STOCKS
The bounce-back move witnessed in the Dow on Tuesday and the Asian markets on early Wednesday were short-lived as we had expected. The equities have come under pressure again as the WHO declared Corono virus a global pandemic. Dow has been beaten down badly again and can fall further in the coming days. Nikkei and DAX are also bearish to see further fall. Shanghai oscillated within its range. Sensex and Nifty can come under pressure following the sell-off in the global markets. While the sell-off in the equities can continue for some time, we will be looking for a strong reversal as the indices approach their crucial long-term supports.
Dow (23553.22, −1464.94, -5.86%) fell-back sharply yesterday giving back all the gains made on Tuesday. Our view of seeing 23000-22000 remains intact. Indeed the fall can extend even up to 21000. However, we see 22000-21000 as a strong support zone that can halt the current fall and will be looking for a strong reversal from there.
DAX (10438.68, −36.81, -0.35%) has declined further and keeps our bearish view intact for testing 10000-9900 on the downside. 10000-9900 is a crucial support zone which needs to hold in order to avoid a further fall to 9000. We will have to wait and watch closely the price action in the 10000-9900 region.
Nikkei (18451.55, −964.51, -4.97%) has failed to sustain the bounce-back move witnessed on early trades yesterday and has tumbled below 19000. A test of 18000-17780 looks likely now. A break below 17780 will increase the danger of the fall extending to 16000 and 15700 eventually.
Contrary to our expectation to see a rise within the sideways range, Shanghai (2932.88, −35.64, -1.20%) has come-down sharply. The near-term outlook continues to remain mixed and the index can oscillate in the range of 2850-3075. Shanghai will come under pressure on a break below 2850 as it will open doors for a fresh fall to revisit 2750-2700 levels.
Nifty (10458.40, -6.95, -0.02%) and Sensex (35697.40, +62.45, +0.18%) are likely to come under pressure following the sell-off in the global equities. Nifty can target 10000 and can even extend the fall to 9000. However, we will be looking for a strong bounce from anywhere in the 9500-9000 region. Sensex on the other hand can test 34000 and even 32000 on the downside after which a strong reversal is possible.
COMMODITIES
Crude prices trade lower as stock inventory rises and EIA reduced its forecast for crude prices by approx. 30%. Gold and Silver looks bearish for the next few sessions. Copper is trading just above crucial support which if holds could produce a bounce in the near term.
Brent (33.60) and WTI (31.01) started coming off in the second half of the session as Saudi Arabia announced expansion in production output by 1mln barrels /day. Adding to that, the EIA released its short term energy monthly report yesterday where it reduced its 2020 forecast for Crude prices by roughly 30%. Also, the agency reported a crude inventory build of 7.7mln barrels for week ended 6th Mar’20.
Crude prices trade further lower today. WTI could test the previous low of $27.35; support is seen in the 27-25 region which is likely to hold and push prices back towards 35+ levels in the near term. Brent on the other hand, can test 28-27 but the fall would be short lived seeing a bounce back towards 35+ levels soon.
Gold (1638.20) is falling and could be headed towards support at 1600 in the near term which could be followed by a bounce back towards 1640-1660 in the medium term.
Silver (16.62) has fallen towards support near 16.5-16.0 mentioned yesterday from where a bounce looks likely in the near term. Failure to hold above 16 would make it vulnerable for a sharper fall going forward.
Copper (2.4675) has fallen down to support near 2.45. Note that an immediate bounce from 2.45-2.43 is needed to keep possibilities of bullishness for the near term. Else we may have to look at fresh lower targets. Preference is to see a bounce from current levels towards 2.57/60.
FOREX
Almost all exchange pairs trade lower today. Dollar Index, Dollar Yen, EURJPY, Aussie, Pound all trade low today and could remain bearish for a couple of sessions more before a bounce is seen. USDINR is also expected to fall during the day if it breaks below 73.40. Yuan weakens towards 7 but upside could be limited. Euro trades higher but we may expect some range trade for now.
Dollar Index (96.23) declined again from 96.70 and could possibly re-test 96.00-95.00 in the near term. Some ranged sideways movement could be on the cards for the near term.
Euro (1.1309) has dipped too and while below crucial resistance at 1.15, we may expect some trade in the 1.1250-1.15 region for the near term.
Dollar-Yen (103.35) has dipped from 104+ levels seen yesterday but overall while above crucial support at 101, we may expect eventual rise towards 106 in the near term.
EURJPY (117.00) has dipped too in line with weakness in other currencies. But we would watch important support at 116 below current levels to hold and push the cross higher in the near term. Failure to bounce from 117 would take it lower towards 114 in the medium term. Watch price action near 116 closely.
Aussie (0.6465) has come down and can test the lower end of the 0.63-0.66 region mentioned yesterday. Near term looks bearish to 0.63 from where a bounce looks likely.
Bearishness may not be over yet as Pound (1.2825) falls back after a brief test of 1.32 on the upside. We would look for a bounce from support near 1.28.
USDCNY (6.9715) has risen well and could test 7 before again falling back towards 6.90 in the medium term. Broad range of 6.88-7.02 could hold for the near term.
USDINR (73.6325) closed at lower levels yesterday but could possible again bounce back towards 73.80/85 in the near term if interim support near 73.55/40 holds. Else, a break below 73.40, if seen during the day could bring down the exchange further down towards 73.20/00 over the next 1-2 sessions. We would watch for a possible break below 73.40 today.
INTEREST RATES
US Treasury yields are showing some sign of relief in spite of a strong sell-off in the equities. Further uptick is possible in the near-term while the Treasury yields manage to sustain higher. The German yields have also bounced slightly and have room to move further higher in the coming days before reversing lower again. The 10Yr GoI can move up in the near-term and can even consolidate sideways for some time before resuming its downtrend.
The US 2Yr (0.42%) and 5Yr (0.57%) Treasury yields sustained higher but stable while those at the far-end, the 10Yr (0.73%) and 30Yr (1.24%) had risen further sharply from the levesl seen on early morning trades yesterday. The bounce-back move in the Yields seems to be sustaining. As mentioned yesterday, while the yields manage to sustain higher, a rise to 1%-1.2% on the 10Yr and 1.5% on the 30Yr is possible in the coming days.
The German 2Yr (-0.97%) yields has dipped further while the 5Yr (-0.92%), 10Yr (-0. 75%) and 30Yr (-0.44%) have seen a slight bounce yesterday. The support at -0.83 on the 10Yr is holding well. As mentioned yesterday, while above -0.83%, a corrective bounce to -0.60% is possible in the near-term. The 30Yr has to rise past -0.38% to get some relief and avoid a further fall to -0.50% and even lower.
The 10Yr GoI (6.1252%) is holding well above 6% and has risen-back as expected yesterday. A test of 6.20% looks likely in the near-term after which the yield can reverse lower again. A range-bound move between 6% and 6.20% is possible for some time before the overall downtrend resumes breaking below 6% targeting 5.60%-5.50% on the downside.
