STOCKS
The rally in the global equities seems to be losing steam. Dow has come-off on Friday and need to see if it can sustain above 28900 to keep the chances alive of seeing a rise again. DAX and Nikkei are turning down from their range resistances and could keep the sideways range intact. Sensex and Nifty have key resistances ahead which need to be broken to move further higher and avoid a fresh fall. Shanghai looks relatively bullish among the lot and has room to rise in the coming days.
Dow (29102.51, -277.26, -0.94%) has crucial support in the 29000-28900 region which needs to hold to keep our bullish view alive of seeing 29750-30000 on the upside. A strong break below 28900 will negate the bullish view and will drag the Dow lower to 28500 again.
DAX (13513.81, -61.01, -0.45%) has failed to breach 13600 which has reduced the chances of seeing an extended rise to 13750 that we had mentioned on Friday. While below 13600 a test of 13400 is likely now. A break below 13400 will drag the DAX lower to 13200-13000 again.
Nikkei (23778.29, −49.69, -0.21%) is turning down from 24000. The broader 22800-24140 range continues to remain intact. While below 24000, a fall to 23200-22800 can be seen in a week or two. A break below 23600 can accelerate the fall. As mentioned on Friday, a strong rise past 24140 is needed to turn the outlook bullish for a rise to 25000.
Shanghai (2880.92, +4.96, +0.17%) is holding well above 2850 and keeps our near-term bullish view intact. As mentioned on Friday a rise to 2900-2925 is likely now. 2850 will continue to serve as an immediate support and 2820-2800 is slightly a deeper support below 2850.
Nifty (12098.35, -39.60, -0.33%) seems to be struggling to breach 12165. While below 12165, a fall-back to 12000-11900 is possible. A strong rise past 12200 is needed to turn the outlook completely positive and negate any further fall.
Similarly, the 41400-41500 resistance region on the Sensex (41141.85, -164.18, -0.40%) is holding very well. A strong rise past 41500 is needed to boost the momentum and take the index higher to 42000-42200 again. But while below 41500, Sensex is likely to remain under pressure and fall to 40600-40200 again.
COMMODITIES
Crude oil production dipped for the OPEC by around 500,000 barrels per day in Jan’20 from Dec’19 (source: monthly S&P Global report) while the impact of coronavirus continues to affect oil demand. Crude prices have dipped lower. Gold and Silver prices may rise higher while Copper looks slightly bearish.
Nymex WTI (50.21) is holding well below 52 and failure to rise past 52 could keep it ranged in the 50-52 region. Note 50 is an important support on the near term charts and while that holds, Crude prices could have fair chances of rising above 52 in the medium term. A break below 50 would be needed to look for further bearish.
Brent (54.42) could have immediate resistance near 57.00-57.50 while support is seen near 52. A bounce from 52 is needed to see a rise back towards the mentioned resistance.
Gold (1572.10) has immediate resistance near 1580 and higher near 1595-1600 which is likely to hold and push price back to 1550-1540. However, weakness in Dollar, if seen could pull up Gold prices to higher levels from 1580-1600 towards 1620+ in the longer run. We would closely watch resistance in the 98.50-99.00 region on Dollar Index which if holds could be bullish for Gold. Till then trade in the 1550-1600 region is likely.
Silver (17.68) has support near current levels and could bounce higher towards 18.25-18.50 in the near term.
Copper (2.57) declined sharply from 2.6250 as expected. While below 2.6250, we may expect ranged trade in the 2.6250-2.50 region with a possibility of a further fall towards 2.45 on a break below 2.50. Although we may look for some ranged trade just now, we may not negate a test of 2.45 in the medium term.
FOREX
US Dollar Index (98.64) has risen above our cautioned 98.50 but has crucial long term resistance coming up near 99 which if holds could drag down Dollar back towards 98 and lower.
Euro (1.0952) is trading lower on stronger Dollar but could be limited to 1.09 in the near term from where a bounce back towards 1.10+ is expected in the near to medium term.
Dollar-Yen (109.81) has dipped slightly. Upside is likely to be capped at resistance near 110.50 while Dollar-Yen could dip back towards 108.50 in the near term.
EURJPY (120.31) is trading above 120 but looks bearish for a turn down towards 119 in the medium term. Upside is likely to be limited to 121.0-121.3.
Pound (1.29) has support near current levels on the weekly charts and if that holds, we may expect a bounce from here taking Pound higher towards 1.32 again. However, a break below 1.29 (looks likely) would turn Pound sharply bearish for a fall towards 1.26 in the medium term. We would be cautious at current levels.
Aussie (0.6704) dipped to test 0.6662 before bouncing back sharply from there. Note that 0.66 is an important support on the medium term charts and while that holds, we may expect a rise towards 0.68-0.70 in the near term.
USDCNY (6.9909) is stuck in the 7.04-6.95 region and is likely to remain ranged in the said region for few more sessions.
USDINR (71.4075) did indeed break above 71.30 as Dollar Index strengthened above 98.50 as cautioned. But if the index starts declining from resistance near 99 we may see limited weakness in Rupee just now to be followed by strength in the medium term. A break above 71.50, could take it higher towards 71.65/70 before coming off from there again.
INTEREST RATES
The US Treasury yields have declined sharply on Friday contrary to our expectation to move further higher. The US NFP data release on Friday that beat the market expectation failed to support the yields move higher. It needs to be seen if they can sustain above their key supports near current levels in order to keep our short-term bullish view intact. The German Yields have also moved lower and can test their key near-term supports now which need to hold to avoid further fall. Both the US and German yields will need a close watch this week. The 10Yr GoI can remain sideways in the near-term before falling further.
Contrary to our expectation for further rise, the US 2Yr (1.40%), 5Yr (1.40%), 10Yr (1.58%) and 30Yr (2.04%) Treasury yields have declined sharply across tenors, especially at the far end. . The 30Yr can test 2% and need to hold above it to keep the chances alive of moving higher to 2.25% that we have been mentioning all through last week. Similarly, the 10Yr can test 1.50% while it remains below 1.60% and has to sustain above it to keep the short-term bullish view of seeing 1.75% on the upside. We will have to wait and closely watch the move this week.
The German 2Yr (-0.65%), 5Yr (-0.60%), 10Yr (-0.39%) and 30Yr (0.13%) yields remain subdued and has dipped further . The near-term outlook is mixed. The 10Yr has an immediate support at -0.40% which needs to hold in order keep the chances alive of seeing a rise to -0.28% / -0.23% that we had mentioned on Friday. A break below -0.40% will negate the chances of a rise and will trigger a fresh fall to -0.50% and even -0.60%. The 30Yr on the other hand has a crucial support at 0.07% which needs a close watch. A break below it can drag it to 0% or even lower.
As expected, the 10Yr GoI (6.4414%) fell to test the 6.41%-6.40% support zone on Friday and has bounced from there. While it sustains above 6.40% a sideways move between 6.40% and 6.50% can be seen for some time. However, the broader picture continues to remain bearish and the 10Yr GoI is likely to test 6.37%-6.35% on the downside eventually.
