STOCKS
Some sign of relief for the global equities as the major indices have seen some uptick yesterday after a strong sell-off towards the end of last week. However, the bounce-back move seems to lack strength in most of the indices. Also the indices have key resistances that need to be breached in order to turn the outlook positive and negate the chances of any further fall. We will have to wait and see if Monday’s bounce-back move sustains and gathers momentum or not. At the moment we remain cautious about the corrective bounce and retain our bearish view on the indices.
Dow (28399.81, +143.78, +0.51%) has bounced but cluster of resistances are poised in between 28500 and 29000 that can restrict this bounce-back move. While this resistance zone holds, the index is still vulnerable to test the crucial support level of 27700
DAX (13045.19, +63.22, +0.49%) bounced from the crucial support level of 12980 yesterday, but seems to lack strength. It will have to be seen if it can sustain above 13000 or not. As mentioned yesterday, a strong rise past 13200 will be needed to turn the outlook positive. While below 13200, a break and fall below 12980 towards 12700 cannot be ruled out.
Nikkei (22995.01, +23.07, +0.10%) is trying to bounce-back but seems to lack strength. Key immediate resistances are at 23120 and 23240 which can cap the upside and keep the index pressured on the downside to test 22000-21500.
Shanghai (2749.80, +3.20, +0.12%) sustains above 2700 but might face strong resistance in the 2800-2820 region While below this resistance we keep our bearish view intact to see 2600 on the downside.
Nifty (11707.90, +46.05, +0.39%) has bounced and could see a corrective rally to 11800-11850 while it sustains above 11600. But the broader picture is weak. The index has to rise past 12000 decisively in order to turn the outlook positive. While below 12000 our view is bearish to see a fall to 11200-11000 in a month or two.
Sensex (39872.31, +136.78, +0.34% on the other hand can test 40300-40400 while it sustains above 39800. But the broader picture is bearish while it remains below the 40900-41000 resistance zone to test 39000 and even 38000 on the downside.
COMMODITIES
Watch support near 50 on WTI which if holds could pull up Brent also from current levels, which otherwise looks potentially bearish towards 50. Gold and Silver could dip in the near term but have interim supports at 1570 and 17.50 respectively. Copper has some more room on the downside before it can bounce back to higher levels.
Brent (54.78) and Nymex WTI (50.47) have broken below supports and are clearly under bear trap with possible lower targets in the near term. Brent is trading below our mentioned 55 levels while WTI trades above 50 just now. While below 55, we may expect Brent to continue its fall towards 50 before pausing there for a short corrective bounce. WTI on the other hand is likely to remain above 50, which if seen could prevent a further sharp fall in Brent and could lead to an upward correction from current levels itself.
Gold (1581.10) is holding above immediate and interim support at 1570 but while resistance near 1600 holds there could be eventual fall in Gold towards 1540 or 1520 in the medium term.
Silver (17.70) has dipped a bit but could get some support near 17.5 as seen on the 3-day line charts. A bounce from 17.50 could keep price ranged in the 17.5-18.5 region for some more time. A break below 17.5 is necessary to turn bearish for the medium term.
Copper (2.5450) has near term support in the 2.50/45 region which is likely to hold and pull prices back towards 2.60/70 in the medium term. But on the weekly line charts, there is room for a further fall towards 2.30/25 which could come into the picture on a break below 2.45 (if seen). For now preference is to expect a bounce from 2.50/45 with an upside target of 2.60/70.
FOREX
US Dollar Index (97.83) rose back sharply yesterday to recover the entire fall seen on Friday thus eliminating immediate bearishness. This could trigger upside momentum for the near term taking the index higher towards 98 or higher in the near term.
Euro (1.1057) fell from 1.11 instead of rising further on Dollar strength. A rise in the dollar index towards 98 or higher could pull down Euro back towards 1.10 in the near term.
Dollar-Yen (108.68) has moved up a bit but we would look for a test of 108 on the downside before seeing a bounce from there back towards 109.50.
EURJPY (120.13) is stuck in the 120.50-119.75 region but is likely to turn bearish for the near term for an eventual fall towards 119.
Pound (1.2992) has surprisingly broken below 1.30 contrary to our expectation of a rise beyond 1.32 as Brexit tensions resurfaced and statements from the UK and European Union indicated possible failure of negotiations on trade deal. While bears look strong for now, we may expect a fall in Pound towards 1.2950-1.2900.
Aussie (0.6685) has support near 0.6650 and while that holds, we may expect a bounce towards 0.67/68 in the medium term.
USDCNY (7.0059) has dipped from 7.0248 and could now head lower towards 6.97/96 in the near term. View is bearish for the near term.
USDINR (71.35) is trading near 71.24 on the offshore markets and we would watch for a sustained dip below 71.28 today. Our expected support near 71.50 was broken yesterday as the pair closed sharply lower. It would now be important for USDINR to remain below 71.50 and head towards 71.20/71.00 in the near term to negate our earlier target of 71.80-72.00. At the same time we remain cautious for a possible bounce back to 71.50+ levels. Close watch for the next couple of sessions would give some clarity on whether we negate further weakness in the Rupee for the near term.
INTEREST RATES
A strong jump in the US Manufacturing data has given a breather to the US Treasury yields yesterday. The US ISM Manufacturing PMI rose sharply to 50.9 in January from 47.2 the month earlier. However, we expect this bounce-back move in the yields to be short-lived and the yields can reverse lower again to keep the broader bearish view intact. The German yields remains subdued and is likely to fall further in line with our expectation. The 10Yr GoI has declined sharply yesterday failing to sustain the gains seen on Friday and looks vulnerable for further fall.
The US 2Yr (1.37%), 5Yr (1.36%) and 10Yr (1.54%) Treasury yields have bounced-back while the 30Yr (2.01%) remained stable. . Though this bounce-back move is likely to delay our preferred fall to 1.50% on the 10Yr and 1.9% on the 30Yr, it is likely to be short-lived. We expect the yields to reverse lower again and keep our broader bearish view intact.
The German 2Yr (-0.68%), 5Yr (-0.65%), 10Yr (-0.44%) and 30Yr (0.06%) yields continue to remain subdued. . Our bearish outlook remains intact. As mentioned yesterday, the 30Yr can test 0% while it trades below 0.07% and the 10Yr can fall to -0.50% while below -0.40%.
The Indian 10Yr GoI (6.6011) has declined sharply to test its crucial 6.50%-6.49% support zone. 6.5250% and 6.55% will now be a good suppor-turned-resistances that can restrict the upside. While below these supports, the 10Yr GoI can break below 6.49% and fall to 6.45% and even 6.40%.
