STOCKS
Equity indices seem to need some strong trigger to gather momentum and breach their near-term resistances to move up sharply. Indices like the Dow and Nikkei has to break above their key near-term resistances in order to gain strength. DAX and Shanghai have little room to move up in the near-term to test their key resistances. Sensex and Nifty can consolidate sideways with a bearish bias.
Dow (29276.34, −0.48, 0.0%) is facing resistance around 29400 again. A strong break above 29400 and a subsequent rise past 29500 is needed to pave way for a rise to 29750-30000 on the upside. While below 29500, the index may consolidate between 29000 and 29500 for some time. However, as mentioned yesterday, only a strong fall below 28900 will bring the index under pressure and negate the above mentioned rise.
As expected, DAX (13627.84, +133.81, 0.99%) has risen above 13600. While it sustains above 13600, a further rise to 13750-13800 is possible in the near-term after which a pull-back to 13600 can be seen again.
The intermediate support at 23600 on the Nikkei (23806.03, +120.05, +0.51%) is holding well and the index has bounced again. It will have to be seen if the index manages to breach 24140 (the upper end of the 22800-24140 range) and rise to 25000 or come down again to keep the sideways range intact.
Shanghai (2902.27, +0.59, +0.02%) is hovering higher but seems to lack strong follow-through buyers above 2900. As mentioned yesterday, the recent bounce in the index is coming closer to a crucial resistance region of 2925-2950 which can cap the upside. While 2950 holds, a corrective fall to 2900-2875 is possible in the coming days.
Nifty (12107.90, +76.40, +0.63%) continues to hold above 12000 and is likely to remain range bound between 12000 and 12200 in the near-term. However, the bias continues to remain negative to see a break below 12000 and a fall to 11800. Only a strong rise past 12200 will negate our bearish view.
Sensex (41216.14, +236.52, +0.58%) moved above 41260 yesterday but failed to breach the next 41400-41500 resistance region. While below 41500, we expect the Sensex to remain vulnerable for a fall to 40500 and even 40200-40000 in the coming days. A strong rise past 41500 is needed to negate the above mentioned fall and bring back the bullishness.
COMMODITIES
The American Petroleum Institute (API) estimated on Tuesday a larger than anticipated crude oil inventory build of 6-million barrels for the week ended February 7th, compared to analyst expectations of a 2.987-million-barrel build in inventory. Crude prices are stable and could be ranged to mildly bullish for the near term. Copper may rise in the next few sessions. Gold is stable just now but could have scope of moving on either side from here. Silver looks potentially bullish while above immediate support levels.
Brent (54.92) has bounced back holding above support at 54 while Nymex WTI (50.55) has risen slightly too. Brent could test 56-58 levels while above 54 while WTI could also be bullish towards 52-54 in the near to medium term. We would be mildly bullish on Crude prices just now to see price action near current levels. Some sideways ranged movement could be possible in case the prices does not move up sharply.
Gold (1570.50) is stable just now with equal chances of moving either towards 1590 or 1550 in the near term. On the medium term charts, there is limited scope for a fall towards 1540 while upside is open towards 1620-1640 on a successive break above 1590-1600 in the coming sessions. For now, trade is likely to be seen within 1590-1550 just now.
Silver (17.59) continues to trade above trend support on the daily candles and looks bullish for the near term towards 18.50-18.75. Only a break below 17.50 would negate our bullish view and consider a possible fall below 17.50.
Copper (2.5955) has moved up and could rise towards 2.65 in the near term. Broad trade range of 2.65-2.50 is likely to hold broadly for the next couple of weeks.
FOREX
Overall currencies are mixed. Dollar Index is trading below crucial resistance and a fall from here could pull up Euro from current levels.Dollar-Yen too has similar resistance but could spend some time in a sideways range before deciding its further direction. Aussie could be bullish supported by rising Copper prices. Pound is headed towards resistance and Yuan could trade strong for now. Overall a trigger is needed in the next few sessions to bring in sharp movement in the currency pairs.
US Dollar Index (98.75) has tested 98.91 and while resistance at 99 holds, we may expect a fall towards 98.00-97.50 in the near term. As mentioned yesterday, we repeat that even if 99 breaks to the upside the rise in index could be limited to 100 before a sharp fall is seen in the medium term.
Euro (1.0914) tested a low of 1.08913 yesterday and has bounced back sharply from there. While above 1.09, we may expect a rise towards 1.0950 or higher within the next few sessions.
Dollar-Yen (109.84) has been stable since the last few sessions. Trading below immediate resistance at 110, it could either fall from here towards 109 or lower or trade sideways in the 109.50-110.00 region for sometime before deciding on further direction from here. A break above 110 is needed to take it higher towards 111.00-111.30 in the medium term. For now we may expect a sideways trade below 110 or a fall from here.
EURJPY (119.92) is stable just now but looks potentially bearish towards 119 in the medium term. View is bearish while below 120.
Pound (1.2967) has bounced back in the last 3-sessions but could be limited to earlier support turned resistance near 1.3000-1.3030.
Aussie (0.6732) has bounced from 0.6666 and if the bounce holds, we may expect a rise towards 0.6750-0.6775 in the near term with a potential to test higher levels of 0.68-0.70.
USDCNY (6.9635) has dipped a bit as expected and could trade in the 7.04-6.95 region for the next few sessions with possibility of a further fall below 6.95.
USDINR (71.28) held above support at 71.16 yesterday and could trade within 71.16-71.40 in the near term with a potential to test 71.08. A bounce in Euro from 1.0891 seen yesterday could favor Rupee strength.
INTEREST RATES
Contrary to our expectation, the US Treasury yields have bounced yesterday across tenors. It will have to be seen if they can sustain this bounce and keep the chances alive of seeing a further rise. The German yields look mixed. The yields at the near-end (2Yr and 5Yr) remain subdued while those at the far-end (10Yr and 30Yr) have inched higher. We need to wait and watch for a few sessions to get a clear cue on the trend. The Indian 10Yr GoI has bounced well and can move up to test its key resistance before reversing lower again. The Indian CPI data release today will need a close watch.
The US 2Yr (1.43%), 5Yr (1.43%), 10Yr (1.61%) and 30Yr (2.08%) Treasury yields have bounced well across tenors contrary to our expectation to see a further dip. It will have to be seen if they can sustain this bounce or not. While above 1.60%, the 10Yr can see a rise to 1.72%. The 30Yr can get a breather if it breaches 2.10% which will then pave way for a rise to 2.20%. The 10Yr and 30Yr will come under pressure only if they fall below 1.50% and 2% respectively.
The German 2Yr (-0.65%) and 5Yr (-0.61%) yields remain subdued and stable while the 10Yr (-0.39%) and 30Yr (0.13%) have inched slightly higher. . However, the 10Yr has to sustain above -0.40% in order to negate the chances of seeing a fall to -0.50% completely. The 30Yr on the other hand has to surpass 0.20% to become bullish again. We will have to wait and watch for a few sessions to see where the German yields are headed.
The 10Yr GoI (6.4668%) has moved higher and is likely to test 6.50% in the near-term. Strong resistance is in the 6.5250%-6.53% region which can cap the upside and trigger a fall again towards 6.40% and even lower. While below 6.53%, the broader bearish view is intact to see a test of 6.37%-6.35% on the downside.
