STOCKS
Equity indices indicate that some more upside is possible before our preferred correction comes into play. Dow may attempt to breach 27000 and move up to 28000 before reversing lower. DAX remains strong and seems to have more upside from current levels than the Dow. Nikkei is stuck in a narrow range. Shanghai can move up to revisit the key resistance and then reverse lower to remain in a broad sideways range. Sensex and Nifty are bullish and can surge further in the coming days.
The Dow (26840.40, +159.53, +0.60%) has moved up within our preferred 26000-27000 range and may attempt to break above 27000. Such a break will pave way for a fresh rise to 28000 after which a corrective fall can come into play. For now the chances are turning high to see one more leg of rise before a correction is seen.
The DAX (13171.83, +124.91, +0.96%) broke above 13200 but has come-off from the day’s high of 13313.90. The broader view is bullish. The index can test 13350-13400 initially and then target 13500-13800 over the medium-term. Immediate support is at 13000 and then at 12800.
Nikkei (22832.26, −51.96, -0.23%) remains stuck in the narrow 22500-23000 range and seems to lack strength to breach 23000. As we have been mentioning for some time, a strong rise past 23000 is needed to pave way for a fresh rise to 24000. For now the index can retain the 22500-23000 range for some more time.
Shanghai (3366.65, +45.75, +1.38%) has risen towards 3350 as expected. The upside can extend upto 3400-3450 in the coming days. It will have to be seen if the index manages to breach 3450 or not. We prefer 3450 to hold and the Shanghai to remain in the broad 3200-3450 for a few weeks.
Nifty (11162.25, +140.05, +1.27%) has moved up further and keeps our bullish view intact of testing 11250 on the upside. A dip from 11250 to 11000 cannot be ruled out. But from a bigger picture Nifty is likely to breach 11250 and move up to 11400-11600 eventually.
Sensex (37930.33, +511.34, +1.37%) has an immediate resistance at 38100 a break above which will pave way for a further rise to 39000 or even higher levels. The outlook is bullish. A pull-back from 38100 if seen could be short-lived and will be limited to 37000.
COMMODITIES
Commodities maintain upside momentum as Dollar weakens further. Stimulus package of 750bln Euros in the European Union and the new aid package in the US may influence crude prices and take it higher but with API’s estimated build in crude inventories of 7.544 mln barrels for week ended 17th July may limit the upside just now. We look at price action near crucial resistances as mentioned earlier. The estimate is contrary to the analysts expectation of seeing a 1.95mln barrels draw. Precious metals and Copper also look bullish for the near term. Watch crucial resistance on Copper above current levels.
Brent (44.10) and WTI (41.68) have both surged but could see a corrective dip from 45 and 42.50 as mentioned yesterday. We continue to watch crucial resistance just now. A break above the mentioned levels, if seen and sustains would be further bullish in the longer run.
Gold (1859.20) and Silver (22.74) are rallying on Dollar weakness and could continue to remain strong for the near term. Silver has broken above the Jul’16 high near 21 and if the rally continues, we may expect a test of 23-24 on the upside soon before a corrective dip sets in. Gold, on the other hand could be headed towards 1860-1900 in the medium term.
Copper (2.9720) has moved up as expected and could face rejection from crucial resistance at 3. If the Dollar continues to weaken and other commodities continue to rally, then Copper may also be pulled up above 3 to indicate a further rise above 3. For now we watch price action near 3.
FOREX
Aggressive monetary policy and hopes of continued recovery keeps the Euro higher dragging down the Dollar Index sharply down. The strength seen in rest of the currencies is an impact of the Dollar weakness and while that continues, overall global currencies could remain strong for the near term.
Dollar Index (95.08) has fallen sharply and if it falls below 94.97, we may expect a fall towards 93.90 in the near term. View for the index is weak and under strong bearish influence just now.
Euro (1.1546) rally has taken it above our expected 1.15 and it could test 1.16 or even higher in the near to medium term towards strong trend resistance coming from the 2008-high near 1.60 on the longer term charts. A dip from 1.16 or slightly higher is possible in the medium term. But for now, view is bullish for Euro. Some profit taking could be expected from 1.16 on first testing.
EURJPY (123.26) is bullish towards 124 as we have been mentioning for the last few days.
Dollar-Yen (106.76) has fallen on Dollar weakness breaking below 107. A test of 106 looks likely for the near term but if the fall in Dollar Index continues longer, we may not negate a test of 105-104 on Dollar Yen. For now watch price action near 106.
Aussie (0.7133) has finally moved up after a short sideways ranged move below 0.70. A test of 0.72 or higher looks possible for the near term. A break above 0.72 could take it higher towards 0.74 in the longer run.
Pound (1.2725) has broken above 1.27 as mentioned yesterday and could be headed towards 1.2819 before facing a corrective dip from there. Downside is likely to be limited to 1.26.
USDCNY (6.9705) has dipped further. We may expect an extension of the current fall towards 6.95 in the near term. Near term view is bullish for Yuan.
USDINR (74.7450) could be headed towards 74.50 while the global currencies strengthen on Dollar weakness. View is bearish for USDINR.
INTEREST RATES
The US Treasury yields continue to trade lower and are poised near their key supports. We expect the yields to sustain above these supports and reverse higher eventually in the coming days. The German Yields remains stable amid the EU reaching a deal to approve the 750 billion Euro virus recovery fund. We expect the German yields to trade in a narrow range in the near-term and then fall. The 10Yr GoI has bounced-back contrary to our expectation and can trade in the range of 5.80%-5.85% for a few sessions.
The US 2Yr (0.14%), 5Yr (0.27%) and the 10Yr (0.60%) Treasury yields have inched lower by 1 bps each while the 30Yr (1.31%) remains stable. The 10Yr is at the -0.60%-0.58% support zone from where we expect it to bounce-back to target 0.70%-0.75% on the upside. The 30Yr has support in the 1.30%-1.25% region which can limit the downside and trigger a reversal towards 1.50% in the coming weeks.
The German 2Yr (-0.68%), 5Yr (-0.67%), 10Yr (-0.46%) and the 30Yr (-0.03%) remain stable. Our view remains the same. The yields can remain in a narrow range of -0.05%/0% (30Yr) and -0.45%/-0.40% (10Yr) in the near-term. The bias is bearish to see a downside break of the above mentioned ranges and a fresh fall to -0.60% (10Yr) and -0.20% (30Yr).
The 10Yr GoI (5.8296%) has risen back above 5.80% contrary to our expectation of seeing a dip to 5.78%-5.75%. A range of 5.80%-5.85% looks possible now. A strong rise past 5.85% will negate our bearish view of seeing 5.75% on the downside.
