STOCKS
Concerns over the coronavirus outbreak and increasing fears on the rising death tolls are keeping the sentiment in the equity markets nervous. Dow has declined sharply on Friday to close below 29000 and has a key support coming up which needs to hold to avoid further fall. Nikkei has tumbled today and is also coming closer to a crucial support. DAX is range bound. Sensex and Nifty have bounced on Friday but have to be seen if they can sustain higher amid the sell-off in the global markets.
Dow (28989.73, -170.36, -0.58%) has come-down below 29000 and need to see if it can sustain above the crucial support level of 28750 . As mentioned on Friday, 28750 need to hold in order to keep the chances alive of moving above 29000 again. A break below 28750 will be bearish to see 28500 and even lower levels this week.
Contrary to our expectation for a fall below 13350, DAX (13576.68, +188.26, +1.41%) has bounced on Friday. This keeps the 13350-13650 range intact. We will have to wait for a breakout of this range. The bias is bullish on the charts to see an upside breakout of this range above 13650.
As expected, Nikkei (23376.18, -451, -1.89%) has tumbled (indeed much faster than we had anticipated) and is heading towards 23200-23000 in line with our expectation. 23000 is a crucial level to watch which needs to hold to avoid the index falling further towards 22000-21500 in the coming weeks. We will have to wait and watch closely.
Nifty (12248.25, +67.90, +0.56%) has risen back above 12200 and need to see if it can sustain above it amid the ongoing concerns over the coronavirus outbreak. While above 12200 a rise to 12300-12400 is possible again. But a fall below 12200 will bring back the chances of seeing a fall to 12100 and even testing 12000 on the downside ahead of the Union Budget this week on Saturday (01-Feb-2020).
Sensex (41613.19, +226.79, +0.55%) on the other hand has to sustain above 41400 in order to move up to 42000-42200 again and avoid a fall to 41000-40700.
Shanghai (2976.53, -84.23, -2.75%) is closed this week for four days for the Chinese New Year holidays and will reopen on Friday (31-Jan-2020).
COMMODITIES
Commodities are in sharp bear run except Gold and Silver which have rallied over the last few sessions. Copper looks bearish and is likely to fall further unless some positive news comes in from the fast spreading coronavirus and its impact on the Chinese economy and metal demand. Gold and Silver have risen sharply and could find some resistance above current levels. Crude prices are expected to bounce from near term supports.
Brent (59.38) and Nymex WTI (52.90) have fallen sharply from the highs seen in the early week of this month. However, there are important support below current levels which looks likely to hold and produce a bounce in the near term. 58-58.50 on Brent and 50 on WTI are immediate support levels that look likely to hold and produce a bounce by either the end of the week or in the early sessions next week.
Gold (1581.80) and Silver (18.27) continue to rise sharply. Gold has come up to our expected 1580 while Silver is headed towards 18.50 in line with our expectation. Resistance is seen near 1600 on Gold which if holds could produce a rejection towards 1540-1520 in the coming sessions. Silver could be capped near 18.50-18.75 on the upside from where a rejection back towards 17 or lower is possible in the medium term.
Copper (2.6380) has fallen sharply breaking below the support at 2.6750 as fear of the coronavirus to hit the Chinese economy and metal’s demand is yet to subside. While Copper sustains to falls below 2.65, we may see a test of 2.60 or even lower in the coming sessions.
FOREX
Dollar Index (97.86) rose from 97.40 earlier but may find some difficulty in rising above 98 just now. A possible ranged movement in the 98.00-97.25 region looks likely in the near term.
Euro (1.1027) is trading lower and has immediate support near 1.10 on the downside which could produce a short term bounce to 1.1050-1.1075 in the near term. In the longer run, we may consider a possible fall below 1.10 targeting lower levels. For now watch for a bounce from 1.10.
Dollar-Yen (109) is trading at support and a fall or bounce from here would be the deciding factor for the near term direction for Yen. While there is scope for a fall towards 108.50-108.00 on the charts, an immediate bounce from 109 could take it back towards 109.50-110. Overall view looks bearish for the near to medium term.
EURJPY (120.16) is down to test support near 120 which if holds could pull up the exchange pair towards 122. A further fall below 120 could be vulnerable for further bearishness towards 119. Watch price action near immediate support.
Pound (1.3056) has not been able to rise sharply from support near 1.2950. Immediate upside is capped at 1.32. While we may expect a sideways range of 1.32-1.2950 to hold in the near term, lack of bulls from here could slowly pave the way for a break below 1.2950 to enable a fall towards 1.2900-1.2820 levels in the medium term.
Aussie (0.6802) is trading at important support just now and if it breaks below 0.68, it may fall further towards 0.67-0.6650 in the coming sessions. Overall bearish view remains intact for Aussie while the news of spreading coronavirus subsides. Sharp fall in Copper could also pull down Aussie which is a commodity-currency and could be impacted by a further fall in commodity prices.
USDCNY (6.9363) is closed for the week as China celebrates the spring festival. The currency trade will resume from 31st Jan’20 post which the pair is expected to rise from current levels targeting 6.95/96-7.00.
Dollar-Rupee (71.3350) has chances to move higher towards 71.50 while above 71.30. A rejection from 71.50 is expected in the near term. Failure to fall from 71.50 would take it higher towards 72 but for now we would watch for a rejection from 71.50. Immediate support is seen at 71.20.
INTEREST RATES
The outbreak of the coronavirus has turned the market highly risk averse. As a result the US Treasury yields have moved down sharply. The outlook is bearish and the Treasury yields can fall further in the coming weeks. The German yields come down to test their key supports as expected. It will have to be seen if they can bounce-back from their supports or not. The 10Yr GOI has dipped below 6.60% and can fall further before reversing higher again.
The US 2Yr (1.45%), 5Yr (1.45%), 10Yr (1.64%) and 30Yr (2.09%) Treasury yields have declined sharply across tenors and keeps our bearish view intact. The 30Yr and 10Yr has come down towards 2.10% and 1.65% as we has mentioned on Friday. They can fall further towards 2%-1.9% (40Yr) and 1.53%-1.50% (10Yr) in the coming weeks.
The German 2Yr (-0.62%), 5Yr (-0.59%), 10Yr (-0.34%) and 30Yr (0.18%) yields are moving down in line with our expectation. . The 10Yr and 30Yr have key supports at current levels and need to see a bounce in order to keep the broader uptrend intact. A further fall today will negate our bullish view drag them down to 0.10% (30Yr) and -0.40% (10Yr).
The 10Yr GoI (6.5824%) has declined below 6.60% on Friday. While below 6.60%, the outlook is bearish to test 6.53%-6.51% on the downside. Thereafter a bounce to 6.60% can be seen.
