STOCKS
Equity segment continues to trade mixed. While the hope for seeing one more rally from here is still there, lack of momentum and fresh trigger leaves the scenario actually in a “could go either ways from here” situation. The US Federal Reserve indicated yesterday that the rates will remain at current levels until 2023 atleast. We retain our view on the major equity indices. The Dow will have to rise past 28500 decisively to become more bullish towards 29000-29500. DAX has to sustain above 13100 to keep the near-term bullish view intact of seeing 13800 on the upside and then a sharp correction. Nikkei has fallen back into the 23000-23500 range. Shanghai can move down towards the lower end of its 2180-3450 range. Sensex and Nifty have risen well yesterday but could see an intermediate dip today following the weakness in the Asian indices which could delay further rise.
Dow (28032.38, +36.78, +0.13%) seems to lack strong follow-through rise above 28000. We reiterate that a strong rise past 28500 will be needed to strengthen the case of seeing 29000-29500 on the upside. Thereafter a sharp correction is possible. 27500 is a good support now. A break below it will reduce the chances of rising past 28500 and in turn will increase the danger of the index falling below 27000. We will have to wait and watch.
DAX (13255.37, +37.70, +0.29%) continues to hover above 13200. We retain the near-term bullish view of seeing 13800 on the upside while the DAX remains above 13100. Thereafter a sharp correction is possible. A fall below 13100 from here itself will bring back the 12800-13200 range in to play again. As mentioned yesterday, only a strong break below 12800 will turn the outlook bearish.
Nikkei (23301.46, −174.07, -0.74%) has failed over the last few days in its attempts to see a sustained break above 23500. The 23000-23500 range can continue to remain intact and the rise to 24000 could get delayed. A breakout of this range will then decide whether the Nikkei will move up to 24000 or fall to 22500 from here. We will have to wait and watch.
The break above 3300 on Shanghai (3263.07, −20.86, -0.64%) is not happening. This has reduced the chances of seeing the rise to 3400-3450. While below 3300, Shanghai can now fall to 3200-3180 – the lower end of the broad 3180-3450/70 range.
As expected Nifty (11604.55, +82.75, +0.72%) has risen and closed just above 11600. While the bias is bullish to see a further rise to 11800 and 12000 in the coming weeks, weakness in the Asian indices on early trades today can drag the Nifty below 11600 today and put it back into the 11400-11600 range again. We will have to wait and see.
Sensex (39302.85, +258.50, +0.66%) has risen well above 39000 looks relatively much stronger than the Nifty. A test of 40000 is likely in the near-term. The upside can extend up to 40500-41000 as well. Supports are at 39000 and 38735.
COMMODITIES
Crude prices have risen slightly while Gold Silver and Copper have dipped. Gold and Silver could be ranged just now but are fairly bullish while above immediate supports. Copper too has similar support at 3 and may bounce back in a few sessions to test 3.10/15. Brent needs to sustain the rise above 42 and eventually break above 42.50 to bring back steady upside momentum to target higher levels while WTI needs to break above 40-41 to move up further. Although the FOMC kept rates unchanged, there has been some volatility in the crude markets overnight.
Brent (41.97) and Nymex WTI (39.94) have both risen after the FOMC yesterday but we need to see if the rise sustains and initiates further upmove for the prices from here. Support near 39.32 is holding well on Brent so far and similar support near 36.43 has been holding on WTI. While above immediate supports we may expect a steady rise from current levels by the next week. Important would be to watch if Brent holds above 42 and WTI above 39.50 today.
Gold (1953.90) has dipped a bit but while above 1930, we expect ranged trade to continue for some more time within 1930-1980 region. Unless a sustained break below 1930 is seen, we remain fairly bullish on Gold for a re-test of 1980-2000.
Silver (27.13) has also dipped a bit but could be fairly bullish while above 26. For now, we do not negate a possible rise to 29.
Copper (3.0290) has dipped too along with the dip seen in other commodities. But while above immediate support at 3, we may look for a re-bounce towards 3.10/15 soon.
FOREX
FOMC kept the rates unchanged and stated to continue with accommodative monetary stance. Dollar Index has risen thereafter dragging down Euro, EURJPY, Aussie and Pound. USDINR too could open higher today as Yuan has shown some weakness against the US Dollar today. Watch for a re-test of 73.80 today. USDJPY is bullish for a rise towards 107 while above crucial support at 105.
Dollar Index (93.45) has moved up after the FOMC but remains within the 92.70-93.70 range that we have been mentioning for quite some time now. A test of 93.70-94.00 would be crucial within the current upmove as a break or fell from the said levels would decide on further direction. Note that only a sustained break above 94 would we consider a possible upmove in the medium term.
Euro (1.1763) dipped back sharply after initially falling from 1.19 earlier this week. Currently trading at crucial near term trend support, it would be important to see if a bounce is seen from here back to 1.18+ or the currency falls back towards 1.17. While the Dollar Index heads towards 93.70-94.00, Euro may remain bearish.
EURJPY (123.58) has fallen below 124 and looks bearish for the near term targeting 123-122 soon.
Dollar-Yen (105.07) has seen a slight bounce from support at 105. While that holds, we may expect a rise towards 107 in the medium term.
Aussie (0.7277) has dipped and could re-test immediate trend support at 0.7243 before again bouncing back higher. The fall has also been in line with the dip seen in Copper (refer to commodities section above). A bounce in Copper from 3, could bring back a bounce in Aussie soon. Overall while above 0.7200-0.7243, there is still some chances of seeing an upmove towards 0.74.
Pound (1.2921) has dipped from 1.30 as expected and while 1.30 holds, we may expect a dip towards 1.29-1.28 again in the near term.
USDCNY (6.7720) has bounced from 6.75 instead of moving lower towards our mentioned 6.7392. On the charts, the view still remains bearish for a possible test of 6.7392 but could be delayed by the corrective bounce seen now. The bounce could be short lived and could extend to 6.7906 before a dip is seen again from there.
USDINR (73.5250) came off from 73.78 yesterday, ranging within 73.40-73.80 (revised from our earlier range of 73.30-73.70). A re-test of 73.70/80 looks possible while the US Dollar has strengthened and most other currencies have shown weakness today. Watch price action today to see if the pair moves back towards 73.80 or higher. On the upside we do not expect a break above 74. Eventually the pair is expected to fall towards 73 in the longer run.
INTEREST RATES
The US Federal Reserve left the rates and current stimulus plan unchanged yesterday. The rates are likely to remain at current levels until 2023 as the central bank doesn’t look for the inflation to rise towards 2% until then. The US Treasury yields remain stable and are likely to remain in a sideways range in the short-term within their long-term downtrend. The German Yields can trade sideways for some time with a bearish bias to see a downside break of those ranges eventually. The 10Yr GoI can dip within the 5.90%-6.10% range in the near-term.
The US 2Yr (0.14%), 5Yr (0.28%), and 10Yr (0.68%) Treasury yields remain flat at levels seen on early Asian trades yesterday while the 30Yr (1.44%) has inched up by 1 bps. The near-term outlook is mixed and the yields can remain in the range of 0.65%-0.73% (10Yr) and 1.40%-1.50% (30Yr). A breakout on either side of these ranges will decide whether the 10Yr can rise to 0.80% or fall to 0.50% and the 30Yr can test 1.60-%1.65% on the upside or decline to 1.30%-1.25% in the coming weeks. The long-term trend is however down and so any upmove will be capped even if the yields break the current ranges on the upside.
The German 2Yr (-0.70%), 5Yr (-0.69%), 10Yr (-0.49%) and the 30Yr (-0.05%) yields remain lower and stable. The bearish view of seeing -0.10% and even -0.20% on the 30Yr remains intact while it trades below 0%. A strong rise past 0.05% is needed to negate this fall. The 10Yr is likely to remain sideways between -0.40% and -0.50% with a bearish bias to break -0.50% and test -0.60% on the downside eventually.
As mentioned in the Morning Briefing yesterday, 10Y GOI (5.9927%, 05.77 GS 2030) has dipped further to test 6%. While below 6%, the yield can test 5.95%-5.93% in the near-term and then can reverse higher again. Broadly, the 5.90%-6.10% range mentioned yesterday remains intact.
