STOCKS
Sell-off in the equity segment continues in the equity segment across the globe. Dow has tumbled below a crucial support that we had expected to hold and is now vulnerable to fall further. Nikkei and DAX also continue to look weak. Shanghai, Nifty and Sensex have crucial supports coming up which will need a close watch today. A break below these supports on these indices can trigger more fall going forward.
Dow (20188.52, −2997.10, +12.93%) has tumbled below the crucial support level of 20800. As mentioned yesterday, this fall has now opened doors to test 18500-18000 on the downside. 19400 can serve as an intermediate support.
As expected, DAX (8742.25, −489.83, -5.31%) tumbled breaking below 9000 to test the 8350-8150 support zone. Though it has bounced-back from the low of 8255 yesterday, it will have to be seen if it can sustain higher. A strong rise past 9100 will be needed to ease the downside pressure. While below 9100, there is a danger of seeing the current fall extending to even 7000 in the coming days.
Nikkei (16923.34, −78.70, -0.46%) tumbled to test its crucial support level of 16500 mentioned yesterday and has bounced from there. . It will have to be seen if it can sustain above 16500 or not. The way the index has come-off from the high of 17513 indicates that the chances of a seeing a break below 16500 and a further fall to 16000 and even 15000 cannot be ruled out in the coming days.
Shanghai (2775.39, −13.86, -0.50%) has come down to test 2750-2730 as mentioned yesterday and has bounced well from the low of 2715. Crucial supports are at 2715 and 2680 which needs to hold in order to avoid a further fall to 2600-2580. While 2680 holds, a bounce-back move to 2800-2850 cannot be ruled out in the coming days.
Sensex (31390.07, -2713.41, -7.96%) and Nifty (9197.40, -757.80, -7.61%) will need a close watch to see if the they can sustain above their crucial support levels of 3000 and 9000. A break below these supports can drag them lower to 28000 or even lower (Sensex) and 8500-8000 (Nifty). However, 8000 is the next strong support that we could see on the Nifty which might have the potential to produce a bounce in case of a sharp fall below 9000.
COMMODITIES
Commodities continue to trade lower but we would have to watch Gold and Copper closely that have moved sharply over the last couple of sessions. Silver and Crude prices too trade above respective supports which need to hold to keep chances of a reversal intact. Markets continue to remain volatile as concerns of COVID19 continues to linger creating panic sell-off across the globe.
Brent (30.52) and Nymex WTI (29.69) have declined too and could test supports near 30 and 27 respectively which are likely to hold in the near term. Note that even if the respective supports break further downside could be very limited with a pull back to levels above the mentioned supports. Watch price action near supports below current levels.
Gold (1489) broke below 1500 to test 1450 yesterday before bouncing back from there slightly. Note that if the price is unable to rise back above 1500 immediately and head towards 1560/80 or higher, we may have to look for further lower levels from here. We would wait to watch price action from here to get clarity on further direction from here. 1480/50 is the support region we would be keeping an eye on.
Silver (12.71) declined sharply breaking below the important long tern support at 14. On the monthly charts, Silver has broken on the downside from the long sideways consolidation in the 14-20 region seen since 2015. A bounce from 12 is expected in the near term failure of which could drag it down to 10 in the near term. Watch price action near 12 closely.
Copper (2.3885) has fallen below 2.40 to head towards long term support near 2.35. Very crucial support at 2.35 on the monthly chart needs to hold to keep bullish chances intact for the medium term. Else it could be vulnerable to a sharper fall towards 2.00. We would expect and prefer a bounce from 2.35 in the near term.
FOREX
Currencies are stable but have important resistances and supports near current levels. Dollar may dip back to 97 but watch resistance on Euro at 1.12. EURJPY is broadly ranged but watch the price action in Dollar Yen while below 107. Yuan has strengthened and has some more room for further strength. Rupee movement has to be seen over the near term. Another USDINR buy/sell swap has been announced by the RBI yesterday to be conducted on 23rd Mar’20.
Dollar Index (98.10) was limited to 98.50/99.00 on the upside within the recent bounce but while above 97.50, we may not negate another attempt to move higher in the near term. Note that 97.50 is an immediate and important support which if breaks could take it down further towards 97.00-96.50.
Euro (1.1176) has moved up as expected but 1.1200-1.1250 is crucial resistance on the upside from where a dip could be expected. We would watch price action near current levels and see whether a dip from 1.12 could be in place in the next 2-3 sessions.
Dollar-Yen (106.23) has dipped a bit. But on the long term charts, it has to remain above 104-106 to turn bullish from here. On the upside there is room for a rise towards 107 or higher.
EURJPY (118.88) is stable. Although the cross is trading in the 120.50-116 range, we will have to be on the watch out for a break on either side of the broad range. For now we may expect trade on either side of the 120.50-116 range.
Aussie (0.6126) is trading above important support at 0.60 and while that holds, we may expect a bounce to 0.62-0.64 soon. An immediate break below 0.60 seems unlikely.
Pound (1.2251) tested 1.2198 before moving up slightly from there. Immediate support at 1.22 is likely to hold just now but we cannot rule out a fall to 1.20 in the medium term. A bounce from here could be limited to 1.25 on the upside.
USDCNY (6.9915) has come down and could trade in the 6.95-7.06 region for the near term. A fall towards 6.95 or lower looks possible from here.
USDINR (74.28) closed higher yesterday but while below immediate resistance at 74.50, we may expect a dip back to 74 or lower in the next 1-3 sessions. Failure of dip to 74 or lower would increase chances of some sideways trade in the 74-74.50 region in the near term while upside possibilities of a break above 74.50 may remain intact for the medium term. Watch price action near 74 or 74.50.
INTEREST RATES
The US Treasury yields though remains lower compared to Friday’s close, have bounced from the lows seen on early Asian trades yesterday. But the rout in the equity market is likely to keep the yields under pressure and drag it lower again. The German yields continue to move up in line with our expectation and have room to rise further in the near-term. The 10Yr GoI is likely to fall following the RBI’s new LTRO announcement yesterday. The upside in the 10Yr GoI could be capped now at 6.30%-6.35% itself.
The US 2Yr (0.39%), 5Yr (0.53%), 10Yr (0.76%) and 30Yr (1.36%) yields have risen-back from lows seen on early Asian trades but are still down compared to Friday’s close. However, we expect the yields to remain under pressure. While below 1% we expect the 10Yr to fall back to 0.40%. Similarly the 30Yr can test 1.1% while it remains below 1.55%.
The German 2Yr (-0.92%) yield continue to trade lower while the 5Yr (-0.71%), 10Yr (-0.47%) and 30Yr (-0.17%) yields have risen back from their lows on Monday. As mentioned yesterday, the 10Yr is heading higher towards -0.40% and can extend its upmove to -0.30% on a break above -0.40%. The 30Yr on the other hand has risen past -0.20%. While above -0.20%, a further rise to 0% is possible in the coming days.
The 10Yr GoI (6.2080%) has closed on a mixed note yesterday. We expect the upside in the yields to be capped on the back of the RBI’s new LTRO announcement yesterday. As such the rise to 6.40%-6.45% may not happen and the yields can reverse lower much ahead (6.35% could be the cap on upside for now) of that to test 6% again. As we had mentioned earlier, from a medium-term perspective the 10Yr GoI has potential to test 5.6%-5.5% on the downside on a break below 6%.
