STOCKS
Equities broadly remain stable. The Dow sustains higher and is inching higher towards 27600 as expected. DAX remains below 12800 and continues to looks weak for a fresh fall. Shanghai can trade in a narrow range for some time within our preferred broad range. Sensex and Nifty can also remain stable in a sideways range before moving higher eventually. Nikkei is closed today.
The Dow (27433.48, +46.50, +0.17%) remains higher and keeping our bullish view intact of testing 27600 on the upside. As we had mentioned last week a break above 27600 will see the upside extending to 28200 eventually. 28000-28200 can be good resistance zone for now from where we would be a little cautious to see a sharp corrective fall.
DAX (12674.88, +83.20, +0.66%) has been stuck in a narrow range below 12800. As we have been mentioning all through last week, a strong rise past 12800 is needed to bring back the bullishness. While below 12800 the bias is negative to see fall to 12000 and even 11500. A break below 11500 can trigger this fall.
Nikkei (22329.94, −88.21, +0.39%) is closed today.
Shanghai (3364.10, +10.06, +0.30%) fell to test 3300 on Friday as expected but has bounced back from there. The near-term outlook is mixed. Shanghai can remain in 3300-3400 range in the near-term within our preferred broad range of 3180-3450.
Nifty (11214.05, +13.90, +0.12%) continued to oscillate around 11200 on Friday as well. While below 11250, the index can remain in a range of 11000-11250 for some time. However, the bias continues to remain bullish while above 11000 to see a break above 11250 and a rise to 11400-11600 eventually.
{Sensex (38040.57, +15.12, +0.04%) on the other hand oscillates around 38000 and can remain in 37300-38300 (narrow) or 37000-38200 (wider) range for some time as mentioned earlier. A strong break above 38200 is needed to boost the momentum and take the Sensex higher to 39500-40000 going forward.
COMMODITIES
Crude prices trade stable with scope of rising in the near to medium term while Gold and Silver have dipped a bit but could be facing upward pressure while Dollar trades weak. A sharp and sustained rebound in the US Dollar will be needed to pull down precious metals for sometime. Copper has fallen sharoly to our lower limit of the mentioned range on demand and production concerns; we may expect a bounce just now or the prices may continue to extend lower.
Brent (44.78) and WTI (41.69) have risen slightly after seeing a dip on Friday. But the prices have held below 45.27 and 42.50 for now. We may look for stable movement in the near term while the prices may continue to slowly inch to the upside.
Gold (2037.10) and Silver (28.09) have dipped from last week’s highs and could see a short correction before resuming the uptrend. Unless a sharp bounce and sustained upmove is not seen in the US Dollar Index, we may consider upside pressure to remain on the precious metals.
Copper (2.8015) has moved down sharply to our expected lower end of the 2.80-3.00 range that we have been mentioning for quite sometime. The sharp fall came in as investors increased short positions and concerns loom over production in China and Peru thereby impacting demand for the coming months.
FOREX
Dollar Index may attempt to move up in the near term pulling up Dollar Yen and thereby dragging down Euro, EURJPY, Pound and Aussie. Yuan looks weak today with a possible test of 6.9834 while Rupee may broadly trade within a range.
Dollar Index (93.34) seems to have formed a double bottom near 92.55 and while that holds, we may expect the index to now show a rise from here towards 94-95 in the near to medium term. Initial break and sustenance above 94 is important for the upward rally in the coming sessions.
Euro (1.1792) dipped well from levels above 1.19. As mentioned last week, there seems to be a double top formation on the daily charts which if holds could down Euro towards 1.17 or even lower in the near to medium term.
EURJPY (124.74) has scope for a fall towards 124.0-123.95 on the downside for the near term. If the weakness in Euro is confirmed for the medium term, we may expect EURJPY also to dip lower in the coming sessions. Resistance on the upside is seen near 126-127.
Dollar-Yen (105.78) has been stable below 106. Immediate channel resistance is seen near 106.36 and while that holds, a dip towards 105 could be on the cards. Only a sustained rise, if seen in Dollar index could prevent further fall in Dollar-Yen given the positive directional correlation between the two.
Aussie (0.7165) has dipped on a sharp fall seen in copper. While immediate resistance near 0.72 holds, Aussie may trade in the 0.70-0.72 region for some time.
Pound (1.3068) has been holding well below 1.32 and is expected to trade in the 1.32-1.30 range for some time. We would watch price action near 1.30; a break below which could open up chances of testing 1.28 on the downside.
USDCNY (6.9674) has channel resistance near 6.9834 on the daily charts and while that holds, a dip back towards 6.9/93 could be possible. Only a break above 6.98 would negate further fall from here.
USDINR (74.9350) could trade within 74.90-75.10 for the near term while extension towards 74.70/80 and 75.20/25 is possible on either side. We wait to see which direction it take s in the near term.
INTEREST RATES
The US Treasury yields have inched higher on Friday as the non-farm payroll numbers beat the market expectation. The US added 1.76 million jobs as against the market expectation to see an increase of 1.5 million in the non-farm payrolls. The supports on the US Treasury yields seem to be holding for now and a follow-through rise in the yields from here will avoid the danger of breaking below those supports. We will have to wait and watch. The German yields continue to trade lower and look bearish to fall further. The 10Yr GoI sustains higher and can move up further from current levels.
The US 2Yr (0.13%) and 5Yr (0.23%) Treasury yields have inched higher by 2 bps each while the 10Yr (0.56%) and the 30Yr (1.23%) have bounced 4bps each. The support at 0.50% on the 10Yr and 1.18% on the 30Yr seems to be holding well for now. However, it will have to see if they can sustain the current bounce which is needed to take them further higher to 0.60%-0.65% (10Yr) and 1.25%-1.30% (30Yr) and also avoid a fall to 0.40% (10Yr) and 1.10% (30Yr).
The German 2Yr (-0.70%), 5Yr (-0.70%), 10Yr (-0.51%) and the 30Yr (-0.11) German yields have inched slightly higher on Friday. However, broadly they continue to remain lower. We retain our bearish view of seeing a fall to 0.60% on the 10Yr and -0.20% on the 30Yr. Resistances at -0.45% (10Yr) and -0.05% (30Yr) can cap the upside.
The 10Yr GOI (5.8880%) has moved up further in line with our expectation. Our bullish view of seeing 5.90%-5.92% on the upside remains intact while the 10Yr GoI sustains above 5.85%.
