STOCKS
Equities continue to trade stable in a narrow range. The broader view is bullish however and the rise that we have been expecting is just getting delayed. Dow oscillates around 34500 and DAX around 15600. Immediate support for the indices are at 34000 and 15400. Nikkei oscillates around 29000 and is bullish while it sustains above 38500. Shanghai continues to consolidate between 3350 and 3625 within its overall uptrend. Nifty and Sensex have bounced-back yesterday and might consolidate in a narrow range of 15600-15800 and 52000-52500 respectively for some time before moving further higher.
Dow (34466.24, +19.10, +0.06%) had come-off sharply from the high of 34737.79 to close below 34500. While below 34500, a test of 34000 in the near-term cannot be ruled out. However, the broader view is bullish with strong support at 34000 and 33500 and we expect the Dow to breach 35000 and rise to 36000 eventually over the medium-term.
DAX (15571.22, −9.92, -0.06%) oscillates around 15600. Near-term support is at 15400 while above which the bullish view is intact of seeing 15800 and 16000/16100 on the upside in the coming weeks. As mentioned yesterday, a break below 15400 can drag DAX to 15200-15000 and will delay the rise to 15800 and 16000-16100.
Nikkei (28923.30, −35.26, -0.12%) hovers around 29000 and looks mixed in the near-term. Our view remains the same. While above 28500, the outlook is bullish to test 29500-30000. A break below 28500 is needed to turn the outlook bearish and bring the danger of seeing 27000-26000 into the picture.
Shanghai (3603.14, −7.72, -0.21%) retains its 3550-3625 range. We expect this range to remain intact for some more time. The broader view is bullish to see an eventual break above the 3625-3650 resistance zone and see a rise to 3750-3800 over the medium-term.
Nifty (15737.75, +102.40, +0.65%) sustains above 15600 and can remain in a range of 15600-15800. The broader view remains bullish to break 15800 and rise to 16200-16500 over the medium-term. In case if Nifty breaks below 15600, a dip to 15400 is possible before a fresh rise is seen.
Sensex (52300.47, +358.83, +0.69%) has moved back above 52000 thereby reducing the chance of a fall to 51500-51000 mentioned yesterday. The bullish view is intact to see 53000-54000 in the coming weeks. A break above 52500 can trigger this rise.
COMMODITIES
Commodities are mixed. While crude prices have inched up, precious metals have risen sharply too but Copper on the other hand has declined further indicating a test of support near 4.40. Gold and Silver are up on dollar weakness and the Dollar Index needs to break and sustain below 90 in order for Gold and Silver to continue rising. We look for a range of 1920-1880/60 to continue in Gold while Silver needs to break above 28.50 to move up further. Crude prices may steadily move up in the near term towards $73-75 (Brent) and $70-72 (WTI)
Brent (72.13) and WTI (69.92) both have risen slightly. We may continue to look for a steady rise towards $73-75 in Brent and $70-72 in WTI in the near term while intra-day movements are expected to be narrow.
Gold (1903.30) has risen today as US Dollar weakens from levels seen yesterday. But the index will have to fall back below 90 and sustain there in order to boost the rise in Gold price else we may expect another dip back to 1880/60 in the near term. Gold is likely to test upper limit of the 1920-1860 region. Only a successive break above 1920 would pave way for further bullishness.
Silver (28.17) has risen sharply as well and could test 28.50 on the upside. Only if 28.50 breaks, we would look for a further rise towards 29-30 in the longer run.
Copper (4.4815) has dipped further and while below 4.50, the price can fall sharply towards immediate support near 4.40. Thereafter the price is expected to bounce back towards 4.60/65, else could be vulnerable to a sharp fall.
FOREX
Currencies are stable without any major movement. Dollar Index has fallen giving slight scope for strength in other currencies globally but the index needs to sustain lower in the near to medium term. Euro has bounced back a bit after the ECB policy release yesterday but overall remains stable below 1.22. Unless the Dollar index breaks and sustains below 90, Euro can remain below 1.2225. EURJPY, USDCNY, Dollar-Yen, Pound and Aussie are stable. USDINR can rise towards 73.20/30 while above 73.
Dollar Index (90.00) tested 90.30 yesterday and has turned around from there after the ECB meeting. The index needs to fall and sustain below 90 in order to re-test 89.65/50/30 levels in the near to medium term. Unless the index falls, Euro (1.2186) will have difficulty to move above 1.22 in the near term and can head back towards 1.21 or lower. A fall in the Dollar Index below 90 is needed in the near term for Euro to rise above 1.2225 and attempt a further rise to 1.23-1.2320. Watch strong support near 89.75/65 on Dollar Index.
EURJPY (133.35) is stable within 133-134 region as mentioned for the last few days and is likely to continue so for now. Maximum downside within the current movement can be limited to 132.50.
Dollar-Yen (109.40) has risen slightly and while above 109, there is scope for a steady rise towards 110. Only a break below 109, if seen would prove our bullishness wrong and take the pair down towards 108.60/30 on the downside.
Aussie (0.7748) is stuck within the broad range of 0.7650-0.78 and may continue so for some more time before a sharp breakout on either side is seen to give some clarity on longer time direction.
Pound (1.4174) has risen a bit but overall remains within the range of 1.4085-1.42. The range needs to break on either side to give more clarity on further direction from here.
USDCNY (6.3844) is almost stable. As mentioned yesterday, we reiterate a possible test of the lower end of the 6.38-6.41 range mentioned yesterday. Note that a fall below 6.38, if seen would be strongly bearish for the medium term.
USDINR (73.0575) rose to test 73.1225 yesterday before closing above 73. While the pair holds above 73, we continue to expect rise towards 73.20/30 in the near term. On the downside 72.90 and 72.70 are important supports.
INTEREST RATES
The US Treasury yields continued to move down despite a strong inflation number. The US CPI surged 4.93% (YoY). The yields have crucial supports coming up which will have to hold in order to indicate a trend reversal and a deeper fall. The focus may turn towards the US Federal Reserve meeting next week. We will have to wait and watch. German yields have come close to their support and the corrective fall could be coming to an end. We expect the yields to bounce from these supports and keep the broader uptrend intact. The ECB left the rates unchanged yesterday. The 10Yr GoI can continue to consolidate in a narrow range for some more time before resuming the fall.
The US 2Yr (0.15%), 5Yr (0.72%), 10Yr (1.43%) and 30Yr (2.13%) Treasury yields have declined further and are just above their crucial supports. 1.40% (revised down from 1.45%) and 2.10% (revised down from 2.15%) are the crucial support which have to hold to avoid a much deeper fall from here. As mentioned yesterday, the yields have to move up from these supports to keep the overall uptrend intact and bring back the chances of revisiting 1.6%-1.7% (10Yr) and 2.3%-2.4% (30Yr) levels.
The German 2Yr (-0.70%), 5Yr (-0.63%), 10Yr (-0.26%) and the 30Yr (0.31%) yields have limited room on the downside from here. The supports at 0.30%-0.25 (30Yr) and -0.30% (10Yr) can halt the corrective fall and trigger a bounce to keep the uptrend intact. We remain bullish on the yields and expect it to rise towards 0% (10Yr) and 0.55% (30Yr) over the medium-term.
The 10Yr GoI (6.0199%) sustains above 6% and could remain in the 6%-6.04% range in the near-term in line with our expectation. The broader trend is down and we expect the 10Yr GoI to break 6% and fall to 5.95% and 5.9% eventually over the medium-term.
