STOCKS
Dow and DAX continue to remain under pressure. Dow looks vulnerable for a fall to 27000-26500 while it remains below 29100. DAX can fall to 12400 and even deeper. Nikkei is stuck in a narrow of 23500-23800. Shanghai looks mixed and has equal chances of moving on either side from current levels within its 3180-3450 range. Sensex and Nifty sustain higher but will have to rise past their key resistances at 41000 and 12100 in order to gain momentum and move up further.
Dow (28308.79, +113.37, +0.40%) failed to sustain the break above 28500 and has come-off from the high of 28575 yesterday. We retain our bearish view intact of seeing a fall to 27500-27000 in the coming weeks. 29000-29100 is a strong resistance zone. Only a strong break above 29100 will negate the above mentioned bearish view.
As expected, DAX (12736.95, −117.71, -0.92%) has declined below 12800. This keeps our bearish view intact of testing 12400-12350 on the downside. As mentioned yesterday, 12400-12350 is a crucial support zone and a break below it can drag the DAX to 12000 or even lower going forward. We need to watch closely the price action in the 12400-12350 region.
Nikkei (23674.89, +107.85, +0.46%) remains stuck in between 23500 and 23800 in line with our expectation. As mentioned yesterday, a breakout on either side of 23500-23800 is needed to get a cue on whether Nikkei will go up to 24000 or fall to 23000 going forward.
Shanghai (3315.28, −12.83, -0.39%) is managing to hold above 3300. However, it will have to be seen if the index can rise past 3350 from here in order to avoid the danger of seeing a fall to 3200-3180 mentioned yesterday and also to bring back the chances of the rise to 3450 into the picture. The price action in the next few sessions will need a close watch to get a clear cue.
Nifty (11896.80, +23.75, +0.20%) sustains above 11800. However, it will have to break above 12100 decisively in order to become more bullish to move further up towards 12250-12500. While below 12100, the index can remain in a range of 11600-12100 for some time.
Sensex (40,544.37 +112.77 (0.28%) on the other hand will have to break above 41000 in order to see a strong rise to 42000. While below 41000, the Sensex can oscillate between 39500 and 41000 for a few days.
COMMODITIES
Commodities rise sharply on weaker Dollar and could sustain strength for a couple of sessions before facing rejection from higher levels. Long position in Copper seems to have risen taking the metal to our expected 3.15+ level. After the US House Speaker Nancy Pelosi said that she believed stimulus legislation could be pushed through before the US Presidential election in two weeks’ time, Gold, Silver and Crude prices rose as Dollar declined.
Brent (43) and Nymex WTI (41.55) have risen on Dollar weakness and if the rise sustains we may expect a test of 45 on Brent and 43.50 on WTI soon. Such a rise if seen could negate a fall towards 39 (Brent) and 36 (WTI) or lower respectively.
Gold (1922.50) and Silver (25.15) both have risen well in line with our expectation. We may expect a rise to 1930/40 on the upside for Gold which is a near term resistance while Silver is open to see a rise towards 26-27.
Copper (3.1585) has risen in line with our expectation and could test 3.20 in the next 1-2 sessions before deciding whether to continue moving up from there or declining back towards 3.10. We would wait to see price action near 3.20 in the near term.
FOREX
Dollar Index trades near important level of 93 which if breaks could drag the index lower to 92.68 before a bounce from there is seen. Euro looks bullish towards 1.19, EURJPY may rise towards 126-127 on a sustained break above 125. Pound, Chinese Yuan also look bullish for the near term. USDINR may rise above 73.50 to target 73.75/80 on RBI’s dollar buying intervention. In absence of RBI, the pair has enough room for a fall towards 73.
Dollar Index (93.08) needs to sustain above 93 in order to move up again in the near term; else a fall below 93 could be possible with a lower target of 92.68.
Euro (1.1839) has moved up and sustained above 1.18 for now. Upward momentum seems to be holding well and could take the currency towards 1.19 soon on the upside. While above 1.18, view is bullish for the next few sessions.
EURJPY (124.76) has moved up well and could test 125 just now, a break above which if seen could be bullish for the medium term towards 126-127.
Dollar-Yen (105.37) has dipped but may continue to remain within 105.0-106.12 for now.
Aussie (0.7074) has bounced slightly and if it emains above 0.70, we may expect a rise towards 0.71-0.72 soon.
Pound (1.2969) has risen slightly but while above 1.28, there is scope for a test of 1.31 on the upside.
USDCNY (6.6627) has declined sharply and trades lower than the PBOC set rate of 6.6781 for the day. While the pair trades lower, we may expect a fall towards 6.58 in the near term.
USDINR (73.4650) moved up sharply to test 73.5150, as PSU banks seemed to have bought dollars for the central bank. A sustained rise above 73.50 could take the pair higher towards 73.75/80 in the near term before a fall from there is seen. View is bullish above 73.50. A stronger Euro and Yuan may not affect the Rupee positively if the central bank buys dollars.
INTEREST RATES
The US Treasury yields have moved up well as the ongoing stimulus talks continue to weigh on the sentiment. The Treasury yields can move up in the short-term term to test their crucial long-term resistances and then can see a fresh fall. The German yields have inched higher and keeps alive the chances of seeing a corrective bounce before a much deeper fall happens. The 10Yr GoI needs to break above the immediate resistance at 5.95% in order to extend the current corrective bounce and avoid a fall-back from here itself.
The US 2Yr (0.15%), 5Yr (0.35%), 10Yr (0.80%) and the 30Yr (1.61%) Treasury yields have moved up across tenors. The 30Yr has risen above 1.60%. While it manages to sustain above 1.60%, a further rise to 1.72%-1.75% is possible after which a fresh fall can be seen. The 10Yr on the other hand can rise to 0.90% on a strong break above 0.80%.
The German 2Yr (-0.79%), 5Yr (-0.81%), 10Yr (-0.61%) and the 30Yr (-0.20%) yields have bounced-back slightly. A further uptick from here can bring back the possibilities of a corrective rise before targeting -0.70% (10Yr) and -0.35% (30Yr) on the downside. We will have to wait and watch.
The 10Yr GoI (5.9313%) remains higher but seems to lack momentum to breach 5.95%. Inability to breach 5.95% can drag the 10Yr GoI lower to 5.90%-5.88% again. As we have been mentioning over the last couple of days, a strong rise past 5.95% is needed to move further up towards 5.98% and 6% in the near-term before resuming the broader downtrend.
