STOCKS
The resistances at 28000 on the Dow and 12800 on DAX are holding well. The news on the US President Donald Trump testing positive for Covid-19 has avoided the Dow from rising past 28000. The bearish bias is intact in both the Dow and DAX to see a further deeper corrective fall from here going forward. Nikkei retains its 23000-23500 range and trades mixed. Sensex and Nifty may have room to move up further is they manage to sustain higher and then can witness a corrective fall. Shanghai is closed till Thursday (08-Oct-20) this week on account of public holidays.
The resistance at 28000 is holding well and the Dow (27682.81, −134.09, -0.48%) has come-off on Friday. While below 28000 we retain our bearish view of seeing 27000-26500 and even lower levels in the coming weeks. As mentioned last week, a strong rise above 28000 is needed to negate the danger of seeing the above mentioned fall and in turn take the Dow up to 28500-29000.
DAX (12689.04, −41.73, -0.33%) has come-off failing to breach 12800 decisively. This keeps the bearish bias intact of seeing a fall to 12000. A break below 12400 can accelerate the fall. As mentioned last week, a strong break above 12800 is needed to open doors to test 13000-13200 on the upside.
Nikkei (23331.42, +301.52, +1.31%) has bounced back after testing 23000 last week. The 23000-23500 range is continuing to remain intact. We reiterate that a breakout on either side of 23000-23500 will decide whether the index will move up to 24000 or fall to 22500.
Shanghai (3218.05) is closed till Thursday (08-Oct-20) this week on account of public holidays.
Nifty (11416.95, +169.40, +1.51%)has risen past 11350 last week contrary to our expectation to reverse lower. It will have to be seen if this break sustains or not. 11350 will be a resistance-turned-support now. While the Nifty manages to sustain above 11350, a further rise to 11600-11700 is possible in the near-term.
Sensex (38697.05, +629.12, +1.65%) has risen breaking above 38400. This has reduced the danger of seeing a fall-back to 37000 immediately. A further rise to 39700-39800 is possible on a strong break above 39000 and then the expected reversal can happen.
COMMODITIES
Crude prices crashed after the news of Trump tested with Covid positive. Although the prices show some signs of improvement, we may expect trades to be low for this week too before any indication of bullishness sets in. Gold and Silver trades higher compared to levels seen on Friday while Copper has dipped below 3 again and unless an immediate rise is seen, there could be chances of further dip.
Brent (39.94) and Nymex WTI (37.79) both trade on the lower side with slight chances of rising in the near term. Note that 42.50 (Brent) and 40 (WTI) are crucial resistances on the daily charts and while they hold, we may expect a dip again towards 39.30 and 36.43 respectively. Some sideways trade within the mentioned supports and resistances look possible for now. In the medium term we may have to allow for some more dip before a rise is seen later on.
Gold (1903.50) has immediate resistance at 1920 on the daily charts and near 1940 on the medium term charts. We may expect 1920 to hold in the near term and produce a decline towards 1880-1860 again in the next 1-2 weeks.
Silver (24.06) on the other hand has immediate trend support at 23 and while that holds, we may expect trade within 23-25 for the next few sessions. Thereafter, we would have to wait and watch which direction the price would move next as there are equal chance of moving on either side.
Copper (2.974) has to break above 3 again in order to avoid a fall towards 2.95/90 in the near term; else we may expect a dip to 2.95/90 soon.
FOREX
Dollar Index is trading low and could fall further in the near term possibly keeping the other currencies positive. Euro could rise towards 1.18 while EURJPY could test 124.40. Dollar Yen looks ranged within 105-106 while Aussie and Pound could move up towards 0.7340 and 1.30/32 respectively. USDINR is likely to continue with the fall seen on Friday and move towards 73.0-72.90 during the week while below 73.50
Dollar Index (93.73) has been stable in the last 2-3 sessions but has support at 93.50 which if breaks could trigger a sharper fall towards 93.10-92.70 again in the sessions to come. This could be positive for currencies in the near term.
Euro (1.1731) has risen well and if the Dollar Index continues to fall, we may expect a decent rise in Euro in the near term towards 1.18 or slightly higher. Immediate view is bullish for the next 2-3 sessions.
EURJPY (123.82) is stable for now and could remain bearish while below 124.40. Watch price action near 124.40 in the near term. Only a break above 124.40, we would consider another scope of a rise towards 124 or higher.
Dollar-Yen (105.53) could be seen within 105-106 region for the next 4-5 sessions.
Aussie (0.7185) has risen towards 0.72 and a break on the upside could take prices higher towards 0.7340 gradually. On the contrary a rejection if seen from 0.72 could keep the range of 0.70-0.72 intact leading to another dip towards 0.70 in the coming sessions. Watch price action near 0.72 over today and tomorrow.
Pound (1.2947) could test 1.30 in the next 1-2 sessions, a break above which would take it higher towards 1.32 before a decline from there is seen in the longer run. Watch price action near 1.30 in the very near term.
USDCNY (6.7898) is closed for the week due to National Day of the People’s Republic and would see action on Friday, the 9th Oct.
USDINR (73.15) closed at the day’s low on Friday and could see a test of 73.0-72.90 in the near term while below 73.50. View is bearish for the pair in the near term.
INTEREST RATES
The US Treasury yields remain strong and higher. Developments on the US President Donald Trump’s health condition and the virus stimulus talks are weighing on the markets. The 30Yr has room to rise further in the coming days before reversing lower again. The German yields continue to trade lower and keep our bearish view intact. The German yields can fall further. The 10Yr GoI has bounced-back towards the end of last week but will need a strong rise past 6% in order to move up further.
The US 2Yr (0.13%) and the 5Yr (0.29%) Treasury yields remained stable while the 10Yr (0.71%) and the 30Yr (1.50%) had risen sharply by 5bps and 10bps respectively last week. The 30Yr has moved up to 1.50% and has room to test 1.60% from where it can reverse lower again. The 10Yr on the other hand needs to breach 0.74% (revised higher from 0.73% mentioned last week) to gain momentum and move up to 0.80% and higher levels.
The German 2Yr (-0.72%), 5Yr (-0.73%), 10Yr (-0.54%) and the 30Yr (-0.11%) yields have dipped across tenors last week. The bearish outlook is intact. We retain our view of seeing a fall to -0.60% on the 10Yr and -0.20% on the 30Yr. Thereafter a corrective bounce is possible. As mentioned last week, the bigger picture is bearish and the 10Yr and 30Yr can extend the fall to -0.70% and -0.35% respectively on an eventual break below 0.60% and -0.20% respectively.
The 10Yr GoI (5.9960%)fell to a low of 5.9617% and has bounced from there. A strong rise past 6% will be needed from here to bring back the chances of seeing 6.10% on the upside into the picture. The price action around 6% will need a close watch today.
