STOCKS
Moment of truth for Equities? Looks like our bullish preference is under severe threat of being proven wrong.
Dow (24388.95) plunged again on Friday to a low of 24285, below the low of our range of 24500-25500, but above Support at 24250. We would prefer a bounce today,leading to fresh bullishness, else, a break below 24250 could intensify the current bearish sentiment.
The DAX (10788.09) has a “last” Support at 10700. Should that break (danger is there), a further decline towards 10000 would come up, as warned on Friday.
Asia looks pretty bearish with the Nikkei (21192) continuing Friday’s fall and possibly breaking below crucial 21200. Sustenance below 21200 would prove our expectation of an eventual rise past 22000 to be wrong.
The Shanghai (2585) seems to be giving up on its attempt to rise past 2600 and there can be vulnerable to a fall towards 2500-2400.
In India, the Nifty (10693) could well fall towards 10400 on global sentiment as well as anxiety over the state election results. The Sensex (35673.25, +1.02%) would test 35000 on the downside.
COMMODITIES
Brent (62.11) is trading higher and could test 64 on the upside in the near term. Above 64, there is scope of testing 66+ levels in the medium term. View looks bullish just now.
WTI( 52.57) too has room to rise towards 56-58 levels in the near term. The small sideways range seems to be over just now and a rise in the medium term looks likely.
Gold (1255.20) has seen a sharp rise too but could face resistance at 1260 as seen on the daily candles. A small corrective dip from 1260 is possible before a sharp rise is seen again breaking above 1260 in the longer run.
Silver (14.69) has risen too and while above 14.50, the price could move up targeting 14.75-15.00 in the near term.
Copper (2.7405) could test support at 2.70 before bouncing back towards 2.80/85 again. Stuck within the 2.85-2.70 region, it is difficult to predict which side the price would eventually tilt towards. For now, the consolidation is likely to continue for some more time.
FOREX
Crucial levels to keep an eye on for Euro, Pound and Dollar Yen at 1.15 (resistance), 1.27 (support) and 112 (support) respectively. UK Parliament’s Brexit vote is due on Tuesday and could bring in volatility in the currency market depending upon the vote’s outcome.
Dollar Index (96.43) had broken below the immediate support at 96.75 last week and continues to trade lower just now. A dip to 96 is possible in the near term from where a bounce could be seen back towards 96.50-96.75 again in the medium term.
Euro (1.1440) has moved up and while above 1.14, there is scope of testing resistance near 1.15 as seen on the 3-day candles before coming off from there again towards 1.14-1.13 levels. Near term looks bullish towards 1.15.
Dollar Yen (112.75) is headed towards support at 112 from where a decent bounce is possible. Failure to bounce back from 112 would open up chances of falling towards 110 in the medium term. Watch price action near 112.
Pound (1.2750) is trading near the 1.27 support levels and only a bounce from here seen immediately could take it higher towards 1.29-1.30 levels. While a bounce from here is preferred just now, failure to bounce could make it vulnerable to a fall towards 1.26-1.24 in the medium term.
Aussie (0.7217) could get some decent support at 0.7215. There is 55-Day MA support just below current levels and if that holds, a bounce to 0.7250 and higher is possible.
Dollar Rupee (70.81) could open with a gap up near 71.20/30 region and is likely to test 71.50 before coming off from there towards 71.20-71.00.
INTEREST RATES
Mixed news on the US Yield Curve. The 2Yr (2.69%) has dipped some more and the 10-2 Spread (14bp) has moved up further from 13bp earlier. We need it to sustain above 11bp and move up to 20bp. At the same time, however, the 5-2 Spread is quoting at -2p, still negative. At the Far end, though, the 30-10 (29bp) and 30-5(45bp) have been rising and can test 35bp and 60bp respectively.
Importantly, the US 10Yr (2.83%) has crucial Support coming up nearby between current levels and 2.80%. A bounce from here is a decent possibility and could lead to the Curve steepening we have been hoping to see.
At the same time, the fall in US Yields is leading the German-US 2Yr Spread (-3.32%) higher and the US-Japan 10Yr Spread (2.79%) lower, which is being reflected in a stronger Euro (1.1435) and Dollar-Yen (112.35) lower.
In India, the 10Yr GOI (7.4636%) saw a small bounce on Friday, contrary to our expectation of a further fall towards 7.30%. Maybe we are in for a period of sideways consolidation between 7.50% on the upside and 7.30% on the downside.
