STOCKS
The Rs. 20 lakh crore stimulus package announced by the Indian Prime Minister yesterday might give the much needed push for the Sensex and Nifty which were struggling over the last few days. The SGX-Nifty (9435.50, +259.50, +2.83%) is up sharply from its low around 9029 seen yesterday and the domestic indices can see a follow-up of that. On the global front the Dow, DAX and Nikkei have come down but can find supports in the near-term and then bounce-back again. A narrow sideways consolidation is also possible for some time. For now we retain our view of seeing a rise first and then a fresh leg of fall eventually. Shanghai remains lower and can see a corrective fall in the near-term within its broader uptrend.
Dow (23764.78, −457.21, -1.89%) has come-off below 24000 but might find support between current levels and 23500. While above 23500, the index can remain in the range of 23500-24500 and the chances of seeing 24700-25000 that we have been mentioning will remain alive. We will be watching closely the price action to gauge whether the fall that we are expecting from the 24700-25000 region can happen from here itself, though this is our less preferred view.
DAX (10819.50, −5.49, -0.05%) is stuck in between 10700 and 11000 over the last few days. We retain our bullish view of seeing 11300-11350 on the upside first before a fresh fall begins. As mentioned yesterday, the DAX has to decline below 10400 to negate the chances of the rise to 11300-11350 and to turn bearish.
Nikkei (20215.05, −151.43, -0.74%) remains below 20500 and is coming down towards 20000 as mentioned yesterday. We expect 20000 to hold and the index can bounce-back again to keep our bullish view intact of seeing 21500-22000 on the upside. A strong break above 20500 can accelerate the rally.
Shanghai (2886.34, −5.22, -0.18%) remains below 2900 but is getting support at 2875 now. It can remain stuck in between 2875 and 2900 for some time. However, while below 2900, we retain our view of seeing a corrective fall to 2850 or even lower in the coming days before a fresh leg of upmove begins. Out medium-term bullish view of seeing 3050 on the upside remains intact.
Sensex (31371.12, -190.10, -0.60%) and Nifty (9196.55, -42.65, -0.46%) can see a gap-up open today following the stimulus announcement last night. This will help them to hold above their crucial support levels of 31000 (Sensex) and 9000 (Nifty) in line with our expectation. Sensex can target 33000-34000 and the Nifty can test 9700-9800 in the near-term now.
COMMODITIES
Crude prices rose yesterday after Saudi Arabia announced to deepen production cuts in June which would be in line with the OPEC+ indications of cuts that it would like to maintain in the longer run. Saudi had announced to cut output by 1mln bpd, reducing production by 7.5mln bpd from April levels. But the rise seen in Crude prices after the announcement from Saudi Arabia was neutralized by the US inventory data that dragged back prices to lower levels. Gold and Silver looks stable just now with Silver having some scope to bounce from current levels. Copper looks weak.
US crude inventory stock saw a build of 7.58mln barrels for the week ended 8th May. This was higher than analyst expectations of 4.147 mln barrels.
Brent (29.46) and Nymex WTI (25.54) trade lower than levels seen yesterday morning. With some more sessions of narrow and ranged trade, we may expect a decent rise in Brent towards $32.50-35 and in WTI towards $27 in the near term. For the rest of the sessions this week, crude prices may trade lower.
Gold (1706.80) is finding difficulty in sustaining a fall below 1700. The broad range of 1740-1660 is likely to hold for another week, while the next 1-2 sessions could see trade in the 1700-1720 region.
Silver (15.72) is trading above immediate support at 15.5 and while that holds, a rise to 16.5 looks likely in the near term.
Copper (2.3465) after repeated attempts to rise above 2.40 could not sustain higher and has now broken below the daily upward channel looking bearish for the near term. A fall towards 2.30/25 is expected in the near term.
FOREX
Dollar Index has fallen taking up Euro and dragging USDJPY lower. EURJPY looks bearish while below immediate resistance levels while Aussie may have some scope for a rise from here. Pound looks bearish along with USDINR. USDCNY is trading a bit lower today but could soon bounce back to higher levels.
Dollar Index (99.96) fell sharply to trade below 100 just now. Resistance on the daily candles near 100.50 has held well as expected and the index could now be headed towards 99. While 100.50-99 range could hold in the near term, a break on either side is required to set the direction for the medium to long term. For now we would prefer to wait and watch for a breakout on either side of the mentioned range.
Euro (1.0850) has risen back in line with our expectation and could rise towards 1.09 before seeing another dip from there. Like Dollar Index a break on either side of the wide 1.07-1.09 range is needed to set medium term direction.
Dollar-Yen (107.20) has dipped after seeing a rise above 107.50. But the pair could bounce back from 106.50 back towards 108 or higher in the medium term.
EURJPY (116.34) has resistance near 117 and while that holds in the near term, we may expect a fall in EURJPY back towards 114.50.
Aussie (0.6473) is trading slightly lower today. With 0.6350 being immediate support, a rise to 0.66-0.67 could be possible in the near term.
Pound (1.2273) has been falling in line with our expectation and could test 1.22/21 I the near term.
USDCNY (7.0889) has dipped slightly but as mentioned yesterday, immediate support is seen near 7.06/07 which if holds could produce a bounce back towards 7.10/12 in the longer run.
USDINR (75.51) tested 75.07 on the NDF offshore market which now quotes 75.30. This could be indicative of a higher Rupee today. We may expect a fall in USDINR towards 75.30/00 over the next couple of sessions. Resistance at 76 is holding strong. On the technical charts, the pair looks like forming a rounding top which would validate if a fall is seen from current levels that holds for the medium term.
INTEREST RATES
The resistances on the US Treasury are holding very well and the yields are reversing lower in line with our expectation. Weak US inflation data release yesterday and increasing talks on negative interest rates are weighing on the yields. We expect the Treasury yields to resume its broader downtrend now. The German yields have room to move up in the near-term before resuming its downtrend. The 10Yr GoI is bullish but an intermediate dip cannot be ruled out before moving higher.
The US 2Yr (0.16%), 5Yr (0.31%), 10Yr (0.65%) and 30Yr (1.35%) Treasury yields have come-off sharply from levels seen in early Asian trades yesterday. The resistance in the 1.43%-1.45% on the 30Yr is holding well in line with our expectation and the yield is turning down well. A fresh fall to 1.10% is possible while the 30Yr remains below 1.45%. The 10Yr on the other hand is turning down from 0.70% itself (well below the 0.75%-0.80% resistance that we had been mentioning) and can dip to revisit its 0.60%-0.58% support zone now.
The German 2Yr (-0.75%), 5Yr (-0.73%), 10Yr (-0.51%) and 30Yr (-0.07%) sustain higher but seem to lack momentum. The broader view is negative. However, the upside is open to test 0%-0.05% on the 30Yr and -0.45%/-0.40% on the 10Yr in the near-term before the overall downtrend resumes.
The 10Yr GoI (6.1633%) sustains above 6.15% and remains bullish to test 6.35%-6.40% on the upside. However, the chances of a dip to 6.10%-6.05% first cannot be ruled out before the above mentioned rally happens.
