STOCKS
Equities remain mixed and could continue to trade sideways for some more time. The crucial supports mentioned yesterday on the major indices are holding for now. We will have to wait and see if the indices manage to bounce-back sharply in the coming days. DAX has bounced from 12800 and can move up to the upper end of the 12800-13200 range. Dow was closed yesterday. Nikkei remains stuck inside a narrow range. Sensex and Nifty have bounced from their respective key support. But they will have to see a strong follow-through rise in the next few days to regain strength. Shanghai has declined and can fall within its sideways range.
Dow (28133.31) was closed yesterday.
The crucial support level of 12800 on the DAX (13100.28, +257.62, +2.01%) has held very as expected and the index has bounced. This has reduced the danger of breaking below 12800 and a fall to 12400 that we had cautioned yesterday. The 12800-13200 range remains intact now. We retain our bullish bias to see an eventual break above 13200 and a rise to 13800 before a sharp corrective fall comes into play.
Nikkei (23217.64, +127.69, +0.55%) continues to trade stable inside the 23000-23500 range. We expect the index to retain this range for some more time. 22500-23500 can be a broader range that is possible in case if 23000 is broken now. For now we retain our bullish view of seeing 24000 on the upside first before a sharp correction begins. Only a strong break below 22500 will negate the chances of seeing 24000.
Shanghai (3291.28, −1.31, -0.04%) has declined sharply and will now be heading towards the lower end of the 3250-3450 (narrow) range as mentioned yesterday. The near-term outlook is negative and the chances are high for Shanghai to break 3250 and extend the fall to 3200-3180 (the lower end of the broad 3180-3470 range) in the coming days.
Nifty (11355.05, +21.20, +0.19%) has bounced-back well after testing the crucial support level of 11250. As mentioned in the Morning and Evening Comments yesterday, Nifty will have to breach/close above 11400 decisively in order to bring back the strength and avoid the danger of falling below 11250. The price action in the coming days will need a close watch.
Sensex (38417.23, +60.05, +0.16%) on the other hand is managing to sustain above 38000 and can consolidate between 38000 and 39000 for some time. A strong rise past 39000 will be needed to keep the bullish view alive of seeing 40500-41000 and also to negate the chances of declining below 38000.
COMMODITIES
Crude prices have dipped and may continue to fall for a few more sessions (about a week maybe) before bouncing back from there to higher levels. Gold and Silver trade above important supports and need to sustain higher in order to keep the upside momentum intact. We would wait for price confirmation from these supports for further direction. Copper could trade within 3.10-2.95 for some time before rising towards 3.15/20 in the longer run (say in the next 1-2 weeks)
Brent (42.07) and WTI (39.13) trades lower but both have series of supports coming up in the
41-39-37.50 and 37.50-35.00 region respectively from where a bounce back towards higher levels looks possible.
Gold (1931.90) trades slightly lower today but remains steady above 1920. Some trade within 1920-1960 looks possible on the near term charts but thereafter we wait for confirmation to decide on further movement. A break on the downside below 1920, if seen could make it vulnerable to a fresh fall.
Silver (26.96) has also dipped slightly but has scope to bounce back while above 26.70. Failure to sustain above 26.70 could drag it down towards 24. But for now we would wait for confirmation for a break or bounce from 26.70.
Copper (3.0655) has interim resistance near 3.10 which may hold just now to keep the price within 3.10-2.95 region for a few sessions before a rise back towards our expected 3.15/20 takes place. We may allow for a sideways consolidation between 2.95-3.10 for the next 4-5 sessions.
FOREX
Dollar Index has moved up and look bullish towards 94 while Euro has immediate support near 1.1768 which if breaks could trigger a fresh fall. EURJPY is on the verge of breaking below support and may continue to fall in absence of an immediate bounce from current levels. Dollar-Yen could rise towards 107 before dipping back towards 106;
Aussie and Pound look bearish towards respective supports. USDCNY may hold above support at 6.80. For USDINR, we watch resistance at 73.50 which if holds could keep the pair in the 73.50-72.90 region for the week; else we may have to allow for a test of 73.70/90 before a fall sets in.
Dollar Index (93.14) has moved up above 93 and has managed to sustain higher. A similar break above 94 is also needed to bring back bullishness in the index for the longer term. We may look for a test of 94 while above 93. Note that 94 is an important resistance above current levels.
Euro (1.1805) has important support at 1.1768 which needs to break in order to turn bearish for the upcoming sessions. While Dollar Index moves towards 94, we may expect a test of 1.1768 on Euro soon. Thereafter, we would wait for confirmation of movement from support levels.
EURJPY (125.48) has just broken below daily trend support at 125.49 and if that sustains, we may have to allow for an eventual fall towards 124.40-124.24 soon. View is bearish while below 125.48.
Dollar-Yen (106.27) remains stable and is broadly trading in the 107-105 region as mentioned yesterday. An initial rise to 106.80-107.00 is possible followed by a fall towards 105.
Aussie (0.7278) has immediate support at 0.7239 and while that holds, we may expect a bounce back towards 0.74-0.75. Overall view is bullish for the near term. A break below 0.7239, if seen could limit the downside to 0.71 which is also a crucial trend support on the daily charts.
Pound (1.3145) has been on a decline in the last few sessions and looks bearish towards 1.30 in the next 3-4 days.
USDCNY (6.8356) has scope to test support near 6.80 from where a bounce is likely towards 6.85/87.
USDINR (73.34) rose to test 73.41 before dipping back to close lower yesterday. While resistance at 73.50 holds, we may expect trade in the 73.50-72.90 region but equal chances of breaking above 73.50 is seen which could take the pair higher towards 73.70/90 before a fall back towards 73.00-72.90 is seen in the longer run (1-2 weeks). Watch price action near 73.50 today.
INTEREST RATES
The US Treasury yields will have to sustain the bounce seen on Friday after the jobs data in order to bring back the earlier bullish view and negate a fall from here. The German yields can dip in the near-term to test their important supports. Whether they break below their supports or not will determine the next move. The price action this week will need a close watch. The 10Yr GoI will have to breach 6% now to see the current corrective rally extending further to 6.05%-6.07%.
The US 2Yr (0.14%), 5Yr (0.29%), 10Yr (0.71%) and the 30Yr (1.47%) Treasury yields remain stable. Our view remains the same. While the 10Yr sustains above 0.70% and moves up further from here, the chances of seeing 0.80% and 0.90% will come back into the picture. In turn it will negate the chances of seeing a fall to 0.50%. The 30Yr on the other hand will become bullish to test 1.60%-1.65% on a strong break above 1.50%. It will also negate the danger of seeing 1.20% on the downside.
The German 2Yr (-0.71%), 5Yr (-0.69%), 10Yr (-0.46%) and the 30Yr (-0.01%) have moved up slightly. The near-term view is negative. -0.52% – an important support can be tested in the near-term and it has to hold in order to avoid a deeper fall to -0.60%. The 30Yr has room to test -0.11% from where it has to bounce-back to prevent a further fall to -0.20%.
The 10Yr GoI (5.9564%) had moved up to 6% as expected and has come-off from there. While below 6% the 10Yr GoI can trade in the range of 5.90%-6% for some time. A strong break above 6% will now be needed to take the yield further higher to 6.05%-6.07% and 6.10% eventually.
