STOCKS
Dow and DAX had failed to get a strong follow-through rise yesterday after having bounced-back well on Friday. Dow looks weak to see a sharp fall to 27500-27000 from here itself without revisiting the 29000-29100 resistance zone. DAX can test 12400 on a break below 12800. Nikkei can remain stuck in the 23500-23800 range. Shanghai has declined sharply and can move down to the lower end of the 3180-3450 range instead of rising to the upper end of the range that we had been expecting so far. Sensex and Nifty have risen well yesterday but have key resistances ahead which will have to be broken in order to become bullish.
Dow (28195.42, −410.89, -1.44%) has declined sharply below 28500 thereby reducing the chances of revisiting 29000-29100 levels. As mentioned yesterday while below 29100 the outlook is bearish and we expect the Dow to test 27500-27000 on the downside in the coming weeks.
DAX (12854.66, −54.33, -0.42%) has come-off from the high of 13028 indicating lack of strong follow-through buyers above 13000. The charts indicate weakness with high chances of seeing a break below 12800 and a fall to 12400 in the coming days. As we had cautioned earlier, 12400-12350 is a crucial support. A break below it will pave way for a deeper fall to 12000 and even lower levels.
Nikkei (23607.90, −63.23, -0.27%) sustains above 23500 but seems to lack momentum to break above 23800. The index may remain stuck in the narrow 23500-23800 range for some time. A breakout on either side of 23500-23800 will then determine whether Nikkei can go up to 24000 and then reverse lower or fall to 23000 straight away from here itself.
Shanghai (3301.37, −11.30, -0.34%) has come-off sharply from the high of 3371 yesterday. A break below 3300 can increase the downside pressure and can drag the index to the lower end of its 3180-3450 range. It will also negate our view of seeing a rise to 3450 that we had been mentioning for some time.
Nifty (11873.05, +110.60, +0.94%) has risen well above 11800 and can now revisit the 12000-12100 resistance zone in the coming days. A strong break above 12100 will be needed to pave way for a further rise to 12250-12500 going forward. Inability to breach 12100 can drag the Nifty lower again and can keep it in the range of 11650-12100 for some time.
Sensex (40431.60, +448.62, +1.12%) has risen well above 40000 and could now move up towards the upper end of the expected 39500-41000 range. As mentioned yesterday, a breakout on either side of this 39500-41000 range will determine whether the Sensex will rise to 42000 or fall to 39000-38500 going forward. We will have to wait and watch.
COMMODITIES
Commodities look mixed as Crude prices trade stable to slightly lower as Covid cases rise in US and Europe increasing concerns of a hit in fuel demand. Gold, Silver and Copper look stable too but while Silver and Copper look bullish towards 26-27 and 3.15/20 respectively, Gold does not look very positive and could face rejection from 1930 to fall towards 1880/60 eventually.
Brent (42.30) and Nymex WTI (40.76) have dipped slightly on concerns over fall in fuel demand as Covid-19 cases rise across US and Europe. We may expect some ranged movement for a few sessions but eventually the view is to see a rise from here towards 45-47.50 (Brent ) and 43-45 (WTI) in the medium to long term.
Gold (1902.40) is stuck in the 1890-1910 region just now and needs to break on either side of this immediate range to move further on either side. Broadly, we may expect 1930 to hold on the upside and eventually lead to a fall towards 1880/1860.
Silver (24.55) is bullish for a rose towards 26-27 while above crucial and immediate support at 24.
Copper (3.0785) has risen slightly and could be headed towards 3.15/20 in the longer run. Bullish view remains intact for Copper.
FOREX
Dollar Index has dipped after facing rejection at 94 and while that holds, we may expect a fall towards 93 or lower which could indicate a positive Euro, Pound and EURJPY in the near term. Watch crucial resistance at 1.18 on Euro while Pound and EURJPY has enough room on the upside towards 1.31 and 125. Aussie looks bearish for a likely fall below 0.70. Yuan has strengthened to 6.6883 and could continue to test 6.66 on a break beyond 6.68. USDINR could fall from 73.45 towards 73.20 or lower as Chinese Yuan and Euro both trade stronger for the day.
Dollar Index (93.423) has dipped from immediate resistance at 94 and could test 93 or lower in the next few sessions. This is positive for other currencies for the next 304 sessions at least.
Euro (1.1770) has moved up as expected to test 1.1785-1.1805. Note that 1.1805 is an important near term resistance and while that holds, Euro could fall back towards 1.17 or even lower. Only a sustained break above 1.18 could keep alive some hopes of a further rise from here. Watch price action near 1.18 for now.
EURJPY (124.23) has shown signs of bounce from support at 123. While the upside momentum remains intact, we may look for a test of 125 on the upside.
Dollar-Yen (105.52) seems to be holding well above 105 and could be soon headed higher towards 106.12. Broad range of 105.0-106.12 remains intact for now.
Aussie (0.7042) looks bearish as the currency is headed towards 0.70 which if breaks could drag it down towards 0.69-0.68 in the medium term. Watch price action near immediate support at 0.70.
Pound (1.2945) has risen slightly but could remain ranged while above 1.28. On the upside, we may expect the movement to be capped at 1.31 for the near term.
USDCNY (6.6883) has fallen sharply from levels above 6.70 yesterday. A test of 6.6840 or slightly lower looks possible just now before a bounce is seen in the medium term. For now while below 6.70, view is bearish towards 6.6840 initially and then towards 6.6670.
It would be important to see if the USDINR (73.3750) gets impacted by a strong Yuan and Euro and falls from here towards 73.20 or lower. But failure to sustain bellow 73.45/50 could be bullish for an initial test of 73.75/80 before falling back towards 73.20/00 or lower in the longer run. Watch price action near 73.45/50 for the day. A stronger Euro and Yuan indicates a lower USDINR for today.
INTEREST RATES
The US Treasury yields remain higher and stable. Expectation that the US will strike a deal on the next stimulus is weighing on the market sentiment. The Treasury yields keep alive the chances of moving up further before witnessing a fresh fall. The German yields have dipped further. The bearish view is intact and the yields can extend the fall from current levels without seeing any corrective bounce. The 10Yr GoI is moving up in line with our expectation. It has room to rise further to test its resistance and then can reverse lower.
The US 2Yr (0.15%), 5Yr (0.33%), 10Yr (0.76%) and the 30Yr (1.55%) Treasury yields remain higher and stable. As mentioned yesterday, the chances of seeing a rise to 1.72% on the 30Yr and 0.90% on the 10Yr is still alive while the yields sustain above 1.50% (30Yr) and 0.70% (10Yr). A strong break above 1.60% (30Yr) and 0.80% (10Yr) could accelerate the rally.
The German 2Yr (-0.80%), 5Yr (-0.82%), 10Yr (-0.63%) and the 30Yr (-0.22%) yields have dipped further and are keeping the broader bearish view intact. The 30Yr and 10Yr have dipped well below -0.60% and -0.20% and can very well head towards -0.70% (10Yr) and -0.35% (30Yr) from here itself without seeing a corrective bounce.
The 10Yr GoI (5.9399%) has moved up further and is heading towards 5.95%. As mentioned yesterday, a break above 5.95% will see an extended rise to 5.98% and then the broader downtrend can resume.
