STOCKS
Asian indices are bleeding as a result of Iran’s retaliation to the US attack that killed their top military leader. Nikkei has tumbled and has room on the downside to fall further. Shanghai has come-off from its key resistance and a dip in the coming days. Sensex and Nifty are likely to see a sharp fall following the global markets. The Dow Futures is trying to recover after having tumbled over 400 points on Iran’s retaliation. The Dow can also run into a sell-off tonight. DAX can fall to test the lower end of its range and could turn bearish if it breaks below the range support.
Dow (28583.68, -119.7, -0.42%) is likely to run into a sell-off tonight. It can break below its support at 28250 and fall to 28000 and 27800. The Dow Futures (28340, -186, -0.65%) has recovered slightly after having tumbled over 400 points the news on Iran’s retaliation.
DAX (13226.83, +99.84, +0.76%) can fall to test its crucial range support zone of 13000-12950. A break below 12950 will be bearish to see 12800 and even lower levels going forward.
Nikkei (23117.79, -457.93, -1.94%) has tumbled below the support level of 23400 and is in danger of seeing further fall towards 22650-22630. A strong close below 23130 will be very bearish which will increase the chances of seeing a break below 23000 which in turn will trigger the above mentioned fall to 22650-22630
The resistance in the 3100-3125 region that we have been mentioning on the Shanghai (3081.47, -23.33, -0.75%) has held well and the index has come-off today. We can now see a dip to 3040-3035 while Shanghai remains below 3100.
Sensex (40869.47, +192.84, +0.47%) which has closed on a mixed note yesterday is likely to fall following the global markets. . It can test 40100-40000 on the downside. 41215 and 41350 (revised higher from 41300 mentioned yesterday) are the important resistances.
Similarly, Nifty (12052.95, +59.90, +0.5%) can break below 12000 and fall to 11900-11800 today. Key resistances for the index are poised at 12135 and 12200.
COMMODITIES
Crude prices including other major commodities have risen after news of two airbases hosting US troops been attacked in Iraq by more than a dozen missiles launched by Iran. Adding to this, the American Petroleum Institute (API) reported a decrease of 5.945 mln barrels of crude in crude stock inventory for the week ended Jan 3rd which in turn boosted a rise in crude prices.
Brent (69.93) is rising back towards 70 after a 1-day short corrective dip. As mentioned yesterday we may have to allow for higher crude levels in the coming weeks as tensions between Iran and US could escalate bringing in more volatility to the markets. A sustained break above 70 could turn bullish towards higher target of $75 for the coming weeks.
Nymex WTI (64.11) rose back before testing our mentioned 61-60.50 levels. A break above 65 could lead to a quick rally towards 67 in the next 1-2 weeks.
Gold (1592.40) re-bounded to 1590 and is trading higher just now. A test of 1600 is in place but a rise beyond that would be clearly bullish for a long term target of 1700-1800. We would watch price action near 1600 to decide on further movement from here. Preference would be to see a fall from 1600 itself.
Silver (18.56) has moved up too and could test 19 over the next 1-2 sessions.
Copper (2.7935) tested 2.763 yesterday and has bounced back from there. While there is support near 2.75/70 on the downside; there is also room for a rise towards 2.90/95 on the upside. A ranged movement within the broad 2.70-2.95 could be seen in the next 1-2 weeks.
FOREX
Dollar Index (96.89) is trading in the 96.35-97.10 region and could remain sideways for some more sessions.
Euro (1.1157) has immediate support near 1.1140 and is likely to trade in a range of 1.1140-1.1239 in the near term.
Dollar-Yen (108.365) dropped to 107.65 before rising back sharply from there. Resistance at 109.72 is holding well on the upside but the currency pair needs to fall sharply below 107.50 to turn bearish for the near term. We wait to see price action on a fall below 108.
EURJPY (120.91) is getting stiff support from 120.15 and while that holds, we may expect some ranged movement above 120.15 in the near term.
Pound (1.3131) is likely to trade above 1.30 for the next few sessions with an attempt to rise above 1.32.
Aussie (0.6877) tested earlier resistance turned support near 0.6845/50 from where it has bounced. A rise towards 0.69-0.6950 could be on the cards for the next 2-3 sessions.
USDCNY (6.9421) has dropped below our expected support near 6.95. Now while the currency pair trades below 6.95, there is scope of falling towards 6.90/85 in the near term.
Dollar-Rupee (71.84) could rise towards 71.92-72.00 while downside is likely to be limited to 71.60/50. Interim resistance at 72.15 remains intact for the week.
INTEREST RATES
Iran’s attack on the US troops is likely to bring back the risk aversion in to the market and drag the yields lower in the coming days. The US Treasury yields have declined yesterday and are likely to fall further on the back of the on-going US-Iran tensions. German yields look mixed in the near-term and are hovering around their key supports which needs to hold in order to see a bounce. The 10Yr GoI can consolidate sideways before we see a fresh rally.
The US 2Yr (1.50%), 5Yr (1.56%), 10Yr (1.77%) and 30Yr (2.25%) Treasury yields have declined across tenors. The 30Yr can break below its support at 2.23%-2.20% and fall to 2.15% and even 2.05% on the back of the ongoing US-Iran tensions. The 10Yr on the other hand has room on the downside to test 1.67%-1.65% in the coming days.
The German 2Yr (-0.64%), 5Yr (-0.56%), 10Yr (-0.29%) yields have dipped slightly while the 30Yr (0.25%) has inched higher. The 30Yr has to sustain above 0.20% in order to move higher towards 0.30% and 0.35%. A break below 0.20% can drag it to 0.15%. We will have to wait and watch. The 10Yr on the other hand has support in the -0.33% / -0.35% region which is likely to hold and produce a bounce to -0.20% again. But a break below -0.35% will be bearish to see -0.40% and even lower levels.
The 10Yr GoI (6.5535%) is oscillating around 6.55%. The yield could trade in a sideways range of 6.49% – 6.57% in the near-term. The bias will continue to remain bullish for the yield to breach 6.57% eventually and rise to 6.60% initially and 6.70% eventually.
