STOCKS
Equities manage to hold higher but are not convincingly looking strong across the segment. While some indices are turning bullish, some are coming closer to their important resistances and will need a close watch. Indices like the Dow, Sensex and Nifty have risen past their key intermediate resistances and are bullish in the near-term to see further rise while they sustain higher. DAX is coming closer to a key resistance which has to be broken for it to move further higher. Shanghai and Nikkei are hovering near their important resistances and can see a fall if if they fail to break above their respective resistances.
Dow (29551.42, +275.08, +0.94%) has risen past 29500 and is now bullish to test 29750-30000 – the next crucial resistance zone from where a corrective fall is possible. The danger of seeing a fall below 28900 stands negated now.
DAX (13749.78, +121.94, +0.89%) has risen further and is heading towards 13800 in line with our expectation. 13800 is an important resistance which needs a close watch. A strong break above it will pave way for 14000 and 14500. But inability to breach 13800 can drag the index lower to 13600-13500 again in the near-term.
Nikkei (23872.04, +10.83, +0.045%) is holding higher but seems lack momentum to breach 24140 (the upper end of the 22800-24140 range). We will have to wait and watch for some time. As mentioned yesterday, a strong rise past 24140 is needed to pave way for a fresh rise to 25000. While below 24140, the sideways range is likely to remain intact and the index can fall within this range in the coming days.
The 2925-2950 resistance region on Shanghai (2925.33, −1.57, +0.054%) is holding well. While 2950 holds, a corrective fall to 2900-2875 can be seen in the coming days. A strong rise past 2950, though less likely now, is needed to open doors for 3050 and 3100 levels again.
Sensex (41565.90, +349.76, +0.85%) and Nifty (12201.20, +93.30, +0.77%) have risen past their crucial resistance levels of 41500 and 12165 respectively and have reduced the danger of seeing a fall that we had been expecting. It will have to be seen if they can hold on to the gains. While above 41400 the outlook is bullish for the Sensex to revisit 42000-42200 levels. Similarly, Nifty can target 12400-12500 while it sustains above 12165.
COMMODITIES
The new cases of Coronavirus have reduced giving some room for recovery in crude prices in spite of rise in crude inventories for the week ended 7th Feb’20 that came out higher than market expectations. Near term is bullish for Crude prices.
Brent (55.94) and Nymex WTI (51.44) have bounced from levels seen yesterday while immediate supports near 54 and 50 has held well as expected. While subdued news of fresh Coronavirus cases are reported, we may expect some recovery in crude prices towards 56-58 (Brent) and 52-54 (WTI) could be expected.
Gold (1573.40) is trying to come down on stronger Dollar and could test support near 1550 before again rising higher. We would watch resistance near 99-100 on Dollar Index which if holds could keep downside limited for Gold.
Silver (17.56) has broken below the immediate support near 17.60 on the daily candles contrary to our expectation of the support holding. Sustained fall below 17.60 could take it down to 17 or lower.
Copper (2.5985) is bullish towards 2.65 while our view of a broad range of 2.65-2.50 is likely to hold.
FOREX
Stronger Dollar drags Euro below 1.09 while Dollar Yen sustains trade below 110 just now. Euro-Yen and Rupee look potentially bearish while Pound could be headed to test earlier support turned resistance above current levels. Subdued news on spread of coronavirus could keep Yuan strong for now while upside is capped at 7 for the very near term. Watch important resistance near 99-100 zone on Dollar Index. On the economic data releases, we may see how the US CPI comes out tonight (Market expectation is 2.4% Y/Y against 2.3% for Dec’19).
US Dollar Index (99.01) has just moved up above 99 and if the rise sustains, we may expect an eventual rise towards 100 in the medium term. Note 99-100 is a crucial resistance zone and could produce a rejection soon.
Euro (1.0867) has been dragged below 1.09 by a stronger Dollar. While below 1.09, there is scope for a test of 1.08 on the downside. But we may soon expect a bounce back towards 1.10 in the medium term.
Dollar-Yen (109.90) is almost stable below 110 despite the rally in Dollar Index. Immediate resistance near 110-110.50 is likely to hold to produce a last leg of fall towards 108 or lower before a rise again is expected in the longer run. Watch price action near 110.
EURJPY (119.45) looks potentially bearish towards 119 while below 120.
Pound (1.2958) could test earlier support turned resistance near 1.3000-1.3050 in the near term which if holds could produce another rejection in the near term. Else a sharp rise above 1.3050 is needed for further bullishness towards 1.32.
Aussie (0.6723) has dipped a bit but while above 0.6660, we may expect some upmove towards 0.650-0.6775.
USDCNY (6.9796) may be stable around 6.95-6.99 region for the near term before moving sharply on either side by next week.
USDINR (71.23) could open higher today and could possibly head towards the upper limit of the 71.08-71.50 range that we have been mentioning for quite sometime now as a stronger Dollar and a weaker Euro below 1.09 could be in favor of Rupee weakness for the very near term.
INTEREST RATES
Strong surge in the US equities help the Treasury yields to sustain higher. The Treasury yields can move further up if it manages to hold higher above their near-term support levels. The German Yields continue to trade mixed and we will have to wait and watch for a few sessions to get a clear cue on the trend. The 10Yr GoI is holding higher and can move up in the near-term before resuming its broader downtrend.
The US 2Yr (1.42%), 5Yr (1.43%), 10Yr (1.61%) and 30Yr (2.07%) Treasury yields remain higher and stable. As mentioned yesterday a rise to 1.72% is possible on the 10Yr while it manages to sustain above 1.60%. The 30Yr has to breach 2.10% to gain strength and rise further to 2.20%. We will have to wait and watch. 1.50% on the 10Yr and 2% on the 30Yr are the crucial supports which need to be broken to bring back the bearishness.
The German 2Yr (-0.65%) and 5Yr (-0.60%) yields continue to trade stable and subdued while the 10Yr (-0.38%) and 30Yr (0.14%) have inched slightly higher. . As mentioned yesterday, the 10Yr has to sustain above -0.40% to avoid the fall to -0.50% completely and rise to -0.30% and -0.20% again. The 30Yr has to breach 0.20% to gain strength and move further higher to 0.40%.
The 10Yr GoI (6.4760%) has come-off from the day’s high of 6.4862% yesterday. Our view remains the same. A rise to 6.50%-6.53% can be seen in the near-term while the 10Yr trades above 6.40%. Thereafter it can reverse lower and is likely to keep the broader bearish view intact to test 6.37%-6.35% on the downside.
