STOCKS
Equity indices are regaining strength across the world. The crucial long-term supports on the major indices that we had mentioned earlier are holding very well now. All major indices, the Dow, DAX, Nikkei, Shanghai, Sensex and Nifty have room on the upside to move further higher. However, they will be coming closer to their crucial resistances soon which will have to be broken in order to clear the way for further rally and also to avoid another leg of fall. Overall, the next few days will be very important for the equity segment to see if the indices are holding on to the current bounce-back move or not.
Dow (22552.17, +1351.62, +6.38%) has risen sharply above 21500. This break above 21500 has now paved way to test 23000-24000 on the upside in line with our expectation. Dow will come under pressure again only if it declines below 21000 again. That looks less probable now.
The support at 9500 on the DAX (10000.96, +126.70, +1.28%) mentioned yesterday is holding well and the index has risen further. Our near-term bullish view of seeing 10400-10500 on the upside remains intact. The price action around 10500 will need a close watch to see if the rally can extend up to 11000 or the index can fall-back to 10000-9800 levels again.
The support at 18500 is holding well as expected on the Nikkei (18895.30, +230.70, +1.24%) . But the index seems to lack strength is being stuck in between 18500 and 19500. While above 18500, the bias is bullish to see a break above 19500 and a rise to 19800-20000 in the near-term.
Though Shanghai (2784.53, +19.62, +0.71%) has not risen sharply over the last few days, it is managing to hold above 2750. As mentioned yesterday, while above 2750 the outlook is bullish to see a break above 2800 and a rise to 2850 in the coming days. Also, we reiterate that a strong close above 2750 this week will be bullish to revisit 3000-3100 in the coming weeks.
Nifty (8641.45, +323.60, +3.89%) has risen well above 8400 – the key level that we had mentioned yesterday. The near-term outlook is bullish now to test 9000 – the next crucial level. Inability to breach 9000 can trigger a fall to 8500-8400 again. A strong rise past 9000 will be needed to see the upmove extending to 9200 and 9500 going forward
Sensex (29946.77, +1410.99, +4.94%) has risen above 29000. As mentioned yesterday, it can now target 31000-32000 on the upside. A break above 30000 can accelerate the rise.
COMMODITIES
Crude prices are stable and could continue to remain in a sideways consolidative phase for some more sessions before a bounce is seen. Gold and Silver too look bearish for the near term while immediate resistances hold above current levels. Copper could attempt to rise from current levels but continues to remain bearish while below the crucial long term support turned resistance holds.
Brent (26.42) is trading in the narrow 26-30 region and is likely to continue this sideways consolidation for some more sessions before a bounce above 30+ levels is seen in the medium term. While below 30, view for Brent remains bearish.
Nymex WTI (22.81) has important support at 20 which is likely to hold and produce a bounce in the coming weeks, taking the price back to 25-27+ levels in the near term.
Gold (1639.70) has dipped and could test 1600-1580 in the next few sessions before bouncing back from there. Immediate view for the next couple of sessions is bearish.
Silver (14.76) has been rising since the past 5- sessions but this rise could be capped at 15.50 on the upside indicating a possible corrective fall in early sessions of next week targeting 14.0-13.5.
Copper (2.1780) has scope to rise towards the crucial support turned resistance near 2.35/40 in the next few sessions while downside could be limited to 2.0 in the near term. In the longer run, we need to see a successive break above 2.35/40 to turn bullish on Copper prices else we may have to see some consolidation within 2.35/40-2.00 region in the near term.
FOREX
Dollar Index (98.98) has lost almost 50% of the rise seen from 94.50 to 103 during the month as the index falls back to 99. We may expect some more dip towards 98-97 levels in the near term within the current fall.
Euro (1.1067) has risen sharply and could face rejection from 1.11 in the next few sessions. Only a break above 1.11 if seen and sustains would indicate a further rise back towards 1.12 or higher in the medium to long term. For now we would watch price action near immediate resistance at 1.11
Dollar-Yen (108.37) fell back sharply in line with our expectations and could test 107.72 as mentioned yesterday. Near term looks bearish in line with a fall in Dollar Index.
EURJPY (119.87) fell back from an intra-day high of 121.15 yesterday and while that holds, we may expect a fall back towards 118 in the near term. As mentioned yesterday 118 and 116 are crucial supports below current levels. Watch for a possible dip to 118 before a bounce is seen from there.
Aussie (0.6112) has risen and is trading above 0.60 breaking above immediate resistance. We may now expect a rise towards 0.63-0.6350 while above 0.60 from where a short rejection is possible back to 0.58. Immediate fall could be limited to 0.58 on the downside.
Pound (1.2252) has risen to trade above 1.20 now and while the rise sustains, we may expect it to move up towards 1.25/27 in the coming sessions.
USDCNY (7.0572) is likely to stabilize in the 7.00-7.10 region for the coming week. A dip to 7 is likely in the next few sessions.
USDINR (75.16) is likely to open lower and fall towards 74.50 in the near term. A further break below 74.50, if seen today would initiate further bearishness in the medium term.
INTEREST RATES
The US Treasury yields remain stable and look vulnerable to fall again as it seems to lack strength to extend the current upmove. The German yields have come down but have key supports which are likely to hold and take it higher in the coming days. The 10Yr GoI has declined sharply yesterday and looks bearish for further fall.
The US 2Yr (0.28%), 5Yr (0.49%), 10Yr (0.80%) and 30Yr (1.39%) Treasury yields remain relatively stable. We expect the yields to come down eventually in the coming days. The 10Yr can fall to 0.4%-0.3% and the 30Yr can test 1.10% on the downside. However, we need to see if there are chances to see one more leg of upmove before the preferred fall happens. The movement over the last few days is reducing the chances of seeing another rise. We will have to wait and watch.
The German 2Yr (-0.68%), 5Yr (-0.57%), 10Yr (-0.37%) and 30Yr (0.11%) yields have reversed sharply lower across tenors. A further fall from current levels will reduce the chances of seeing the rise that we had been expecting. The 10Yr has to sustain above -0.40% in order to test -0.20% on the upside. The 30Yr on the other hand still looks strong to test 0.20% – the crucial resistance on the upside.
The 10Yr GoI (6.2245%) has come-down sharply within the preferred 6.20%-6.40%. The bias is bearish to see a break below 6.20% and a fall to 6.10%-6% in the near-term. The chances of seeing a rise past 6.40% to 6.45%-6.50% that we had mentioned yesterday stands reduced now. A break below 6.20% will completely negate it.
