STOCKS
Some of the indices like the DAX and Nikkei are showing increased signs of a rise in the near-term before we see a fresh fall while the Dow continues to remain mixed and unclear about that. Shanghai remains bullish and can test its resistance in the coming days from where a corrective fall is possible. Sensex and Nifty have room to test their crucial supports in the near-term which will have to be watched very closely. While we prefer the Sensex and Nifty to bounce from their supports, a break below those supports can drag them further lower.
Dow (23875.89, +211.25, -0.89%) continues to oscillate around 24000 and remains mixed. As mentioned yesterday, the Dow can remain in the 23000-25000 range for some time and break below 23000 eventually and fall to 22000-21500 in the coming weeks. Thereafter a fresh leg of rally is possible. But whether the fall to 22000-21500 can happen from here itself or after rise to 24700-25000 continues to remain unclear.
DAX (10759.27, +153.07, +1.44%) has risen above 10700 again. The index looks relatively little convincing than the Dow to see a rise in the near-term. As such we expect the DAX to rise towards 11000 now. The chances of this rise extending beyond 11000 towards 11300-11350 will have to be seen. Thereafter we can see a fresh fall towards 10400-10200 initially and even beyond that to 10000-9500.
Nikkei (20025.91, +351.14, +1.78%) has risen well and is breaking above 20000. It will have to be seen if it can sustain above 20000 in which case a further rise to 20500 is possible. The chances of the upmove extending upto 21500 will have to be seen. The close for the week today can give a cue on that. A close below 20000 will put the index back into the 19000-20000 range.
Shanghai (2888.68, +17.16, +0.60%) has moved up further and is heading towards 2900-2910 in line with our expectation. While we retain our broader bullish view of seeing 3050 on the upside over the medium-term, a corrective fall from 2910 to 2875 or even lower can be seen first before a fresh leg of rally begins..
Nifty (9199.05, -71.85, -0.78%) remains lower and continues to remain vulnerable to test 9000 on the downside in line with our expectation. As mentioned yesterday, 9000 is an important support which will need a close watch today. A strong break below 9000 will negate the chances of seeing 9400 and 9600-9700 on the upside and in turn will increase the chances of seeing 8800-8500 on the downside. We prefer 9000 to hold for now and produce a bounce to 9300-9400 again.
Sensex (31443.38, -242.37, -0.76%) can test 31000 and then bounce-back towards 31800-32000 again. As mentioned yesterday a strong rise past 32000 is needed to strengthen the case to test 33000-34000 on the upside. The price action around 31000 will need a close watch as a break below it can drag the index lower to 30000-29000.
COMMODITIES
Precious metals gains on Dollar weakness while crude prices remains stable. Copper has broken above crucial resistance level but we need to see if the rise sustains to become bullish for the medium term.
Brent (29.85) is stable near levels seen yesterday while Nymex WTI (24.01) has dipped a bit. Overall crude prices are likely to remain stable in the near term with narrow movement. As mentioned earlier, upside could be curbed near $35 and $30 for Brent and WTI respectively.
Gold (1727.70) and Silver (15.76) have moved up on Dollar weakness. Gold remained above 1680 and did not test our expected 1660 on the downside. We may expect a fresh rise back to 1740 in the near term. Silver on the other hand could test 16 before coming off from there.
Copper (2.4040) has finally moved up above the crucial 2.40 that we have been mentioning for quite some time now. It would be crucial to break above 2.40 and sustain in the near term as this could trigger fresh rally to the upside in the near term. We would keep a close watch for a couple of sessions to see if the rise sustains or the price falls back below 2.40 in the near term.
FOREX
Dollar sees some weakness pulling up EURJPY and Euro while USDJPY trades within the narrow range above 106. Aussie and Pound look bullish for the very near term. The stability seen in Yuan and Euro could reflect in a range trade in Rupee also which tested weaker levels on the NDF offshore markets.
Dollar Index (99.65) failed to sustain a rise to 101 and instead came off from 100.40 itself to currently trade below the psychological mark of 100. This has indicated a possible retention of the broad sideways range of 98.0-101 to remain intact while the index could be headed towards the lower end of the mentioned range in the near term.
Euro (1.0851) bounced back from 1.0766 as Dollar showed weakness. A re-test of 1.0750 or lower looks less likely now with a possible bounce back towards 1.09-1.10. On the medium term charts, the 1.07-1.10 range may remain intact for some more time.
Dollar-Yen (106.36) rose to test 106.66 yesterday but has dipped from there now. 106-107 range could hold for the near term. A break on either side would then pave the way for the next set of movement.
EURJPY (115.38) held well above 114.40 to rise back above 115 on Euro strength. However, while below 116, near term bearishness would remain intact. A break above 116 is needed to take it higher towards 117-118 in the medium term. Overall medium term looks bearish. A sustained break below 115 is needed to target 112 which could be negated if the cross fairly trades above 115.
Aussie (0.6544) has bounced well from 0.64 and while the support holds, Aussie could turn near term bullish towards 0.66 now and 0.67-0.68 later. Failure to break above 0.66 could keep Aussie ranged in the 0.64-0.66 region for the near term before a bounce is seen in the longer term.
Pound (1.2405) briefly tested 1.2266 before bouncing back to current levels. A false break below the immediate support at 1.2330 could not sustain indicating that the range of 1.23-1.27 could remain intact for the coming 1-2 weeks at least.
The PBOC has set the exchange reference rate at 7.0788 for the day. USDCNY (7.0717) has turned lower from levels above 7.09 and did not test 7.10/12 as we had mentioned earlier. We may expect the currency pair to stabilize a bit for the near term and trade in the 7.05-7.10 region.
Strength in the Yuan and Euro has helped Rupee to stabilze a bit on the NDF market which quotes at 75.7850 against 76.1430 seen yesterday (on NDF). USDINR (75.7650) on the OTC markets could open near previous close of 75.76 and possible trade within the sideways range of 75.60-76.00 for the day.
INTEREST RATES
The US Treasury have dipped but is likely to move higher in the coming days while they remain above their near-term supports. The German yields can also move up in the near-term before resuming their overall downtrend. The 10Yr GoI has come closer to is crucial support zone from where it is likely to reverse higher again.
The US 2Yr (0.13%), 5Yr (0.30%), 10Yr (0.64%) and 30Yr (1.32%) Treasury yields have come-off sharply across tenors. However, we retain our near-term bullish view mentioned yesterday intact. We expect the 10Yr to rise towards 0.80% while it sustains above 0.58%. A strong break above 0.70% can accelerate the rise. Only a sharp fall below 0.58% will bring back the earlier bearish view into the picture again. The 30Yr can move up to 1.43%-1.45% while it remains above 1.30%.
The German 2Yr (-0.79%), 5Yr (-0.76%), 10Yr (-0.55%) and 30Yr (-0.09%) have dipped slightly across tenors. The broader trend is down. However, as mentioned yesterday, the yields can move up to -0.45%/-0.40% (10Yr) and 0% (30Yr) in the near-term before resuming their overall downtrend. The 10Yr will have to fall below -0.60% to confirm the resumption of the downtrend and fall to our preferred target level of -0.80%.
The 10Yr GoI (6.0282%) is coming closer to its crucial support zone of 6%-5.95%. With little room on the downside, we expect the 10Yr GoI to reverse higher from this 6%-5.95% support zone. Such a bounce can take the yield higher to 6.10% and 6.20% again.
