STOCKS
Equities look mixed. As cautioned, the Dow has come-off from the crucial 28000-28200 resistance zone and is keeping alive the chances of seeing a corrective fall from here. It will need a close watch. DAX has risen above 12800 thereby avoiding the danger of seeing fall that we had been mentioning for some time. It can move up further. Nikkei is trading at a key range resistance which has to be broken in order to move up. Else it can fall within the range. Shanghai has come-off sharply and can move down within its broad sideways range. Sensex and Nifty can dip today taking cues from the fall in the SGX-Nifty (11232.50, -108, -0.95%). However, the broader picture continues to remain bullish for both Sensex and Nifty with strong supports on the downside.
The Dow (27686.91, −104.53, -0.38%) has come-off from the high of 28154 yesterday. As we have been mentioning over the last few days, 28000-28200 is a key resistance region which will need a close watch. Inability to breach 28200 can trigger a corrective fall to 27000-26500 over the next few weeks. We retain our view of staying cautious on the Dow at current levels. A strong rise past 28200 is needed to become more bullish.
DAX (12946.89, +259.36, +2.04%) has surged above 12800. The danger of seeing a fall to 12000 and 11500 that we have been cautioning over the last few days stands negated now. The near-term view is positive. 13200 is the next important hurdle that can be tested now. A strong break above 13200 will then pave way for a further rise to 13600 and 13800 over the medium term.
Nikkei (22789.15, +38.91, +0.17%) sustains higher but will need to gain momentum and rise past the 22800-23000 resistance region. As mentioned yesterday, a strong break above 23000 is needed to become bullish to see 23800-24000 on the upside. While below 23000, a fall-back to 22500-22000 can be seen again and the current sideways range of 21500-23000 will continue to remain intact.
Shanghai (3304.57, −35.72, -1.07%) has failed to breach 3400 and has come-off sharply after making a high of 3409 yesterday. The index can now fall to 3250-3200 within our preferred broad range of 3180-3450.
Nifty (11322.50, +52.35, +0.46%) had come-off from the high of 11373.6 yesterday. The index could dip to 11250-11200 today taking cues from the fall in SGX-Nifty (11232.50, -108, -0.95%). This could delay our preferred rise to 11400-11600. However, the broader view continues to remain bullish with strong supports at 11200 and 11000. Only a fall below 11000 will turn the outlook bearish.
Sensex (38407.01, +224.93, +0.59%) on the other hand can test 38000 today. But the downside is likely to be limited and our broader view of seeing 39500-40000 will continue to remain intact as long as it trades above the 37500-37000 support zone.
COMMODITIES
The much awaited fall in precious metals is seen finally. After such a sharp rise seen over the last few weeks, Gold and Silver may spend some time cooling off the bullish effect. With a sharp fall already seen in a single sessions, it would be important to see if the prices continue to fall or bounce back a bit from current levels. Copper has dipped and trades above support levels which if holds could soon produce a bounce. Crude prices are stable while we continue to look for a trigger that could take the prices higher soon.
Brent (44.59) and WTI (41.66) have dipped from levels seen yesterday. Stability is still seen in crude prices and a pick up in upside momentum is needed for it to break above initial hurdles. For now we continue to look for bullish signals on a break above 45.27 on Brent and 42.50 on WTI for the near term. Overall view is potentially bullish.
Gold (1900.40) and Silver (24.07) have both declined sharply on some signs of strength in the US Dollar. Note that 1900 is an important support on the daily charts and while that holds, a short bounce from here could be possible towards 1950-1960. A break below 1880 is needed in the medium term to expect further decline in the near term. Silver also has fallen sharply in line with our expectation of seeing a corrective dip soon. On the daily charts, support is seen near $21 but we would look to see if a short bounce is seen from $24 itself towards $26. Else if the bears remain intact, we may expect a test of $21 before the prices rise back towards $24-25 again in the longer run.
Copper (2.8305) is likely to continue in the range of 2.80-3.00 for now and we would wait for break on either side to decide on further direction. Watch support at 2.80 which if holds could produce a bounce towards 2.90/95 in the net few sessions.
FOREX
Dollar Index shows some sign of strength while the fall in Euro indicates a further fall confirming a double top pattern on the charts. EURJPY could dip in the near term with important resistance near 126. Dollar Yen has moved up as Gold fell sharply; upside could be limited in the near term. Aussie and Pound look bearish for the near term with immediate resistances holding well. Dollar-Rupee may see a gap-down opening today but we would have to see if RBI allows the appreciation or takes the pair back to higher levels.
Dollar Index (93.83) seems has moved up and is heading towards immediate and initial hurdle of 94. A break above 94 would be needed to sustain the upmove and target further rise towards 95 and higher in the upcoming sessions. Watch price action near 94.
Euro (1.1721) has dipped further confirming the double top formation just above 1.19 on the daily charts. While the fall sustains, we may expect a dip towards 1.1630 in the near term. View is bearish for the near term.
EURJPY (125.08) has moved up a bit but has crucial resistance near 126 which could likely hold for the near term and push the pair back towards 124. A rise in Dollar Index above 94 would drag the pair down in the near term. Watch price action near 126 for now.
Dollar-Yen (106.74) has moved up sharply boosted by the sharp fall in Gold prices (refer to commodity section above) and some strength visible in the US Dollar. A rise to 107.54 could be seen initially before a dip from there is seen back towards 106.30.
Aussie (0.7120) fell on weakness in Copper prices and on strength seen in US Dollar. Immediate support is seen at 0.71 which if breaks could see prices drag down to 0.70 in the near term. On the contrary, if 0.71 holds, Aussie may again try to bounce back towards 0.72.
Pound (1.3030) has held below crucial resistance at 1.32 and is heading towards immediate support at 1.30 which may break and take the currency down towards 1.28 in the near term. View is bearish on a break below 1.30.
USDCNY (6.9550) has bounced a bit and is likely to trade within the broad 6.97-6.9350 region for the upcoming sessions. A break on either side would be needed to confirm further direction from here. For the near term, price is likely to be ranged.
USDINR (74.77) fell sharply to levels near 74.60 in the offshore market after news stated registration of vaccine for Corona Virus by Russia. While the movement in the offshore market indicates a possible gap down opening today with chances of testing 74.50/25 on the downside, it would be important for RBI to stay away from intervention in order to facilitate such a move. Any buying seen from RBI would prevent appreciation of Rupee and bring it back to the 74.70-74.90 range for the day. Watch price action today for a possible gap down opening towards 74.50.
INTEREST RATES
The news on Russia approving a vaccine for corona virus has triggered a sharp fall in safe-haven assets like gold and bonds yesterday. As a result the Treasury yields have surged across tenors. The expected bounce has happened finally and there is room to move up further. The German Yields have also risen back sharply and are likely to see a corrective rally in the near-term before resuming their downtrend. The 10Yr GoI sustains higher and is bullish to move up further in the near-term.
The US 2Yr (0.15%) and 5Yr (0.28%), 10Yr (0.64%) and the 30Yr (1.33%) Treasury yields have surged across tenors, especially at the far-end. The danger of falling below 0.40% (10Yr) and 1.10% (30Yr) has been negated now. The outlook is bullish. The 10Yr has come into the 0.60%-0.65% region as expected and the 30Yr has moved beyond our expected level of 1.30%. A break above 0.65% can take the 10Yr higher to 0.70% and even 0.80% in the coming days. The 30Yr can rise to 1.40% and even 1.50% on a strong break above 1.35%.
The German 2Yr (-0.69%), 5Yr (-0.69%), 10Yr (-0.48%) and the 30Yr (-0.05%) have reversed sharply higher across tenors. While this bounce sustains a further corrective rise to -0.40% on the 10Yr and 0% on the 30Yr is possible. However, the broader trend continues to remain down. We can expect a fresh leg of fall from -0.40% (10Yr) and 0% (30Yr) eventually.
The 10Yr GoI (5.9072%) dipped to 5.8853% yesterday but has bounced-back well from there. This keeps the chances high of the yield breaking above 5.92% and move further higher to 5.95% in the near-term. The chances of seeing a test of 5.85% while below 5.92% stands reduced now.
