STOCKS
The rise to 33550 on the Dow has happened and it has to fall-back immediately and break below 33300 from here to keep intact our view of seeing a corrective fall. DAX has room to test 15500-15700 from here before reversing lower. Nikkei can retain its 28000-30500/31000 range and can fall within this range in the coming days. Shanghai has to break above 3500 to become bullish again and also to negate the bearish view. Sensex and Nifty have declined sharply yesterday and are likely to remain under pressure to fall further.
The expected rise to 33550 on the Dow (33527.19, +373.98, +1.13%) has happened. Now we need to get a pull-back today and a subsequent fall below 33000 to keep our view intact of seeing a corrective fall to 32000-31000. A follow-through rise from here will negate that view and will pave way for a further rise to 33700 and even 34000. The price action in the next few days will need a close watch.
DAX (15107.17) was closed yesterday and can rise to 15500-15700 while it sustains above 15050. This in turn will negate/delay our view of seeing a fall to 14000-13800 immediately.
Nikkei (30000.66, −88.59, -0.29%) seems to lack strong follow-through rise above 30000 and has come-off from the high of 30208.89. The upside could be capped at 30500 itself. A strong fall below 30000 can drag it to 29000-28500 again. Broadly, our view of seeing a sideways consolidation between 28000 and 30500/31000 remains intact.
Shanghai (3473.39, −11.01, -0.32%) has to break above 3500 to become bullish to revisit 3550-3600 levels. While below 3500, the index can fall back to 3400-3350 again and will keep alive the bearish view of seeing 3250-3200 on the downside. The price action in the coming days will need a close watch.
Sensex (49159.32, −870.51, -1.74%) failed to sustain above 50000 and has come-off sharply contrary to our expectation to test 51000 and then reverse lower. The view of seeing 48000 on the downside remains intact. The price action at 48000 will need a close watch to gauge whether the fall can extend up to 47000-46000 or not.
Nifty (14637.80, −229.55, -1.54%) did not rise to 15000 and fell sharply below 14800. Our view of seeing 14400-14200 on the downside remains intact. As we have been mentioning for some time, the chances of the fall extending even up to 14000-13800 cannot be ruled out. 14800-14900 will continue to act as a good resistance zone.
COMMODITIES
Commodities look ranged for now. Gold has risen from levels seen yesterday and needs to break above 1760 to turn sharply bullish. A rise to 1760 is expected in the next few sessions. Silver looks stable. Copper needs to break above current levels to rise towards 4.20/30; else a fall back to 3.90 cannot be negated. We would wait and watch price action near 4.10. Crude prices look ranged for the near term.
Brent (62.74) and WTI (59.28) have both dipped slightly today but overall keeps the near term range intact. We continue to look for a range of 66-60 on Brent and 63.50-59/57 on WTI.
Gold (1734.60) has risen from levels seen yesterday. We may expect a test of 1340/60 on the upside in the near term but unless a break above 1760 is seen and sustained , we may not become very bullish for Gold and may expect some more of sideways consolidation between 1700-1760 before a sharp rally sets in.
Silver (24.99) looks stable. While below 25.50, Silver could be bearish for a dip towards 23-22 in the longer run. Only a sustained break above 25.50-26.00 would take the price higher towards 29-30.
Copper (4.1055) has risen as expected. There is very near term resistance at current levels which if holds could push the price down to 4.00-3.90 in the near term keeping a ranged movement within 3.90-4.10 for the near term. But a break above 4.10 could be bullish for copper opening up chances of a rise to 4.20/30.
FOREX
Dollar Index trades lower and while it remains below 93, we may expect strength in other currencies to continue. Euro has risen well and needs to break above 1.1850 to rise towards 1.19 and higher. Aussie and Pound may rise to 0.77 and 1.39. USDCNY may rise to 6.58/60 in the medium term while USDINR is holding below 73.50 and could test 73.20/00 in the very near term. EURJPY is headed towards resistance at 131 which if holds could push the cross back to 129.5.
Dollar Index (92.66) trades lower and needs to sustain below 93 to slowly move down towards 92.00 in order to confirm a reversal and negate immediate upmove. Watch price action near current levels. View is bearish while below 93.
Euro (1.1805) has risen but needs to sustain above 1.18 in order to slowly move higher in the medium term. Watch for a rise above 1.1850 in the near term to confirm a possible slow and steady upmove towards 1.19+ levels.
EURJPY (130.25) is heading towards resistance near 131 and if that holds, a dip back to 129.50 may not be negated. On the contrary a sustained break above 131 is needed to open up chances of a rise towards 135.
Dollar-Yen (110.31) tested 109.96 yesterday before bouncing back a little from there. While immediate support near 110-109.50 holds, we may have to allow for a bounce from here towards 111 again in the near term. View is bullish while above 109.50.
Aussie (0.7642) may slowly rise towards 0.77 from where a possible rejection looks likely.
Pound (1.3891) has broken above 1.3850 and could now rise towards 1.3940-1.40 on the upside if it manages to break above 1.39 just now. Failure to rise above 1.39 would bring in a corrective dip to 1.3848 before rallying up further.
USDCNY (6.5570) has support at 6.54 and while the pair trades above it, we may allow for a rise to 6.58/60 in the near term. Overall we may expect a slow and steady move on the upside. View is bullish while above 6.54.
USDINR (73.2950) fell from 73.46 yesterday as it could not sustain above 73.40 for long. While below immediate resistance near 73.50, we may allow for a dip to 73.20-73.00 in the near term. An extension to 72.90/80 also could be possible if 73 breaks on the downside but for the very near term we would allow for fall to 73.20/00. Only a break above 73.50, if seen would open up chances of a rise towards 73.60/80 but such a rise looks less likely.
INTEREST RATES
The US Treasury yields have dipped across tenors. Crucial supports are there below current levels which have to be broken necessarily in order to indicate a top in place and negate any further rise. German yields are consolidating within their broader upmove. We see room for further rise before a reversal is seen. The 10Yr GoI has come-off sharply within its range and has to be seen if it can retain the range for some more time or is going to break it on the downside immediately in line with our expectation.
The US 2Yr (0.16%) and 5Yr (0.92%), 10Yr (1.69%) and 30Yr (2.33%) Treasury yields have dipped across tenors. 1.6% (10Yr) and 2.25% (30Yr) are the first important levels that have to be broken to indicate a top in place. A subsequent fall below 1.55% (10Yr) and 2.2% (30Yr) is needed to confirm a reversal. While above these supports, the 10Yr and 30Yr can consolidate in the range of 1.6%-1.8% and 2.25%-2.50% respectively with a bullish bias of seeing 2% (10Yr) and 2.9%-3% (30Yr) eventually over the medium-term.
The German 2Yr (-0.72%), 5Yr (-0.66), 10Yr (-0.33%) and the 30Yr (0.22%) have been consolidating at higher levels over the last one month. We reiterate that while above -0.40% (10Yr) and 0.18% (30Yr) the bias is bullish to see -0.20%/-0.15% (10Yr) and 0.35% (30Yr) on the upside. As mentioned yesterday, a strong break below -0.40% (10Yr) and 0.20% (30Yr) is needed to negate the bullish view and turn bearish.
Contrary to our expectation to see a test of 6.20%, the 10Yr GoI (6.1231%) fell sharply within its 6.10%-6.20% range. A break below 6.10% will trigger the fall to 6% and 5.9% that we have been mentioning for some time. It will have to be seen if the yield manages to sustain above 6.10% to retain the 6.10%-6.20% range for some more time and delay the above mentioned fall.
