STOCKS
The outbreak of a new variant of a much faster spreading corona virus in the UK had beaten down the DAX, Sensex and Nifty badly. While an intermediate bounce in these indices cannot be ruled out, the sharp fall hints an initial sign of the long awaited correction. This leaves scope for further fall in the DAX, Sensex and Nifty going forward. Dow has bounced-back as the new stimulus package overweighs the impact of the news from the UK. The chances of seeing a rise in Dow is still alive before the expected correction comes into play. Nikkei will have to sustain above 26500 in order to avoid a fall from here itself and negate the chances of seeing 27500 on the upside. Shanghai can test 3450 before falling back to keep the 3180-3450 range intact.
Dow (30216.45, +37.40, +0.12%) has recovered well from the low of 29755.53 yesterday. But it will have to be seen if it can sustain this bounce and keep alive the chances of seeing 30800-31000 or not. However, from a bigger picture we reiterate that 31000 will be a cap on the upside and a corrective fall to 29000-28000 can be seen in the coming weeks. A fall and a close below 29500 from current levels will negate the chances of seeing 31000 and can drag the Dow lower from here itself.
The fall to 13200-13000 on DAX (13246.30, −384.21, -2.82%) had happened much faster than expected in just a single day. This keeps intact our broader view of seeing 12400 on the downside eventually. However, while the DAX manages to sustain above 13000 for now, a consolidation between 13000 and 13400 is possible before the fall expected fall to 12400 and even lower levels happen.
Nikkei (26609.53, −104.89, -0.39%) will need close watch now to see if it can still sustain above 26500 amid the sell-off in other equity markets and continue to remain stuck between 26500 and 27000. A strong break and close below 26500 from in the coming days can trigger the corrective fall to 25500-24500 that we had been mentioning for some time.
Shanghai (3407.76, −12.81, -0.37%) is managing to sustain above 3400. As mentioned yesterday, while above 3400 rise back to 3450 cannot be ruled out which in turn will delay the fall to 3300-3250 that we had mentioned last week. Broadly, the 3180-3450 range will continue to remain intact.
Nifty (13328.40, −432.15, -3.14%) and Sensex (45553.96, −1406.73, +3%) had tumbled yesterday. 13600 on the Nifty and 46350-46500 on the Sensex are key levels to watch now. Inability to rise past these levels from here will give an initial confirmation of a top in place. While below these intermediate resistances, Nifty can fall to 13000-12850 and Sensex can test 44000-43500 on the downside in the short-term.
INTEREST RATES
The US Treasury yields have risen back recovering the loss made in the US session overnight. The new stimulus package over weighs the concerns of the new variant of covid virus in the UK. The Treasury yields have room to rise in the near-term, but the presence of long-term resistances ahead can cap the upside and drag them lower eventually. The German Yields can also move up in the near-term to test their key resistances. The price action thereafter will need a close watch to see if the yields move further higher or reverse lower. The 10Yr GoI can fall within its 5.90%-5.98% in the coming days.
The US 2Yr (0.12%), 5Yr (0.37%), 10Yr (0.93%) and the 30Yr (1.67%) have risen back to the levels seen in early Asian trades yesterday after falling in the US session overnight. There is room on the upside for the 10Yr and 30Yr to test 1% and 1.75% in the near-term. But we expect the yields to reverse lower thereafter and fall back to 0.80% (10Yr) and 1.50% (30Yr) in order to keep the long-term downtrend intact.
German 2Yr (-0.75%), 5Yr (-0.76%), 10Yr (-0.58%) and the 30Yr (-0.18%) yields remain higher and stable. We retain our view of seeing a rise to -0.50% (10Yr) and -0.10% (30Yr) in the near-term. Thereafter the price action will need a close watch to see if the yields can breach -0.50% (10Yr) and -0.10% (30Yr) and negate the chances of falling back to -0.70% (10Yr) and -0.40% (30Yr) that we have been expecting..
The 10Yr GoI (5.9568%) traded near the 5.97%-5.98% resistance yesterday. We see 5.90%-5.98% as the range and the 10Yr GoI can fall within this range towards 5.92%-5.90% in the coming days.
COMMODITIES
Gold may test 1860 before bouncing back to higher levels soon while Silver may trade within 25-28 while above 25. Copper may test 3.50 before again bouncing back. Crude prices have also seen a sharp corrective fall yesterday but may remain in a range for the near term attempting to rise back to higher levels soon.
Brent (50.78) and Nymex WTI (47.81) have seen a corrective decline as well but we expect any downside in Brent to be limited to 49 and in WTI to be limited to 46 just now. We may expect the prices to rise back soon in the near term. Any corrective or ranged movement would be short lived.
Gold (1886) and Silver (26.56) have dipped from higher levels seen yesterday morning. Gold fell off from 1908 itself before testing our mentioned resistance near 1920 but while that holds, view is bearish for a decline towards 1860 before another attempt to rise is seen. Silver on the other hand has taken a good support at 25 which is an earlier resistance turned support and while above 25 we may expect consolidation within 25-28 for the near term. A fall below 25 would be needed to take it down to 23-22 else Silver may continue to stabilize at higher levels.
Copper (3.5855) is holding well below immediate resistance and could test 3.50 before again bouncing back higher. Immediate view is bearish but is likely to be short lived.
FOREX
Euro has risen back from yesterday’s low at 1.2129 but we may expect a re-test of 1.2150 before an attempt to test 1.23/1.2350 on the upside. Aussie and Pound look bearish just now while EURJPY may remain ranged. USDCNY has fallen back below 6.56 and this could be positive for the Rupee today that could bring down USDINR towards 73.80/70 after sharply rising yesterday.
Dollar Index (90.18) has dipped slightly and while below 91, the overall view is still bearish to be soon followed after a phase of ranged trade seen just now within 91-90 region.
Euro (1.2232) has recovered the fall to 1.2129 seen yesterday. We had said in yesterday’s edition that the fall could be limited to 1.21 and while that remains, we may slowly expect Euro to rise again towards 1.23-1.2350 in the medium term. Downside is now likely to be limited to 1.2150.
EURJPY (126.43) is ranged within 126.80-125.75 and while the range holds, we may have to wait for more clarity on further direction beyond the sideways range.
Dollar-Yen (103.35) is stable near levels seen yesterday and while below 104.50, we may expect trade within 103.00-104.50 for the near term.
Aussie (0.7571) is stable and while 0.7650 holds as a decent resistance and as Copper trades lower, a dip to 0.75 cannot be negated in the near term.
Pound (1.3421) has bounced back well yesterday but we cannot negate a possible fall to 1.33 on the downside. A broad trade range of 1.33-1.36 could hold for the medium term.
USDCNY (6.5458) has failed to break above 6.56 and sustain higher. While below 6.56, we continue to keep the range of 6.52-6.56 intact for the medium term.
USDINR (73.56) is likely to trade within the broad 73.75/80-73.45 region for the day. Weakness in Euro on Dollar strength possibly indicates that Dollar Rupee could bounce back higher today towards 73.75/80. Watch price action as support near 73.45/50 holds for now.
INTEREST RATES
The US Treasury yields have risen back recovering the loss made in the US session overnight. The new stimulus package over weighs the concerns of the new variant of covid virus in the UK. The Treasury yields have room to rise in the near-term, but the presence of long-term resistances ahead can cap the upside and drag them lower eventually. The German Yields can also move up in the near-term to test their key resistances. The price action thereafter will need a close watch to see if the yields move further higher or reverse lower. The 10Yr GoI can fall within its 5.90%-5.98% in the coming days.
The US 2Yr (0.12%), 5Yr (0.37%), 10Yr (0.93%) and the 30Yr (1.67%) have risen back to the levels seen in early Asian trades yesterday after falling in the US session overnight. There is room on the upside for the 10Yr and 30Yr to test 1% and 1.75% in the near-term. But we expect the yields to reverse lower thereafter and fall back to 0.80% (10Yr) and 1.50% (30Yr) in order to keep the long-term downtrend intact.
German 2Yr (-0.75%), 5Yr (-0.76%), 10Yr (-0.58%) and the 30Yr (-0.18%) yields remain higher and stable. We retain our view of seeing a rise to -0.50% (10Yr) and -0.10% (30Yr) in the near-term. Thereafter the price action will need a close watch to see if the yields can breach -0.50% (10Yr) and -0.10% (30Yr) and negate the chances of falling back to -0.70% (10Yr) and -0.40% (30Yr) that we have been expecting..
The 10Yr GoI (5.9568%) traded near the 5.97%-5.98% resistance yesterday. We see 5.90%-5.98% as the range and the 10Yr GoI can fall within this range towards 5.92%-5.90% in the coming days.
