STOCKS
A day of panic selling followed by a day of bounce on some hope – this has been the pattern of move in the Dow over the last one week. We will have to see if the bounce yesterday after the news of a possible $1 trillion stimulus package from the US Government can sustain. On the charts of DAX, Shanghai and Nikkei, there is scope for seeing a recovery possible in the coming days. Sensex and Nifty might bounce-back taking cues from the global markets but will need to see if they can sustain or fall-back again like yesterday.
Dow (21237.38, +1048.86, -5.20%) has bounce-back sharply from the low of 19882 yesterday. The index has to sustain well above the 21000-20800 support zone and also rise past 22000 decisively in order to gain strength for a strong corrective rally. Else the chances of seeing 18500-18000 that we had mentioned yesterday will continue to remain intact from where we could see a strong reversal.
DAX (8939.10, +196.85, +2.25%) is getting support in the 8400-8200 region over the last couple of days and is trying to bounce. It will have to be seen if the index can breach the 9100-9200 zone. A strong break above 9200 will pave way for a corrective rally to 9800-10000 in the short-term.
The support at 16500 on the Nikkei (17308.33, +296.80, +1.74%) is holding well. A break above 17500 can take the index higher to 17800-18000 in the near-term. However, a strong rise past 18000 will be needed to gain bullish momentum and extend the corrective rally. That will need a close watch.
The crucial support level of 2715 on Shanghai (2808.69, +29.05, +1.04%) mentioned yesterday has held very well and the index has bounced-back sharply. A close above 2825 today will increase the chances of seeing a further rise to 2900 levels in the coming days. Broadly the 2700-3150 range is remaining intact on Shanghai.
Nifty (8967.05, -230.35, -2.50%) had failed to sustain above 9000 but might see a bounce-back again towards 9400-9500 taking cue from the global markets. But in case if it fails to sustain the bounce above 9000 during the day like yesterday, then that will keep alive the chances of seeing 8500-8000 on the downside before we see a strong and sustained recovery
Similarly, Sensex (30579.09, -810.98, -2.58%) has to bounce-back above 31000 and also need to breach 32000 decisively in order to avoid the fall to 28000 that we had mentioned yesterday. A strong break below 30000 can trigger this fall. We will have to wait and watch the price action closely in the next few days.
COMMODITIES
As Saudi Arabia plans to have 10mln barrels /day available for export (40% higher exports than in Jan-Feb’20), crude prices drop sharply below $30. Crude and precious metals look bearish for the near term while Copper has broken below long term support and needs to see an immediate bounce to avoid further decline from here.
Brent (29) and Nymex WTI (27.44) have risen slightly from 28.40 and 26.62 respectively but may see some more fall towards $27-25-23 and $25-20 which are respective supports and could produce a bounce back to 30+ levels in the near term. The support on the quarterly charts seems to be working well for now. Near term is bearish while we wait for a reversal signal to come in soon.
Gold (1531.40) tested support at 1453 and is now trading above 1500. While the rise above 1500 sustains, we may expect a bounce back towards 1600 in the near term. Downside is likely to be limited to immediate support at 1450. Only a break below 1450 if seen again, would force us to look at lower levels.
Silver (12.78) is almost stable and has not seen a bounce as seen in Gold. If Silver is unable to rise back from current levels, we may have to consider some more bearishness coming in for Silver towards 10.00. For now, we would look at interim support at 12 to hold.
Copper (2.3355) has fallen sharply breaking below our expected long term support at 2.35. If an immediate bounce is seen to levels above 2.35, we may still keep some hopes of reversal intact. Else we will have to allow for a further fall towards 2.20 in the coming weeks. Watch price action near current levels.
FOREX
Currencies continue to remain under bearish pressure. Aussie and Pound looks weak. Dollar Index could face rejection from crucial resistance at 100 that could pull up Euro from support near 1.10 and take prevent further rise in Dollar Yen. EURJPY is volatile and could fluctuate within a broad range. Yuan has weakened a bit but we would watch price action near 7.03. USDINR is likely to be ranged but we would be cautious of a rise above immediate resistance near 74.50.
Dollar Index (99.37) rose sharply above 99 to test resistance near 100 from where a rejection is expected. A break above 100, if seen could take it higher towards 101 but for now we may prefer to see rejection from 100.
Euro (1.1019) continues to trade above 1.10 just now but could bounce back to levels above 1.11 if Dollar Index falls sharply from 100. On the Euro charts, 1.10 itself is a decent support which if holds, could take the exchange rate higher towards 1.11+ levels.
Dollar-Yen (107.23) has moved up in line with sharp rise in Dollar Index and the bounce seen in Nikkei. While above 107, the pair can attempt to rise back towards 108 or higher in the near term. But we would be cautious of rising Gold and resistance near 100 on the dollar index that could prevent any sharp rise in USDJPY.
EURJPY (118.22) is stable. Broad range of 120.50-116 remains intact for now but we will have to be on the watch out for a break on either side of the broad range.
Aussie (0.6017) has come down to test support near 0.60 which is expected to produce a bounce back towards 0.62-0.64 in the near term. Failure to bounce from 0.60, could make Aussie vulnerable to a fall to 0.55 in the coming sessions making it more bearish for this week and the next.
Pound (1.2120) looks bearish towards support at 1.20 from where a bounce could be expected back towards 1.25 on the upside. Near term is bearish.
USDCNY (7.0083) has moved back to levels above 7. We would watch price action near current levels. 7.03 is expected to hold as immediate resistance.
USDINR (74.26) is likely to trade in the 74.50-73.80 region but unless a break below 73.80 is seen, we may not be able to negate further upside from here. Sideways consolidation between the mentioned levels could continue for some more time before a sharp move comes in.
INTEREST RATES
News that the US Government is planning for a $1 trillion stimulus has triggered a sharp rise in the Treasury yields. This could delay further fall that we had been expecting as there is room on the upside to test the key resistances before reversing lower again. The German Yields continue to move up in line with our expectation and can move further higher. The 10Yr GoI is holding well above 6.20% and can move up in the near-term and then can reverse lower again.
The US 2Yr (0.45%), 5Yr (0.65%), 10Yr (1%) and 30Yr (1.59%) yields have risen sharply further and the downside pressure is getting eased. 1.2%-1.3% on the 10Yr and 1.5%-1.7% on the 30Yr are crucial resistance zones that can be tested now. We will be watching closely the movement around this support zone as we expect it to hold and drag the yields lower again.
The German 2Yr (-0.88%), 5Yr (-0.67%), 10Yr (-0.44%) and 30Yr (-0.15%) yields have risen further across tenors. The bounce-back move from Monday’s low seems to be sustaining well in line with our expectation. As we have been mentioning over the last couple of days, the 10Yr can test -0.40% and can even extend the upmove towards -0.30% on a break above -0.40%. The 30Yr is sustaining well above -0.20% and can test 0% on the upside in the coming days.
The 10Yr GOI (6.2647%) is holding well above 6.20%. While above 6.20% a rise to 6.30%-6.35% is possible. We prefer the yield to reverse lower from the 6.30%-6.35% region. However, the price action in this region will need a close watch to gauge the chances of the upmove extending beyond 6.35%.
