STOCKS
Equities continue to trade mixed. The wait and watch and could go either ways from here stance continues to remain intact. Dow has dipped below 28000 and seems to lack strength to see a sustained rise above 28000. DAX still keeps alive the chances of seeing one more leg of rise before seeing a sharp correction. Nikkei and Shanghai are stuck in a narrow range. Sensex and Nifty have near-term supports which are likely to hold and keep the chances high of seeing a rise from here.
Dow (27901.98, −130.40, -0.47%) has dipped below 28000. The chances of seeing a strong rise past 28500 seems to be reducing. 27500 will be an important level to watch which if broken can take the Dow lower to 27000. It will also increase the downside pressure to drag the Dow deeper below 27000 towards 26000 eventually. We will have to wait and watch closely.
DAX (13208.12, −47.25, -0.36%) fell below 13100 but had bounced-back again taking support from near 13000. We retain our bullish view of seeing 13800 on the upside first before a sharp corrective fall begins. As we have been mentioning over the last few days, only a strong break below 12800 will negate the above mentioned rise to 13800 and will trigger a fall from here itself.
Nikkei (23352.41, +33.04, +0.14%) remains stable inside the 23000-23500 range. A breakout of this range will determine whether a rise to 24000 or a fall to 22500 happens from here. From a bigger picture 24000-24500 is a strong resistance zone that can cap the upside if a breakout above 23500 is seen from going forward.
Shanghai (3273.88, +3.44, +0.11%) has been stuck in between 3250 and 3300 all through this week. A breakout on either side of this range will give a cue on whether the index will move up to 3400-3450 or fall to 3200 within its broad 3180-3450/70 range.
As expected, the weakness in the Asian indices had dragged the Nifty (11516.10, -88.45, -0.76%) below 11600 yesterday. Immediate support is in the 11450-11400 region and a range-bound move between 11400 and 11600 is possible in the near-term. A strong rise past 11600 will now be needed to strengthen the case of seeing 11800-12000 levels.
Sensex (38979.85, −323, -0.82%) has an immediate support at 38770 which will need a close watch today. A break below it can drag the Sensex lower to 38000 and in turn will reduce the chances of seeing a rise to 40000 levels.
COMMODITIES
Commodities have risen yet again as Dollar shows weakness after a short rise seen yesterday as an after impact of the FOMC policy statement. Crude prices have risen well as our expected supports are holding for now. Brent and WTI could soon rise towards 45-46 and 44 respectively. Gold, Silver and Copper have also risen well and look bullish for the near to medium term towards 1980/2000, 29 and 3.10/15 respectively.
Brent (43.34) and Nymex WTI (41.23) have risen well while our expected supports near 39.32 and 36.43 seems to be holding well on Brent and WTI respectively, thus negating any possible fall towards 37.50-35.00 (Brent) and 33 (WTI) just now. View could now be turning bullish for the near to medium term. Immediate targets on the upside are seen at 45-46 on Brent and 44 on WTI. Overall view is bullish.
Gold (1958.70) has also gained some upward momentum and while above 1930/40, we may not negate a test of 1980/2000 in the coming week.
Silver (27.24) is sustaining above 27 and looks bullish for a rise towards 29.
Copper (3.0895) has bounced back sharply moving towards our expected 3.10/15. View is bullish for the near term.
FOREX
US Dollar shows weakness again as the Dollar Index falls below 93 letting Euro, EURJPY, Aussie and Pound to strengthen a bit. Only if the Dollar index continues to fall towards 92.50, we may expect strength in other currencies to sustain for some more sessions. USDINR may also be expected to fall towards 73.45/50 as Euro and Chinese Yuan trades higher. Euro could try to re-test 1.19 again. USDJPY needs to hold above 104.50 to re-bounce to 105+ in the next 1-2 sessions; else a test of 104 cannot be negated.
Dollar Index (92.96) came off from 93.60 yesterday, just below our mentioned resistance at 93.70. While below 94.0-93.7, the index has room for a dip to 92.70-92.50 in the near term. Immediate view is bearish.
Euro (1.1844) has bounced back from 1.1737 instead of moving lower as Dollar Index dipped below 93. A re-test of 1.19 could be possible on Euro for the near term as the Dollar Index tests 92.70/50.
EURJPY (124.20) bounced back sharply from 123.30 instead of falling to 123 or lower as mentioned yesterday. The turn in movement is due to the fall in the Dollar Index from below our expected 93.70/94.00 levels. A test of 125 could be possible in the near term but failure to rise above 125 could keep bearish view intact for the medium term.
Dollar-Yen (104.85) tested 104.50 on a break below 105 yesterday. While above 104.50, we may expect a rise back towards 105.50/70 in the near term. Failure to hold above 104.50 could drag the pair down to 104 soon.
Aussie (0.7317) has risen well from immediate support near 0.7253 and could slowly inch upwards while the Dollar Index trades weak and Copper prices continue to rise (refer to commodities section above)
Pound (1.2942) has dipped from 1.30 a expected and while that holds, near term is bearish for a fall towards 1.28.
USDCNY (6.7573) has fallen bit and has scope for a dip towards 6.7392 in the near term. Immediate view is bearish.
USDINR (73.6550) tested 73.77 before closing lower. But after seeing an overnight fall in Dollar Index and an eventual rise in Chinese Yuan and Euro, Rupee could show some strength today towards 73.50/40. We may expect a dip to lower limit of the 73.80-73.40 range today. A break below 73.40 and further below 73.30 would be needed to turn further bearish. At the same time we remain cautious of any possible rise above 73.80 which could be triggered either on RBI buying dollars near 73.50 or on weakness in Euro and Yuan seen on a possible US Dollar strength.
INTEREST RATES
The US Treasury yields continue to trade stable. The near-term outlook is mixed and the yields can remain in a sideways range for sometime. The German Yields have dipped and are keeping our bearish bias intact. We expect them to fall breaking below their immediate supports in the coming days. The 10Yr GoI has bounced back but will have to breach 6.05% to move up further. We look for a range of 5.95%-6.05% for a few sessions.
The US 2Yr (0.14%), 5Yr (0.27%), 10Yr (0.68%) and the 30Yr (1.44%) Treasury yields continue to trade flat. The 0.65%-0.73% range on the 10Yr and 1.40%-1.50% on the 30Yr remains intact. We will have to wait for a breakout of this range to see if the 10Yr and 30Yr are going up to 0.80% and 1.60%-1.65% respectively or fall to 0.50% and 1.30%-1.25% respectively. We reiterate that the long-term trend down and any sharp upmove from here will be capped even if the current range is broken on the upside.
The German 2Yr (-0.71%), 5Yr (-0.70%), 10Yr (-0.49%) and the 30Yr (-0.06%) yields have dipped slightly and keeps our bearish view intact. While below 0% the 30Yr can fall to -0.10% and even -0.20%. A strong break above 0.05% is needed to negate this fall. But that looks unlikely for now. The 10Yr on the other hand can trade in between 0.40% and -0.50%. The bias is bearish to see break below -0.50% and a fall to -0.60% eventually.
The 10Y GOI (6.0339%, 05.77 GS 2030) has bounced-back above 6% again thereby reducing the danger of seeing 5.95%-5.90% on the downside. It will have to be seen if the yield can move above 6.05% from here which will then open doors to test 6.10% again. While below 6.05%, a range of 5.95%-6.05% is possible for some time and the chances of seeing 5.90% on the downside will continue to remain alive.
