STOCKS
Asian indices look relatively stronger than the Dow and DAX. Nikkei and Shanghai have moved up well from their supports and can rise further in line with our expectation. Sensex and Nifty have also risen-back sharply. A strong follow-through rise today will be bullish to see further rally and also negate our bearish view of seeing a dip in Sensex and Nifty. Dow and DAX looks bullish from a bigger picture. But in the near-term they look vulnerable to dip first before moving up.
Dow (26080.10, −39.51, +0.15%) continues its struggle to get a strong follow-through rise. As such the chances of seeing a test of 25000 on the downside first seems more apparent before we get a fresh rise. As mentioned yesterday, while above 25000, the broader picture remains bullish to test 27000-28000 on the upside.
DAX (12281.53, −100.61, -0.81%) is oscillating between 12200 and 12500. A breakout on either side of 12200-12500 will determine whether the index will fall to 12000 and 11600/11500 first and then resume the uptrend or will go up to 12800 and 13000-13200 from here itself. From a bigger picture the trend is up as long as the DAX remains above 11500.
As expected Nikkei (22369.16, +13.70, +0.06%) is getting support at 22000. This keeps our bullish view intact of seeing a rise to 23200. A break above 22500 can accelerate the rise. As mentioned yesterday 21500 is slightly a deeper support for the index which will have to broken in order to turn the view negative. That looks less likely as of now.
Shanghai (2952.83, +13.52, +0.46%) has risen above 2950 and can move up further to 2970-2975 in line with our expectation. While a pull-back from 2975 to 2950 cannot be ruled out, the bigger picture will continue to remain bullish. As we had mentioned earlier, Shanghai can breach 2975 eventually and rise to 3000-3025 over the medium-term.
Sensex (34208.05, +700.13, +2.09%) and Nifty (10091.65, +210.50, +2.13%) have bounced-back sharply to close above 34000 and 10000 respectively. This has reduced the chances of seeing a fall to 32000 on Sensex and 9600-9500 on the Nifty that we had expected yesterday. A follow-through rise and a strong close today will be bullish to bring back the chances of seeing 36000 (Sensex) and 10500-10750 (Nifty) into the picture.
COMMODITIES
In the OPEC+ meet yesterday, the countries were found to have complied with 87% of the earlier agreed production cuts in May’20. The Joint Ministerial Monitoring Committee has stressed upon the importance of the countries reaching 100% of their pledged cuts and said that they will have to make up for any previous shortfalls in the upcoming months of July, August and September. Crude prices had started rising ahead of the meet yesterday but continued to remain strong and close at higher levels. Near term look bullish. Gold is stable but Silver could dip towards 16.5 in the near to medium term indicating a possible rise in Gold too. Copper has moved up and could target 2.65 as China indicates to maintain financial liquidity for rest of the year that could boost demand for Copper.
Brent (41.77) and Nymex WTI (39.25) have risen back to close at higher levels yesterday. We may expect a rise to 42.50-45 on Brent and 41-44 on WTI in the near term.
Gold (1734.40) is stable while Silver (17.52) has dipped to test near term support. A break below 17.5 on Silver would confirm bearishness towards 16.5 that could pull down Gold too towards 1725-1700 in the near term.
Copper (2.6010) rose after the Chinese central bank said yesterday that it would maintain ample financial system liquidity in the second half of the year. This could indicate bullishness for Copper as demand for the metal could be expected to rise. A test of 2.65 could be on the cards for the near term.
FOREX
Dollar Index is bullish for the near term that could take Euro below 1.12. Dollar Yen is stable but needs to rise above 107 to head towards 108 in the near term. View is bullish. Aussie may test support below current levels but we would have to see if it manages to bounce from there or moves lower. Aussie and EURJPY are bearish. Yuan could be stable in the 7.06-7.10 region. Dollar-Rupee may trade stable too while below 76.25. A break above 76.25 however could trigger a sharper upmove in the medium term.
Dollar Index (97.42) is trying to move up towards 98.0-98.50 which could be tested in the next 2-weeks before another dip is seen from there. Immediate view is to see a rise from here.
Euro (1.1208) has come down to test 1.12 and could continue to fall towards 1.1145 before a bounce is seen from there. Immediate view is bearish.
EURJPY (119.84) looks bearish towards 119.45 while upside could be capped near 120.55.
Dollar-Yen (106.91) is stable above support at 106.67 and an eventual rise looks possible towards 108. View is bullish while above 106.67.
Aussie (0.6857) has immediate support at 0.68 and lower near 0.6755 (revised from 0.6732/10 mentioned yesterday) which if holds could keep the currency stable and eventually lead to a rise towards 0.70 again. We would watch crucial support for the coming sessions because a break below 0.6755 would trigger a sharp fall to 0.66. Although overall view looks bearish while below 0.71/70, we may look for a short sideways movement above 0.6755 just now. This could be in line with a possible rise in Copper towards 2.65.
Pound (1.2428) has fallen in line with our expectation and could target lower levels of 1.2400 as mentioned yesterday. Below 1.24, support is seen near 1.2320 which could come into the picture if Pound fails to bounce from 1.24 itself, making the view more bearish for the next 1-2 weeks.
USDCNY (7.0861) is likely to trade in the 7.06-7.0 region for the near term. No major movement is expected outside this range just now. But in the medium term view would be bullish while above support at 7.06.
USDINR (76.1450) was stable yesterday. 76.25 is an important level to look at just now which if holds could keep the pair within 75.90-76.25 region for the near term. Only a break above 76.25 would trigger a sharper rise towards 76.40 or even higher in the medium term. For today we may not expect a break above 76.25, instead trade in the 76.20-75.90 could hold for a day or two.
INTEREST RATES
The US Treasury yields remain lower and keep alive the chances of moving down further before reversing higher again. The German Yields looks vulnerable to fall further and negate out bullish view of seeing a rise back going forward. The price action in the coming days will need a close watch. The 10Yr GoI has dipped below 6% and can move down to test the range support in the near-term.
The US 2Yr (0.19%), 5Yr (0.33%), 10Yr (0.71%) and the 30Yr (1.48%) Treasury yields remain lower. As mentioned yesterday, the chances of seeing a further fall remains alive before we see a fresh rise. As such while below 0.75%, the 10Yr can fall to 0.60%-0.58% in the coming days. The 30Yr can fall to 1.30%-1.25% while it remains below 1.55%. Thereafter the yields can reverse higher again. A strong rise past 0.75% on the 10Yr and 1.55% on the 30Yr is needed to negate the above mentioned fall.
The German 2Yr (-0.67%), 5Yr (-0.65%) and the 10Yr (-0.41%) yields remain stable while the 30Yr (0.01%) has dipped slightly. The fall below 0% on the 30Yr will negate our bullish view of seeing a rise back to 0.25%. In turn it will drag the 30Yr lower back to -0.20%. In that case the 10Yr can also fall-back to -0.60% in the coming weeks. We will have to wait and watch.
The 10Yr GoI (5.9792%) has dipped below 6%%. (our less preferred view mentioned in the Morning Briefing yesterday) and can now test 5.95% on the downside. We expect the yield to bounce from 5.95% and remain in the range of 5.95%-6.05% for some time.
