsequent break above 32000 will also be needed for the Sensex to gain strength and also to completely negated the chances of seeing 29000 on the downside.
COMMODITIES
Precious metals trade lower today but look potentially bullish for the medium term. Crude prices continue to rise but have resistance just above current levels which could produce a short term dip before the prices again rise in the longer run. Copper is bullish if it sustains above 2.40.
Brent (35.14) and Nymex WTI (32.08) continue to rise. Brent has important resistance at current levels and could see a short dip from here in the near term targeting a dip back to $30 before again rising back towards $40 in the medium term. Watch for a dip in the next 1-2 sessions. Failure to see a dip from current levels would take it higher towards $37.5 from where a dip could then be seen. Nymex WTI also has resistance at current levels on the 3-day and weekly candle charts and while that holds, a dip from here is possible to $25.
Gold (1741.10) and Silver (17.48) have dipped a bit. But the dip is likely to hold for a very short term before the prices start to rise again. Medium term view looks bullish for the metals. Our mentioned targets of 1800 and 19 for Gold and Silver respectively is on the cards.
Copper (2.4170) has again broken above 2.40 to our surprise and contrary to our expectation of seeing a range trade below 2.40. If the current rise sustains, we may look for a further rise towards 2.45 or even higher.
FOREX
Dollar Index trades lower and has dragged Euro sharply higher, but Euro may have interim resistance which if holds could produce a short term dip for the currency. EURJPY has risen on stronger Euro. Dollar Yen has risen contrary to its in-sync movement with the dollar index. Pound is likely to see a short upmove but looks bearish for the medium term. Yuan continues to weaken in the near term. While Rupee may be strong due to a stronger Euro, we have to see if that is neutralized by the impact of a weaker Yuan. Overall Rupee may strengthen a bit today as 76 holds just now.
Dollar Index (99.71) has not managed a rise above immediate resistance near 100.50 and while that holds, the index has scope for a fall towards 99-98.50 in the near term.
Euro (1.0902) has risen as expected but will have to sustain a rise above 1.0930 to move up further. While 1.0930 holds, a short dip from here looks possible towards 1.0874.
Dollar-Yen (107.35) is slightly up but could face some rejection in the very near term to see a dip back to 106.76. Else a break above current levels would open up chances of a further rise towards 108.
EURJPY (117.08) has risen sharply breaking above 117 on Euro strength yesterday but if the Euro falls towards 1.0874 in the near term, EURJPY could also see a dip from here to 116.55.
Aussie (0.6524) could test interim resistance at 0.6560 from where a dip looks possible. Only a failure to fall from there could enable a further rose towards 0.6650-0.67 in the medium term.
Pound (1.2188) has risen a bit but while below 1.2266, Pound is bearish for the medium term.
USDCNY (7.1104) has dipped well from 7.1191 but while it trades above 7.10, we may expect a test of 7.1150-7.1200 in the near term from where a corrective dip could be possible back towards 7.10/09. A sustained break is needed below 7.10 to drag the pair towards 7.09/08.
USDINR (75.9150) tested an intra-day high of 76.06 on the NDF offshore markets yesterday before it came down to 75.60. Currently NDF quotes 75.72 and could indicate a dip in the onshore trade from levels above 75.90+ seen yesterday. A fall towards 75.70/60 looks possible today.
INTEREST RATES
The US and German yields have risen sharply contrary to our expectation to extend the fall. A strong rally in the equities following the news on the positive outcome of the phase one test on the Corona virus vaccine has taken the yields higher. The US Treasury yields have key resistance coming up. A strong rise past those resistances will negate the chances of any further fall and take them further higher in the coming days. The German yields can move up in the near-term to test their resistance and then can reverse lower again. The 10Yr GoI can dip to test it key support zone from where it can bounce-back sharply.
The US 2Yr (0.17%) and 5Yr (0.36%), 10Yr (0.71%) and 30Yr (1.43%) Treasury yields have risen sharply, especially at the far-end (10Yr and 30Yr). Immediate resistances are at 0.75%-0.80% on the 10Yr and 1.45% on the 30Yr. A strong break above these resistances will negate our bearish view of seeing 0.60%-0.58% (10Yr) and 1.20% (30Yr) that we had been expecting for some time. The 30Yr can rise to 1.7% on a strong break above 1.45%. The 10Y on the other had can target 1% on a strong break above 0.80%.
The German 2Yr (-0.71%), 5Yr (-0.68%), 10Yr (-0.47%) and 30Yr (-0.02%) yields have risen sharply across tenors contrary to our expectation to extend the fall. There is room on the upside to move up further in the near-term. The 10Yr can test -0.40% and the 30Yr can inch higher to 0.05%. Thereafter, the yields can reverse lower again thereby resuming the overall downtrend.
The 10Yr GoI (6.0505%) remains lower and have room to dip in the near-term However, the downside is likely to be limited and the 6%-5.95% can hold well and produce a bounce to 6.15%-6.20% again.
