STOCKS
Concerns of a slow-down as a result of the coronavirus outbreak have been weighing on the global equity segment. Shanghai seems to be an exemption among the lot as it continues to move higher in line with our expectation and looks strong to move further up from current levels. The Dow has dipped and need to see if it can sustain above 29000 which is needed to see a bounce again. DAX is coming down from a key resistance and can fall further if it breaks below the intermediate support poised near current levels. Nikkei is likely to fall within its sideway range. Sensex and Nifty has bounced from the day’s low yesterday but the upside is likely to be capped and the indices are likely to extend their fall.
Dow (29232.19, −165.89, -0.56%) is inching lower and could test 29000 while it remains below 29400. But the pace of the recent fall is slow which leaves the chances high of seeing a bounce-back from 29000 towards 29500 again. While above 29000, the chances of seeing a break above 29500 and rise to 29750-30000 is still alive.
The resistance at 13800 on the DAX (13681.19, −102.70, -0.75%) seems to be holding well. 13600 is an intermediate support to watch now. While it holds, a narrow range of 13600-13800 is possible in the near-term. But a break below 13600 will negate the chances of seeing a break above 13800 and will drag the DAX lower to 13400 and 13200 again.
Nikkei (23374.07, +180.27, +0.78%) is trying to recover after a sharp fall yesterday but is likely to face resistance at 23400 and 23600 which can cap the upside. While below 23600 we expect the Nikkei to fall within its 22800-24140 range towards 23000-22800 in the near-term.
Shanghai (2992.81, +7.84, +0.26%) has moved further higher break above 2975. Our bullish view remains intact to see 3050 on the upside. A break above 3000 can accelerate the rally. 2975 and 2950 are important supports now which can limit the downside.
Nifty (11992.50, -53.30, -0.44%) has bounced after testing 11900. However, the upside is likely to be capped with strong resistances in the 12070-12130 region and fall to 11800 is likely. Also as mentioned in the Evening comments yesterday, there is a danger of this fall extending beyond 11800 as a possible head and shoulder reversal pattern is visible on the 3-day chart.
Sensex (40894.38, -161.31, -0.39%) has bounced from the low of 40610 but can face resistance in the 41000-41100 region. While below 41100, the outlook is negative and Sensex can break 40500 and fall to 40100-40000 in the near-term.
COMMODITIES
Crude prices trade higher along with a higher Gold and Silver. Copper is likely to trade sideways for some time before moving up further. Overall commodity prices are moving in line with our expectations.
Brent (57.89) and Nymex WTI (52.40) have risen back after the brief dip seen yesterday, rising towards our expected targets of 58 and 54 respectively. A short corrective dip is expected from 58 and 54 levels respectively before a further rise is seen.
Gold (1604.50) has risen above 1600 amidst the rise in Dollar Index. While the rise continues, we may expect a rise towards 1625-1650 in the near term. View is bullish for the near term.
Silver (18.23) has risen as expected and could rise towards 18.25-18.50 as we have been mentioning for quite sometime now. View is bullish for Silver for the next few sessions.
Copper (2.6145) could see some ranged sideways movement below 2.65 while downside could be limited to 2.58 just now.
FOREX
Dollar strength continues as the index is headed towards 99.60-100. A reversal from there is expected in the near term. Dollar Yen has moved up above 110 as Gold strengthens along with the Dollar Index. EURJPY, Aussie and Pound look stable just now while USDCNY has moved up.
US Dollar Index (99.43) has moved higher as expected and is headed towards 99.60-100 from where a dip is possible. Near term view is bullish.
Euro (1.0798) has just fallen below 1.08 and while the fall sustains a scope of testing 1.0750 looks possible on the charts from where a bounce could be expected for the medium term.
Dollar-Yen (110.02) has finally moved above 110 as Dollar and Gold both surged to the upside. USDJPY seems more sensitive to movement in Gold than in Dollar Index as the recent upmove in Dollar Index could not pull up USDJPY higher which has moved up today on Gold strength. While Gold moves higher to test 1625-1650, USDJPY could also be pulled up to test 110.60 on the upside.
EURJPY (118.82) is stable just now but could fall towards 118-117 in the near to medium term.
Aussie (0.6695) is stable. Trade in the 0.6750-0.6650 region looks likely for the near term. As mentioned yesterday, a fall below 0.6650 if seen could make it vulnerable for a further towards 0.66 or lower. Watch price action near 0.6650.
Pound (1.2997) is stable like the Aussie and EURJPY. But Pound looks bearish for the near term not giving enough signs for a sustained rise above 1.30.
USDCNY (7.0032) is trading higher but could be capped near 7.02 in the next few sessions from where a dip looks possible. Only a break above 7.02, if seen would force us to look for higher levels.
USDINR (71.56) moved higher to close above 71.50, contrary to our expectation of trade below 71.50 to continue for this week. A sharp rise in Dollar Index dragged down Euro to levels below 1.08 and could favor further Rupee weakness tomorrow as Indian FOREX markets are closed today for Shivaji Jayanthi. We may expect to see a test of 71.65/70 tomorrow. Also note that tomorrow would be the lasts session of the week as Indian markets are again closed on Friday due to Shivaratri.
INTEREST RATES
The US Treasury yields continue to trade lower and keep our bearish view intact. Risk aversion on the back of the coronavirus outbreak has been dragging the yields lower now. We expect the Treasury yields to dip further for the rest of the week. The German yields remain subdued and looks mixed in the near-term. We will have to wait and watch for some time to get a clear cue on the trend. The 10Yr GoI is likely to remain under pressure while it remains below 6.40% and can dip again tomorrow. The Indian bond market is closed today on account of a public holiday.
The US 2Yr (1.41%), 5Yr (1.39%), 10Yr (1.56%) and 30Yr (2.01%) Treasury yields continue to trade lower and keep our bearish view intact. The 30Yr can fall to 1.95%-1.90% on a break below the immediate support level of 2%. Immediate resistance is at 2.05% which needs to be broken to negate the above mentioned fall. The 10Yr on the other hand can test 1.50%-1.45%. Resistance for it is at 1.65%.
The German 2Yr (-0.66%), 5Yr (-0.62%), 10Yr (-0.41%) and 30Yr (0.11%) yields continue to remain stable at lower levels and keeps the near-term outlook mixed. . The 10Yr has dipped below -0.40% and can fall to -0.45% and -0.50% while it remains below -0.40%. The 30Yr is stuck around 0.11% over the last few days and looks unclear. We will have to wait and see whether the yield is going up to 0.20% or fall to 0.03% and 0% from current levels.
The 10Yr GoI (6.3864%) has come-off from 6.4131% yesterday. While below 6.40% dip to 6.35% can be seen again tomorrow and the 10Yr GoI will remain under pressure to test 6.30%-6.28% eventually. The Indian bond markets are closed today on account of a public holiday.
