STOCKS
Equities continue to trade mixed. The ongoing consolidation within their broader downtrend can continue for some more time. We expect the broader downtrend to remain in place and will be looking for a fresh fall.
Dow (26036.10, +258.20, +1%) continues to remain choppy within the expected broad 25500-26500 range. The range-bound move can remain in place for some more time. Our bias remains negative to see a break below 25500 and a fall to 25000.
DAX (11701.02, -29, -0.25%) has bounced sharply from the low of 11573.64 and remains bullish to test 11800-11850. As being reiterated here, 11850 is a very crucial level a break above which will confirm an inverted head and shoulder reversal pattern on the chart.
Nikkei (20383.73, -95.69, -0.47%) remains stuck and continues to consolidate in its 20100-20800 sideways range. We will have to wait this range to break to get clarity on the next leg of move.
Shanghai (2885.26, -8.5, -0.29%) is still struggling to get strong follow-through buying above 2900. Crucial support is at 2870 a break below which will reduce the chances of a rally beyond 2900 and will drag Shanghai lower to 2850.
Nifty (11046.10, -59.25, -0.53%) is managing to hold above 11000. But as mentioned yesterday 11145 is a key immediate resistance and the Nifty has to surpass 11200 decisively to turn the outlook positive and trigger a fresh rise. While below 11145/11200, the bias is negative to see a decisive break below 11000 and a fall to 10900-10800.
As expected, Sensex (37451.84, -189.43, -0.50%) declined below 37500 yesterday. Though it is getting support at 37250, the bias is weak as long as the Sensex remains below 37750 to test 37000 on the downside.
COMMODITIES
Gold consolidates within its overall uptrend while silver continues to remain strong and has room to rise further. Copper is managing to sustain higher but has to breach an important resistance to ease the downside pressure and move further higher. Oil prices surged after a sharp fall in US inventories but failed to sustain higher. Crude inventories fell by 10 million barrels as against the market expectation of a fall by 2.1 million barrels. The short-term resistances are holding well and oil has to surpass them to move further higher.
Gold (1540) remains stable between 1525 and 1555. A breakout on either side of 1525 or 1555 will decide whether it will fall to 1500 or rise to 1580-1590. The broader bias however continues to remain positive for gold.
Silver (18.32) remains strong and has moved further higher in line with our expectations. Support is at 18.15 while above which the bullish outlook will remain intact to test 18.7 and 19 on the upside. A strong break above 18.5 can accelerate the rally.
Copper (2.55) remains stable above 2.52 but is not gaining momentum to breach 2.5750. We will have to wait and watch if it can break above 2.5750 and rise to 2.60 and 2.6250 which will ease the downside pressure.
As expected, Brent (60.36) rose to test 61 yesterday and has come-off from there. Support is in the 60.15-60.00 region. While this holds, another leg of upmove to 61 and 61.50 is possible before the price come down again. As mentioned yesterday, broadly Brent can remain range bound between 58 and 61.50.
WTI (55.80) has come-off from 56.80 and can test 55.30 in the coming sessions. WTI has to breach 56.80 decisively to take the prices further higher towards 58 for which it has to sustain above 55.30. A break below 55.30 will negate further upmove and will drag the prices to 54.75.
FOREX
Currencies continue to trade stable. Euro remains lower but has chances of moving higher in the coming days. Dollar-Yen lacks strength to sustain higher and may dip in the near term. Pound is under pressure after the UK’s Prime Minister announced to suspend the parliament and looks vulnerable for further fall. Aussie looks weak. USDCNY is at a very crucial juncture which will need a close watch. Dollar-Rupee has room to test 71.95 on the upside before coming-back again to 71.40 levels.
Dollar Index (98.18) sustains above 98 and has moved higher. A test of 98.45-98.55 is likely while it trades above 98. A break above 98.25 can trigger the above mentioned rise.
Euro (1.1085) remains stable below 1.11 and seems to lack strong sellers. Though the possibility of testing 1.1060 on the downside is still alive, a strong reversal seems to be on the cards which could take the pair higher to 1.1135 and 1.1165 in the near term.
Dollar-Yen (105.90) continues to lack strength to breach 106 decisively. As mentioned yesterday, 105.5 is a key level to watch. A break below it can drag it to 105 and 104.5 again which will then rule out the possibilities of seeing 106.7 on the upside.
EUR-JPY (117.42) is consolidating between 117 and 118 as mentioned yesterday. The bias is negative for it to break 117 and fall to 116. A strong rise past 118.3 is needed to avoid this fall.
Aussie (0.6727) has dipped below 0.6735 and looks weak to test 0.6700 on the downside. From a slightly bigger picture Aussie looks vulnerable to break 0.6700 and fall even to 0.6635 in the coming weeks.
Though Pound (1.2212) has bounced sharply from the low of 1.2155, the sentiment remains negative for it to fall-back to 1.2150 and 1.2130 levels.
USDCNY (7.1697) is at a crucial juncture. The level of 7.17 will need a close watch which has to hold in order to arrest the current rally trigger a corrective fall to 7.14 and 7.12
USDINR (71.775) has bounced sharply and may have room to test 71.95 on the upside before falling back again towards 71.40. While below 71.95 we expect the Dollar-Rupee to break 71.40 and fall further.
INTEREST RATES
Yields continue to fall as the recession fears weigh on the market. The broader bearish view remains intact and both the German and the US yields have room to extend the downtrend. The 10Yr GoI has a key resistance ahead which has to be breached in order to move further higher.
The US 2Yr (1.50%) and10Yr (1.45%) were down 2bps. The 5Yr (1.35%) was down 3bps while the 30Yr (1.92%) is stable. The 30Yr sustains below 2% and remains bearish to test 1.8%. The 5Yr is heading towards 1.3% as expected.
The German yields, 2Yr (-0.89%), 5Yr (-0.89%), 10Yr (-0.71%) and 30Yr (-0.26%) remained stable. The downtrend is intact and we retain our view of the 10Yr falling to -0.80% and even -0.90%. The 5Yr can test -1% on the downside.
The 10Yr GoI (6.5717%) has risen breaking above 6.53% and can test 6.61%. Whether it breaks above 6.61% or not will determine the next move.
