STOCKS
The fear of an increasing virus spread in the European countries and news reports stating that the US may not reach a stimulus deal before elections have triggered a sell-off in the equity segment. Dow and DAX have declined below their crucial levels of 28500 and 12800 respectively. Inability to bounce-back today could be bearish to see a much deeper fall in both the Dow and DAX going forward. Sensex and Nifty had declined sharply and are poised just above their crucial supports which will have to hold in order to avoid a further fall from here. Shanghai looks mixed as it remains stable at the mid-point of its 3180-3450 range. Nikkei looks vulnerable to break 23500 and see a fresh fall. Overall, even if we get a bounce over the next few days, it is unlikely to sustain and our bias would be to look at the equity segment from the sell side at the moment.
Dow (28494.20, −19.80, -0.07%) had recovered well from the low of 28181.54 to close just below 28500. The picture is inclining towards weakness. Inability to rise past and close decisively above 28500 today will be bearish to see a fall to 27500. It will also reduce the chances to revisit and break the 29000-29100 resistance zone.
DAX (12703.75, −324.31, -2.49%) has tumbled below 12800 and looks vulnerable to test 12400-12350 now. The 12400-12350 is a crucial support zoen to watch now. A strong break below it will be bearish to see a deeper fall to 12000 and 11500 going forward. The chances of seeing 13200-13400 on the upside that we had been mentioning earlier stands negated now while the DAX remains below 12800.
Nikkei (23518.36, +11.13, +0.05%) has managed to bounce-back above 23500 after opening lower today. Considering the weakness in the global equities we see high chances for the Nikkei to break 23500 and fall to 23000 initially and even to 22000 eventually in the coming weeks. The chances of seeing a break above 23700 and a rise to 24000 seems to be getting reduced now.
Shanghai (3338.90, +6.71, +0.2%) remains stable at the mid-point of its 3180-3450 range. A dip to test 3320-3300 cannot be ruled out in the near-term. Broadly, we retain our view of seeing a rise to 3450 – the upper end of the range while the index sustains above 3300.
Nifty (11680.35, -290.70, -2.43%) and Sensex (39728.41, −1,066.33, -2.61%) had tumbled yesterday. 11650 on the Nifty and 39500 on the Sensex are crucial supports to watch closely over the next few sessions. A break below these supports can drag the indices lower to 11500-11300 (Nifty) and 39000-38500 (Sensex). It will also negate the earlier bullish view of seeing 12250-12500 on the Nifty and 42000 on the Sensex.
COMMODITIES
Strong Dollar weigh on the commodity prices especially Crude and Gold. Crude prices trade slightly lower today but indicates possible rise in the coming week. View is bullish for Crude for the near term. Gold may fall while below 1930. Silver has crucial support at 24 which if holds could keep bullish momentum intact for now. Copper too looks bullish for a rise to 3.15/20.
Brent (42.80) and Nymex WTI (40.92) dipped from levels seen yesterday on fresh Dollar strength and concerns of lower demand as resurgence of Covid infections across Europe is seen. We expect some stability in crude prices for now while the view is biased for a rise from current levels to be seen soon. Also the API (American Petroleum Institute) reported that the US inventories fell by 5.4mln barrels for the week ended 9th October while the EIA reported a fall by 3.8mln barrels; both indicating bullishness for the crude prices.
Gold (1911.60) is holding well below 1930/20 just now and could dip further below 1900 soon. The broad 1880-1930 region may remain intact for now indicating near term bearishness while resistances hold.
Silver (24.41) continues to trade above crucial support at 24 and while that holds, we may keep possibilities of a rise towards 26-27 intact. Only a dip below 24, if seen would make it vulnerable for a fall to 22 in the medium term. While above 24, hopes for a bounce remains intact.
Copper (3.0820) has risen and while above 3, we may expect a rise towards 3.15/20 within a week or two.
FOREX
Dollar Index trades higher just now but needs to break above 94 to head higher towards 95+. Euro on the other hand needs to hold above 1.17 else could be dragged lower towards 1.16. EURJPY, USDJPY, Aussie and Pound look bearish for the next 1-2 sessions. USDCNY and USDINR could rise within a broad range.
Dollar Index (93.77) has risen and could soon break above 94 if the current momentum remains intact. A rise to 95.15 could be possible on a break above 94.
Euro (1.1704) is trading just at support of 1.17 and if that breaks lower, we may expect the pair to drag lower towards 1.16 soon before again bouncing back from there.
EURJPY (123.21) has immediate support at 122.90 which needs to hold to pull back the pair towards 124 or higher in the next few sessions. Failure to bounce from 122.90 could be bearish taking the pair down towards 122 in the medium term.
Dollar-Yen (105.25) tested 105.50 on the upside but could not sustain above it. We may expect trade in the 105-105.50 region for the day.
Pound (1.2891) has dipped on a strong Dollar and could test support at 1.28 which needs to hold to produce a bounce back towards 1.30. Failure to sustain above 1.28 could trigger a fall towards 1.2670 in the medium term.
Aussie (0.7080) could be headed towards support at 0.70 which if breaks could have potential to push Aussie down towards 0.68 in the medium term. Watch price action near 0.70 in the next 2-3 sessions. A bounce from 0.70 on the other hand could take it back towards 0.71-0.72.
USDCNY (6.7228) has risen slightly. But while above 6.70, we may expecxt trade within the broad 6.75-6.70 region. A stronger Dollar could lead to a rise towards 6.75 initially.
USDINR (73.3850) closed higher yesterday from an intra-day low of 73.22. We may expect a range of 73.20-73.47 to hold for the day.
INTEREST RATES
The US Treasury yields have inched slightly higher. It will have to be seen if it can gain momentum and move up breaking above the intermediate resistances in order to avoid the possible fall mentioned yesterday. The German Yields have declined sharply and are poised just below their intermediate supports. Inability to bounce from here can drag them further deeper without seeing a corrective fall that we had indicated yesterday. The 10Yr GoI continues to remain stable and look mixed in the near-term. A sideways range and a rise within the range is possible before the broader downtrend resumes.
The US 2Yr (0.14%) and 5Yr (0.31%) Treasury yields remain stable while the 10Yr (0.73%) and the 30Yr (1.51%) have inched slightly higher from levels seen in early Asian trades yesterday. The 30Yr will have to sustain above 1.50% and breach 1.60% in order to bring back the chances of seeing 1.72% on the upside. While below 1.60%, the chances of a fall to 1.40% mentioned yesterday cannot be ruled out. Similarly, though the 10Yr sustains above 0.70%, it will have to break 0.80% in order to move up to 0.90% and avoid the fall to 0.60%.
The German 2Yr (-0.78%), 5Yr (-0.80%), 10Yr (-0.61%) and the 30Yr (-0.21%) yields have declined sharply across tenors. The 30Yr and 10Yr have dipped below -0.20% and -0.61%. Inability to bounce from here can drag the yields to -0.70% (30Yr) and -0.35% (10Yr) straight away from here without seeing a corrective bounce that was mentioned yesterday.
The 10Yr GoI (5.8984%) continues to hover around 5.90%.and remains mixed. 5.88%-5.93%/5.95% could be a possible range. A rise to 5.93%-5.95% within this range in the near-term cannot be ruled out before the broader downtrend resumes to break below 5.88% and fall to 5.80%-5.75% eventually.
