STOCKS
A good recovery in most of the indices on Friday. But it will have to be seen if the recovery sustains and translates into further rise. Key resistances are ahead for the indices which will have to be broken to bring back the bullish momentum. 26000 on Dow, 12200-12500 on the DAX, 2925 on Shanghai, 35000 on Sensex and 10000-10250 on Nifty are the important levels we will have to watch this week. A strong rise past these resistances can pave way for further rally in the equities going forward. Else the indices can fall-back again. Among the lot Nikkei looks relatively more bullish than the others with strong support at 21500.
Dow (25605.54, +477.37, +1.90%) had recovered a bit on Friday after having tumbled about 7% on Thursday last week. However, it will have to be seen if it manages to surpass 26000 or not which is needed to ease the downside pressure and pave way for 27000-28000 again. Inability to breach 26000 from here and a subsequent fall below 25000 can drag the Dow to 24500 or even 23000 in the coming weeks.
DAX (11949.28, −21.01, -0.18%) remains lower and is facing resistance at 12200 now. Our view of seeing 11600 first on the downside remains intact before we see a fresh leg of rally. 12200 and 12500 are important resistances that can cap the upside. A strong rise past 12500 will be needed to negate the above mentioned fall to 11600.
Nikkei (22183.55, −121.93, -0.55%) is getting support below 22000. As mentioned on Friday 21500 is an important support. We expect this support to hold well and the Nikkei can see a fresh rally targeting 24000 on the upside. A strong break below 21500 will be needed to see much deeper fall which looks less probable now.
Shanghai (2915.57, −4.17, +0.14%) is managing to sustain above 2900. A break above 2925 will ease the downside pressure and will take it higher to 2950. While below 2925, the index looks vulnerable to revisit 2875 or even 2850 on the downside before beginning a fresh leg of rally.
As expected, the Nifty (9972.90, +70.90, +0.72%) fell to 9600 but had recovered sharply from the low of 9544 on Friday. 10000-10250 is going to be a crucial region to watch now. A strong rise past 10250 will be bullish to see 10500-10750 on the upside. While below 10250, the Nifty can fall again and can remain in the broad range of 9500-10250 for some time.
Sensex (33780.89, +242.52, +0.72%) has recovered sharply from the low of 32348 on Friday. But index will need a strong rise past 35000 from here in order to bring back the chances of seeing 36000 on the upside into the picture. While below 35000, Sensex can trade in the range of 32000-35000 for some time.
COMMODITIES
The sharp rise in US crude stock inventories and the FED’s projections that the world economy will shrink by 6.5% this year have kept crude prices low. WTI could test support below current levels and if it manages to bounce back from there, it could pull up Brent too. Gold looks ranged with room on the downside to 1690. Next few sessions could see a bounce but while below 1760, a fall to 1690 is not negated. Silver has trend support at current levels and could see a bounce in the near term. Copper may dip to test near term support before bouncing back by the end of the week.
Brent (37.91) has dipped quite a bit from levels above 40 and could now have room towards 35-33 on the downside before a bounce could be expected. On the daily charts, immediate resistance is seen near 42.50.
Nymex WTI (35.12) may bounce back from anywhere in the 35-32 region within the next few sessions. Support zone on WTI is visible below current levels and could lead the rise pulling up Brent along with it. Watch price action below current levels closely.
Gold (1738.50) continues to range in the 1760-1690 region (revised from 1760-1680/60 earlier). An interim support could be seen near 1725 which if holds could keep the price ranged within 1725-1760 region for some time; else there is enough room for Gold to fall towards 1700-1690 within this week or the next.
Clear support trend line is visible on the Silver (17.56) daily candles and while support at 17.5 holds, we may expect a bounce back towards 18.5-19.0 again in the medium term. Near term view is bullish while above 17.50.
Copper (2.5795) has dipped and could be headed towards our expected 2.55 before a bounce from there is seen. Near term could see a dip but medium to long term looks bullish.
FOREX
Dollar Index and Euro could spend some time in a ranged fashion before any sharp movement is seen. Dollar index looks bullish and Euro could see a dip in the longer run. Dollar Yen needs to break above 107.70 to move further up. EURJPY looks stable and could be ranged for some time while Pound and Aussie has immediate support below current levels which needs to hold to take the currencies higher. Yuan and Rupee looks weak for the near term within which USDINR could possibly test 75.75.
Dollar Index (97.13) has been rising well and could see some sideways ranged move below 97.58 for sometime before eventually moving up in the medium term towards 98-99 levels.
Euro (1.1256) could get some support near 1.1193 that could keep prices ranged above 1.1193 for sometime but an eventual break on the downside towards 1.1150 or even lower is on the cards.
EURJPY (120.67) has series of supports in the 120-119 region and could soon see a bounce from the support zone. Some sideways movement in the 121.50-119 is also a possibility.
Dollar-Yen (107.20) is holding above our mentioned support region of 106.56-106.36 but for Dollar Yen to rise sharply from here it needs to break above 107.70 in the next few sessions, else we may expect sideways trade within 107.70-106.56 for sometime before the expected bounce is seen.
Pound (1.2514) has interim support at 1.2468 and lower support near 1.24 which if holds could see a bounce back towards 1.26 or higher in the medium term.
Aussie (0.6821) has immediate trend support at 0.68 and while that holds, we may expect a bounce back towards 0.70 or higher in the medium term. Failure to bounce from 0.68 could take it slightly lower to 0.6732 before the expected bounce takes place. But a rise from 0.68 looks more likely.
USDCNY (7.0857) has been inching up slowly and looks bullish for a test of 7.10 on the upside.
USDINR (75.8450) rose sharply to test 76.1050 on Friday but came off sharply to close lower. While we do not negate a re-test of 76+ levels to 76.30, we may expect a short corrective dip to 75.75 before another bounce is seen. Bias is to the upside for the medium term.
INTEREST RATES
The Treasury yields have dipped again in the early Asian trades today after witnessing a bounce on Friday in the US session. Our near-term view remains negative after the sharp fall seen last week. The Treasury yields have room to dip further in the coming days to test their key supports and then can reverse higher again. The German yields are coming down towards their crucial supports which need to hold in order to avoid a further fall. We will have to wait and watch. The 10Yr GoI hovers around 6% and is likely to move up in the near-term within our preferred range of 5.95%-6.10%.
The US 2Yr (0.18%), 5Yr (0.31%), 10Yr (0.67%) and 30Yr (1.41%) yields have dipped again in early Asian trades today. We retain our near-term bearish view intact of seeing a dip to 0.58% on the 10Yr and 1.25% on the 30Yr. Thereafter the yields can reverse higher again in which case the chances of seeing 0.80% (10Yr) and 1.70% (30Yr) on the upside will come back into the picture.
The German 2Yr (-0.69%), 5Yr (-0.66%), 10Yr (-0.44%) and 30Yr (0.04%) yields have dipped further and are coming closer to their crucial supports As mentioned on Friday 0% on the 30Yr and -0.45%/-0.50% region on the 10Yr are crucial supports that need to hold in order to keep our broader bullish view intact. A break below these supports will negate the bullish view and will drag the 10Yr lower to -0.60% and the 30Yr to -0.10% in the coming days.
The 10Yr GoI (5.9908%) broke above 6% on Friday but failed to sustain higher. It will have to be seen if it manages to rise past 6% again today which can take it higher to 6.05% and 6.10% in line with our expectation. Overall, we expect the yield to trade in the range of 5.95%-6.10%.
