STOCKS
Sell-off continues in the equity segment as the fear pertaining to the corona virus outbreak continues to keep the market highly risk averse. However, as mentioned yesterday, the major indices are coming closer to their crucial support which can have the potential to halt the current fall. Dow has tested its key support level of 27000 yesterday and can bounce-back well from here while this support holds. DAX and Nikkei have room to dip for a day or two before seeing a reversal. Shanghai has bounced well from its key support and keep the bullish view intact. Sensex and Nifty have supports near current levels itself but can break them following the sell-off in the global indices to test their little deeper supports which are likely to hold and produce a bounce-back thereafter.
Dow (27081.36, −879.44, -3.15%) extended the sell-off for the second consecutive day. Strong support is at 27000 which has held well yesterday. A break below 27000 could be difficult. While 27000 holds, a short-covering rally to 27700-28000 and even higher levels is possible the coming weeks.
DAX (12790.49, −244.75, -1.88%) has declined below the crucial 13000-12900 support zone . While below 12900, a fall to 12500 looks likely. 12500 is the next strong support which is likely to hold and trigger a reversal back to 12900-13000 and even higher levels going forward.
Nikkei (22357.39, −248.02, -1.10%) has tumbled further thereby confirming the downside breakout of its sideways range. A test of 21800-21500 looks possible in the near-term. The region between 21800 and 21500 is a strong support from where a fresh leg of upmove targeting 22500 and even higher levels can begin.
The support at 2950 on Shanghai (3008.18, -4.87, -0.16%) has held very well as expected and the index has bounce-back. While above 2950, our bullish view remains intact to see a rise to 3100-3150 in the coming weeks. However, the possibility of seeing a range bound move between 2950 and 3050 for sometime cannot be ruled out before we see the above mentioned rise.
Nifty (11797.90, -31.50, -0.27%) has closed just below 11800 and need to see if this break sustains today. Inability to bounce-back above 11800 will increase the chances of seeing a break below 11750 and a fall to 11600-11500. However, 11600-11500 is a strong support zone which can halt the current fall. A fresh leg of upmove is likely to begin thereafter which can target 12000 and even higher levels in the next couple of months.
Sensex (40281.20, -82.03, -0.20%) is managing to hold above 40200. The crucial levels to watch today will be 40200 and 40000. While 40000 holds, a bounce-back move to 41000-41400 can be seen in the short-term which in turn will negate the danger of seeing 39500-39000 on the downside. A strong break below 40000 on the other hand can drag the Sensex lower to 39500-39000 and then a fresh bounce can be seen thereafter.
COMMODITIES
Gold and Silver trade lower today but another rise from here cannot be negated. Spreading virus outside China is concerning as reported infections from countries like Italy, Iran, South Korea seems to have increased. Copper looks bearish for the near term but watch support below current levels. Crude prices also trade lower just now but have important supports below current levels that could hold and produce a bounce in the near term to take Crude prices higher.
Gold (1644.10) tested a low of 1635 yesterday before bouncing back to trade higher. Overall the price could hold within the broad 1700-1640/20 region for the near term with a possibility of rising back towards 1700 in the near term.
Silver (18.07) has come down sharply and has to sustain a fall below 18.75 to negate a test of 19 mentioned yesterday. However, 17.80-18.00 is an important support zone for the near term which if holds could pull back Silver prices towards 18.75.
Copper (2.5730) could test immediate support near 2.55 or lower levels of 2.50 in the near term before bouncing back from there. On the weekly there is enough room on the downside below 2.55. Upside could be capped at 2.60.
Brent (55.36) and Nymex WTI (50.39) have both dipped and are trading low. While below 56, Brent could be bearish towards 54 but at the same time we would watch price action near 55 for a possible bounce. Note that 54 on the medium term charts and 55 on the very near term charts are important supports and a rally could be soon in place for Crude. On the other hand, WTI has support near 50 which could hold and pull back prices towards 54-56 levels in the near term.
FOREX
US Dollar Index has dipped turning towards 99 as resistance near 100 seems to be holding well. Falling Dollar Index has pulled up Euro and could prevent further fall to sub 1.08 region in the near term. Dollar Yen looks stable but could have some scope for a slight dip from here. Aussie is trading below crucial levels and a further dip from here could turn bearish for the next few sessions. Yuan could be stable just now while Dollar Rupee could trade in a narrow range above interim near term support.
US Dollar Index (99.10) has dipped fairly and if we consider this as a possible reversal from 100, we may look for a fall towards 98.50 or even lower in the medium term.
Euro (1.0868) is trading higher and could target 1.09 or higher in the medium term. Near term is bullish while above 1.08.
Dollar-Yen (110.55) has immediate support at 110.50 which if holds could lead to a decent rally from here back towards 111 or higher. But falling Dollar Index and a dip in Gold could prevent a sharp rise in Dollar-Yen from current levels. While below 112, near term could be stable within the broad 109.50-112.00 with slight possibility of fall from here.
EURJPY (120.12) could fall back towards 119.50-119.00 in the near term. View could be bearish while below 121.50.
Aussie (0.6599) has just broken below 0.66 and if it fails to bounce back immediately, we would turn bearish for the near term to see a test of 0.655-0.650 on the downside.
Pound (1.2997) has risen on weaker Dollar but while below 1.31, there is scope for a fall again from current levels. Watch for a possible brief rise to 1.31 before falling from there.
USDCNY (7.0170) is likely to trade within 6.99-7.04 region for the near term. While news of further infections within China has reduced, its spread across the China borders seems to be increasing. However, some stability could now be expected for the Yuan.
USDINR (71.89) is likely to trade in the 71.75-72.00 region for the day with a possible dip towards 71.65/50 in the near term. Watch price action near 71.75/70, the initial support below current levels.
INTEREST RATES
Market sentiment continues to remain highly risk averse. The concerns pertaining to the corona virus outbreak continue to weigh on the sentiment. As a result, the equities are getting beaten down badly which in turn continue to drag the yields lower. The US Treasury yields have declined further in line with our expectation. Though there is room for further fall the Treasury yields are coming closer to their crucial supports from where we expect them to reverse higher again. The German yields have also declined further and remains bearish. The 10Yr GoI is managing to hold above it support but seems to lack momentum. The price action today will need a close watch.
The US 2Yr (1.20%), 5Yr (1.17%), 10Yr (1.34%) and 30Yr (1.81%) Treasury yields have declined further sharply. and are coming closer to their crucial supports as we had mentioned yesterday. 1.25% on the 10Yr and 1.73% on the 30Yr are crucial supports which can be tested in the near-term. We expect these supports to halt the current fall and trigger a reversal towards 1.50% (10Yr) and 1.90% (30Yr) in the next two-three weeks. At the near-end, the 2Yr has room to test 1% while it sustains the break below 1.25% and then bounce-back thereafter.
The German 2Yr (-0.71%), 5Yr (-0.69%), 10Yr (-0.52%) and 30Yr (-0.04%) yields have fallen further and keeps our bearish view intact. The 10Yr has dipped below -0.50% and can now test -0.60% and even -0.70% in a week or two. The 30Yr on the other hand can test -0.10% initially and then can even extend the fall to -0.30% (revised lower from -0.20% mentioned yesterday) on a subsequent break below -0.10%.
The 10Yr GoI (6.3545%) sustains above 6.35% but seems to lack strength. While above 6.35% a rise to 6.40% cannot be ruled out in the near-term. It will have to be seen whether the yield can move beyond 6.40% towards 6.45% and 6.50% or not before we see a reversal again. In case of an immediate break below 6.35%, a test of 6.30%-6.28% is possible. We will have to watch closely the movement around 6.35% today.
