STOCKS
Equity indices remain subdued as they continue to lack a fresh trigger to move up. The on going corona virus stimulus negotiations by the US Government and the US Federal Reserve meeting on Wednesday are key events to watch for this week that can influence the equity market movement. A sideways consolidation looks likely to be a possibility in the major indices for some time before a clear trend emerges. Dow has come down within our preferred 26000-27000 range. DAX, Nikkei and Shanghai are poised at their key supports which we expect to hold and keep the indices in a sideways range. Sensex and Nifty can also remain range bound before seeing a fresh from here.
The Dow (26469.89, −182.44, -0.68%) has come down further within our preferred 26000-27000 range. Our view remains the same. 26000-27000 is the range that can be seen for now. A strong break below 26000 will trigger the expected corrective fall from here itself without seeing another rise to 28000 levels that we had been expecting.
The DAX (12838.06, −265.33, -2.02%) has come down sharply below 13000 on Friday. However, it can find support at 12800 and see a bounce again. 12800-13200 range is possible for some time before our preferred rise to 13350-13400 happens. Our medium-term view of seeing 13800 on the upside also remains intact.
Nikkei (22751.61) has bounced from the low of 22429 and need to be seen if it can sustain above 22500 or not. A break below 22400 will be bearish to see a fall to 22000 or even lower. Such a break below will also negate the chances of seeing a break above 23000 that we have been looking for.
Shanghai (3285.98, −39.13, -1.18%) tested 3200 again as expected and is bouncing back from there. 3200-3180 region continues to serve as a support and a further rise to 3300-3350 can be seen again in the coming days. From a bigger picture we retain our view of seeing a broad range of 3200-3450 for a few weeks. Only a strong break below 3180 will negate this view and turn the outlook negative.
Nifty (11194.15, -21.30, -0.19%) retains its 11000-11250 range in line with our expectation. It can continue to trade in this range for some more time. Our bias remains bullish to see a break above 11250 and a rise to 11400-11600 eventually.
Sensex (38128.90, −11.57, -0.03%) on the other hand continues to oscillate around 38000. As mentioned on Friday, a strong close above 38200 will be needed to boost the momentum and take it up to 39000 and further higher levels.
COMMODITIES
The plunge in Dollar Index seen over the last week continues to keep upward pressure on precious metals intact taking up Gold and Silver sharply higher. With some more room left on the downside for Dollar Index (Refer Forex section below), we may expect Gold and Silver to move up some more before a corrective fall is seen. Copper may be expected to trade sideways while resistance at 3 holds. Crude prices are stable but are likely to move up slowly in the near term before a corrective fall is seen by next week.
Brent (43.15) and WTI (41.17) have dipped slightly. For Brent, a successful break above 45.27 is needed to take it further towards 50 while WTI looks strong in the near term and may continue to see narrow movements on either side. While the longer term look bullish for both WTI and Brent, we may expect some corrective fall in the near term as Brent hits 45.27 on the upside before a rally again sets in. WTI could test 43.50-44 (revised from 43 mentioned on Friday) on the upside.
Gold (1918.10) and Silver (23.32) continue to rise towards 1940/60 and 24 respectively. Near term looks strongly bullish while the upside momentum continues to hold. Gold has broken above the multi-year resistance near 1900 with ease but we would be cautious for a corrective fall from 1960 in the near term especially after such a strong rally over the last few weeks. Unless a bounce back is seen in Dollar Index, precious metals would continue to move up or remain at higher levels.
Copper (2.90) is unable to break above the crucial resistance at 3. But at the same time, refuses to fall below 2.85 as a signal of further bearishness. In that case, the price could spend more time in the 2.85-3.00 region before eventually breaking on the upside. Continuous attempts to break above 3, if seen in the near term could get it higher in the longer run. Only a sustained break below 2.80 would indicate bearishness coming in.
FOREX
Dollar Index looks weak and could pull up Euro, EURJPY, Yen and Pound in the near term. Aussie needs to break above 0.72 to move up further while Chines Yuan looks stable just now. We may expect some strength in Rupee while Euro trades higher.
Dollar Index (93.91) has fallen below 94 and looks strongly bearish for the near term. Our mentioned 93.90 on Friday has been tested now and while the fall continues, some more room is seen on the downside towards 93.20-93.10 before a possible bounce comes in. Watch for a fall towards 93.20/10 in the near term.
Euro (1.1711) on the other hand is headed towards 1.1750-1.1800 that we had mentioned on Friday. The upside target remains intact for now as Dollar Index heads towards 93.20/10. Near term is bullish for Euro.
EURJPY (123.62) is bullish along with a rise in Euro. 124 is now an immediate obstacle which if breaks on the upside could take the pair towards 124.60 by the end of the week. The next interim resistance above 124 is seen near 127.50.
Dollar-Yen (105.55) has fallen below 106, unable to sustain on the upside after continued attempts. While below 106, there is room for a test of 105-104 in the near term. Our earlier mentioned 108-106 can be negated while below 106.
Aussie (0.7135) has immediate resistance at 0.72 which if breaks on the upside, could take it to 0.74 in the near term. But we would be cautious to see a rejection from 0.72 just now. With resistance near 3 holding on Copper, we may expect 0.72 to hold on Aussie just now.
Pound (1.2846) has broken above our expected 1.28 and could be headed towards 1.30/31 now as Dollar continues to remain weak. Near term is bullish.
USDCNY (6.9966) is likely to remain ranged within 7.03-6.9 region.
USDINR (74.8350) can come down towards 74.60/50 again if the immediate resistance at 75 holds for the near term. While strength is seen in other currencies on Dollar weakness, we expect Rupee to see some strength in the near term too.
INTEREST RATES
The US Treasury yields continue to hover around their crucial support. While we expect the supports to hold and produce a bounce, a further fall from current levels will prove our bullish bias wrong. The US Federal Reserve meeting on Wednesday and the ongoing negotiations on the corona virus stimulus are the key events to watch this week that can influence the yield movement. The German Yields have bounced-back and can remain in a sideways range for some time before our preferred fall happens. The 10Yr GoI can remain stuck in a narrow range.
The US 2Yr (0.15%), 5Yr (0.27%), 10Yr (0.59%) and the 30Yr (1.23%) Treasury yields remain stable around their crucial supports. The 10Yr is at its crucial support level of 0.58%. Our view is to see a fresh bounce from there. The 30Yr on the other hand has dipped just below the key level of 1.25% and needs to be seen if it can bounce-back. As mentioned on Friday, inability to bounce from current levels will negate our bullish view and will drag the yields lower to 0.40% (10Yr) and 1.15%-1.10% (30Yr).
The German 2Yr (-0.67%), 5Yr (-0.65%), 10Yr (-0.45%) and the 30Yr (-0.03%) yields have moved up further higher across tenors. Our earlier view of seeing a narrow consolidation before seeing a fresh fall from here seems to be still in place. As such the 10Yr and 30Yr can trade in the -0.48%/-0.40% and -0.05%/0.05% range respectively for some time before falling to -0.60% (10Yr) and -0.20% (30Yr) eventually.
The 10Yr GoI (5.8177%) sustains above 5.80% and retains the 5.80%-5.85% range. This range is likely to remain intact. In case of a break below 5.80%, then a fall to 5.78%-5.75% will come into the picture in which case the broader 5.75%-5.85% range will come into play.
