STOCKS
Dow has surged but is coming closer to a crucial long-term resistance level of 29000 which can halt the upmove and drag it lower. DAX has to break above 13400 in order to regain bullishness. Shanghai is hovering around a key long-term resistance which will need close watch. Sensex and Nifty can break their range on the upside and move higher to test their important resistances and then can reverse lower again.
Dow (28868.80, +330.36, +1.16%) has surged breaking above the key resistance at 28650 and is now likely to test 29000. The level of 29000 is a very crucial long-term resistance which can halt the current rally. We expect the Dow to reverse lower targeting 28000-27800 again.
DAX (13385.93, +136.92, +1.03%) has bounced again. But as mentioned yesterday, it has to rise past 13400 decisively in order to turn bullish and rise further to 13500-13600. While 13400 holds, it can continue to oscillate between 13000 and 13400. We will have to wait and watch.
Nikkei (23656.62, -181.1, -0.76%) remains closed.
Shanghai (3085.41, +0.21, +0.01%) tested 3100 yesterday and is hovering below it now. As mentioned yesterday 3100-3120 is a strong resistance zone and while it holds, a dip to 3050 is possible in the near term. A strong rise past 3120 will be very bullish. We will have to wait and watch.
Nifty (12282.95, +100.45, +0.82%) and Sensex (41626.64, +320.62, +0.78%) have surged within their respective preferred range of 12100-12300 and 41100-41800. We expect them to break this range on the upside and rise to 12350-12370 (Nifty) and 42000-42200 (Sensex) in the coming days. Thereafter both the Nifty and Sensex are likely to reverse lower again.
COMMODITIES
Rally in US equity and Crude prices overnight has suggested possibly entry of bulls for the near term. Gold and Silver also trades higher with some more possible upside in the near term. Copper has dipped slightly and could trade below important resistance.
Brent (68.39) has bounced from support at 66 but moved up beyond the previous high of 68.33 indication that the bulls could be coming stronger in the near term. While the price sustains above 68, we will have to allow for a rise towards 70, wherein our expectation of a fall towards 65 or lower can be delayed. Both resistances mentioned yesterday near 66.7 and 67 are broken.
Nymex WTI (63.13) has also risen sharply and could test resistance at 64. Near term looks bullish.
Gold (1541.30) has moved up above interim resistance near 1535 and now looks further bullish towards 1565 in the near term.
Silver (18.17) is holding well above support near 17.75 and could rise towards 18.5 as mentioned yesterday.
Copper (2.8085) is holding above 2.7775 and could see a small sideways trade for a few sessions. Overall downside could be limited to 2.75 within the current move from where we may expect resumption of the upward rally.
FOREX
Dollar Index (96.76) is looking bearish while below 97. A test of 96 or even 95 looks possible in the near term.
Euro (1.1172) has resistance near 1.1240/50 region as mentioned yesterday. Although the currency is trading below 1.12 just now, there is scope of rising back towards the mentioned resistances over the next few sessions.
Dollar-Yen (108.01) has come down sharply to test our expected 108. We may not look for a continued fall below 108 just now and a bounce from current levels could be on the cards. Only a sustained break below 108 would invalidate our view and force us to look for lower targets. For now we watch support at 108 and look for a bounce from here.
Pound (1.3128) has room to fall towards 1.2950 which is a near term support. We do not look for a fall below 1.2950 just now. However, a rise back towards 1.3350 is likely after the current corrective dip is over.
Aussie (0.6967) has been coming off from 0.703 and could fall towards 0.6940/30 in the near term before bouncing back from there. The short term corrective dip in Copper has kept Aussie lower since the last 2-3 sessions. Watch interim supports near 0.6940/30.
USDCNY (6.96782) is can rise back towards 6.98 and eventually towards 7 while above 6.95.
Dollar-Rupee (71.38) has been stable within 71.18-71.40 but we may expect an eventual rise towards 71.50 or even higher towards 71.65 in the near term. Bullish possibilities for USDINR remains intact.
INTEREST RATES
The US Treasury yields have reversed lower and look vulnerable for a fall with limited upside. The German Yields have also dipped. However, they have key supports near current levels which can produce a bounce and keep the bullish view intact. The 10Yr GoI can sustain very well above the 6.50%-6.45% support zone and is likely to move higher. The Reserve Bank of India’s announcement of another round of bond purchase/sale (Operation Twist) is likely to aid our bullish view.
The US 2Yr (1.57%), 5Yr (1.67%), 10Yr (1.88%) and 30Yr (2.33%) Treasury yields have come-off across the tenors. The 10Yr and 30Yr are struggling to breach 1.95% and 2.35% decisively which can keep it pressured on the downside. As mentioned yesterday we expect the upside to be capped. Our bias continues to remain bearish to see a fall to 2.25%-2.22% on a break below 2.30% on the 30Yr. Similarly the 10Yr can test 1.75% on the downside on a break below 1.85%.
The German 2Yr (-0.62%), 5Yr (-0.51%), 10Yr (-0.23%) and 30Yr (0.30%) yields have declined across tenors. The 10Yr has support near current levels and the 30Yr has at 0.28% which are likely to limit the downside and keep the bullish view intact. We expect the yields to reverse higher again and see the 10Yr targeting -0.10% and the 30Yr 0.40% in the coming weeks.
The 10Yr GoI (6.5052%) remained stable around 6.50% all through yesterday. The Reserve Bank of India announcing another round of bond purchase/sale program (Operation Twist) yesterday will aid in keeping our bullish view on the yields intact. As such we can see the 10Yr GoI yield moving higher towards 6.60%-6.65% and also revisit 6.70% and even higher levels in the coming weeks. 6.50%-6.45% will continue to remain as a strong support zone and limit the downside,
