STOCKS
Strong sell-off in the equity segment yesterday. Surging corona virus cases in the US and reducing chances of getting the next stimulus before the elections have triggered a sharp fall in the equities. The fall can extend in the coming days as well. Dow can fall to 27000 and even 26600-26500 while it remains below 28000. DAX can fall to 11400 while below 12400. Nikkei has broken its 23500-23800 range on the downside as expected and can test 23000 and even 22500 on the downside. Shanghai can fall to test the lower end of its 3180-3450 range. Sensex and Nifty have declined sharply within their preferred sideways range and have room to test 39500-39000 and 11600-11500 respectively after which a bounce is possible.
As expected, the Dow (27685.38, −650.19, -2.29%) had tumbled breaking below 28000 to test 27500 on the downside much quicker than we had expected. We retain our bearish view. A further fall to 27000 and even 26600-26500 is possible while below 28000. The 26600-26500 is a very crucial support zone which has to necessarily hold in order to avoid a much deeper fall.
DAX (12177.18, −468.57, -3.71%) had declined sharply breaking below the 12400-12350 support zone in line with our expectation. The outlook is bearish. 12400 will now act as a good support-turned resistance. With a head and shoulder reversal pattern on the charts, DAX has the potential to see a deeper fall to 11400 and even 11200 in the coming days.
Nikkei (23434.74, −59.60, -0.25%) has broken the 23500-23800 range on the downside as expected. While below 23500, the outlook is bearish and a fall to 23000 can be seen now. A further break below 23000 will see a deeper fall to 22500 and even 22200 in the coming weeks.
Shanghai (3242.62, −8.50, 0.26%) remains lower and is likely to head down towards the lower end of its 3180-3450 range. We expect the index to retain this sideways range and see a bounce from the 3200-3180 support zone.
Nifty (11767.75, -162.60, -1.36%) had declined sharply within the broad 11600-12100 range. A test of 11650-11600 is possible while it remains below 11800 now. It will have to be seen if the Nifty sustains above 11600 to retain the sideways range and also to keep alive the chances of seeing 12500 on the upside over the medium-term. A break below 11600 will see the fall extending to 11500 and in turn will delay the above mentioned rise to 12500.
Sensex (40145.50, −540, -1.33%)on the other hand can fall to 39500 and even 39000 on a break below 40000. Thereafter a fresh rally is possible.
COMMODITIES
Bearish sentiment looms for crude prices as lockdown measures in Europe and other parts of the country seem to be rising amidst rising production concerns from Libya and rising gasoline stocks concerns from US. We may expect ranged movement for sometime with a possible bias for a dip from current levels before a significant beak above $45 is seen in the longer run. Gold could be ranged for now within 1920-1880 before a break on either side is seen. On the charts, view is bearish for a fall towards 1860-1840. Silver needs to hold above 24 to keep the upward momentum intact else a fall towards 22-21.50 can be initiated. While above 24, view is bullish towards 25-27. Copper is bearish while below 3.10 and could fall towards 3.00 in the near term.
Brent (40.62) and Nymex WTI (38.71) slightly risen but could have scope of testing 39.30-38 and 37.50 respectively before bouncing back to higher levels. Any rise thereafter could be limited to 42.50 (Brent) and 40 (WTI) just now. Watch price action within 42.50-38 on Brent and 37.50-40 on WTI for the next couple of sessions.
Gold (1911.50) failed to break below 1880, moving back to 1910+ levels contrary to our expectation. While charts indicate a possible fall towards 1880-1840, Gold could remain ranged within 1920-1880 for a few sessions before a break on either side is seen. View could be fairly ranged for now.
Silver (24.58) has immediate trend support on the daily candles near 24 (revised from 24.40/30 mentioned yesterday) which if holds could produce a bounce towards 25 initially and 26-27 in the longer run. But if the support fails to hold and declines below 24, Silver could be vulnerable to a sharp fall towards 22-21.50. Watch price action near 24.
Copper (3.0845) has held well below resistance at 3.20. Breaking below 3.10, we may expect a further dip towards 3.00 contrary to our expectation of a bounce back towards 3.20. View is bearish for the near to medium term.
FOREX
Dollar Index may rise to 93.70 before dipping back to 92.50. EURJPY is nearing support and could also see a bounce soon while Euro looks ranged for now. USDJPY may bounce to 105-106 while above 104.50, Pound looks bullish while above 1.30. USDINR looks bullish towards 74.0-74.25 while above 73.80. Overall currencies may face some downward pressure or remain stable for now.
Dollar Index (93.072) has risen but while below 93.70 there is scope for a fall towards 92.50 in the near term.
Euro (1.1821) may fall towards 1.1750 which is an immediate support below current levels. Upside could be limited to 1.1870.
EURJPY (123.76) has immediate trend support at 123.22 which if holds could take the pair higher towards 125 or even 126 in the medium term. While above 123.22 view is bullish.
Dollar-Yen (104.71) has support at 104.50 and while that holds, we may expect a rise towards 105-106 in the near term.
Aussie (0.7134) has been stable since the last 3-4 sessions. While below 0.7170, we may expect a dip below 0.71 towards 0.70 soon.
Pound (1.3032) has bounced slightly from 1.30 and while that holds, a rise towards 1.31 looks possible in the near term. Failure to rise sharply from here could drag it down towards 1.2930 in the near term.
USDCNY (6.7048) has dipped a bit and while below 6.71, a fall to 6.6920 looks possible in the next couple of sessions before a bounce is seen again towards 6.71.
USDINR (73.8550) rose sharply breaking above our expected resistance at 73.80. While the pair sustains above 73.80, we may expect a test of 74.00-74.25 on the upside. View is bullish above 73.80.
INTEREST RATES
The US Treasury yields have dipped further. Sell-off in the equity segment and reducing hopes on the US striking a deal on the stimulus before elections are keeping the yields subdued. Inability to bounce immediately from here can drag the yields further lower in the coming days. The German yields remain stable and can see a corrective rise while it sustains above the immediate supports. The 10Yr GoI fell further as expected and keeps the bearish view intact. There is room to fall further before a bounce is seen.
The US 2Yr (0.15%), 5Yr (0.35%), 10Yr (0.80%) and the 30Yr (1.59%) Treasury yields have dipped slightly across tenors. The 30Yr has dipped below 1.59%. Inability to bounce-back above 1.60% can drag it to 1.50% as mentioned yesterday. The 10Yr on the other hand will come under pressure for a further fall to 0.70% on a break below 0.80%. Broadly the upmove in the yields seem to be ending and there could be a fresh fall from here which will get confirmed over the next few days.
The German 2Yr (-0.77%), 5Yr (-0.78%), 10Yr (-0.58%) and the 30Yr (-0.17%) yields continue to trade stable. We retain our view of seeing a corrective bounce to -0.50% (10Yr) and -0.10% (30Yr) after which the broader downtrend can resume. A fall below -0.60% (10Yr) and -0.20% (30Yr) from current levels will negate the chances of seeing the above mentioned corrective rise and in turn will drag the yields from here itself.
The 10Yr GoI (5.8344%) tested 5.80% as expected and had bounced back from the low of 5.7889% yesterday. The bearish view remains intact. While below 5.85%, a test of 5.75% on the downside cannot be ruled out. In case of a break above 5.85%, a corrective bounce to 5.88%-5.90% is possible before we see a fresh fall to 5.75%.
