STOCKS
Dow and DAX have declined below their near-term supports that we had expected to hold thereby reducing the chances to the rise that we had been expecting for some time. While the DAX will now have room to fall further, 23000 on the Dow will need a close watch which has to hold in order to avoid a further fall. Nikkei is managing to hold above its near-term support for now and need to be seen it can continue to sustain above it or not. Shanghai is stuck in a narrow range in line with our expectation. We prefer to see a corrective fall first before the overall uptrend resumes in Shanghai. Sensex and Nifty have come-off from their day’s high yesterday. SGX-Nifty (9265.50, -134, -1.43%) is trading lower indicating that a further fall is possible in the Sensex and Nifty today.
Contrary to our expectation the Dow (23247.97, −516.81, -2.17%) has declined below 23500 thereby reducing the chances of seeing a rise to 24700-25000. 23000 is the next important support. A break below it will turn the view bearish to test 22500 and even 22000 on the downside and will negate the chances of a rise completely.
DAX (10542.66, −276.84, -2.56%) has declined below 10700 as against our expectation. It can now test 10400 and 10250/200 – the next two key supports in the near-term. The chances of seeing a rise to 11300-11350 that we had been mentioning stands reduced now. A fall below 10200 will completely negate the chances of the above mentioned rise. While 10200 holds, we might see a sideways consolidation between 10200 and 11000 for some more time.
Nikkei (20138.45, −128.60,-0.63%) trades lower but is managing to hold above 20000 – an important support to watch now. As mentioned yesterday Nikkei has to sustain above 20000 in order to keep the chances alive of seeing a rise to 21500-22000. A break below 20000 will negate the chances and in turn will drag it lower to 19500-19000 again.
As expected Shanghai (2886.34, −5.22, -0.18%) remains stuck in between 2875 and 2900 We continue to prefer for seeing a corrective fall to 2850 or even lower first before the overall uptrend resumes. In case if the index breaks above 2900 just now it can move up to 2925 and then reverse lower again. We reiterate that our medium-term bullish view of seeing 3050 on the upside remains intact.
Sensex (32008.61, +637.49, +2.03%) tested 3300 yesterday as expected but failed to hold higher and had come-off yesterday. It can dip below 32000 today to test 31000 again. 31000 is an important support which will have to hold in order to avoid any further fall. While 31000 holds, Sensex can remain in the range of 31000-33000 for some time.
Similarly, Nifty (9383.55, +187, +2.03%) had also come-off from the high of 9584.50 yesterday giving back most of the gains. 9300-9275 will be an important support zone to watch today which needs to hold in order to avoid a fall-back to 9000 again. From a bigger picture 9000 will be a very crucial for the Nifty which if broken can turn the outlook negative. 9000-9400/9500 will be range that we can look for while the Nifty manages to sustain above 9000.
COMMODITIES
Crude prices trade weak even after the US stock inventories saw a surprise draw of 745,000barrels for the week ended 8 May against analyst expectation of 4.15mln barrel build. Gold has risen well and indicates some bullishness while Silver trades stable. Copper has also moved up and could re-test crucial levels of 2.40 again in the near term.
Brent (29.12) and Nymex WTI (25.40) continue to trade in the narrow range despite crude inventory draws. $27-32.5 could be the range for Brent in the near term while WTI could trade in the $23-27 region.
Gold (1722.20) has risen sharply and could possibly indicate a trade above 1720 during the day. Breaking above the 1700-1720, region Gold is likely to turn bullish for the near term towards 1740/50. While above 1720, near term could be bullish.
Silver (15.71) is stable near levels seen yesterday. We do not negate a rise to 16.5 in the near term while above support at 15.5.
Copper (2.3540) has turned up slightly. While there is scope for re-testing 2.40 or higher, we may not negate a fall towards 2.30/25 in the medium term. While above 2.35, we may consider a possible rise to 2.40 and higher but remain cautious near 2.40.
FOREX
Dollar Index trades higher but Euro also has important near term support below current levels which could hold and keep Euro higher in the medium term. Aussie and Pound could fall towards immediate support. Yuan trades weak and Rupee could also trade weak against the US Dollar today.
Dollar Index (100.25) has risen back to 100+ levels and could test resistance near 100.50. A dip from there could again be expected in the near term. Watch price action near 100.50. A break on either side of the 100.5-99 range is needed set direction for the medium term.
Euro (1.0812) fell as Dollar index strengthened but manages to remain above 1.08. Immediate trend support is seen at 1.08 and we may expect that to hold and eventually take Euro to higher levels. Watch a bounce from 1.08 in the near term which would be possible if the Dollar index falls off from 100.50.
Dollar-Yen (106.90) has dipped and a fall towards 106 cannot be ruled out. Near term looks bearish.
EURJPY (115.61) has dipped as resistance near 117 seems to be holding well for now. On the downside there is now enough scope towards 115.00-114.50. Near term looks weak.
Aussie (0.6439) has fallen as expected and could be headed towards 0.64-0.6350 in the near term. A test of lower support could be possible before a bounce from there is seen.
Pound (1.2216) continues to fall in line with our expectation and could test 1.22/21 in the near term.
USDCNY (7.0963) is almost stable but has scope for a rise towards 7.10/12 in the medium term while above 7.05/06.
USDINR (75.48) could see some range trade near current levels. 75.30-75.60 could be the trade range for the day. Only a break above 75.60, if seen would bring in upper and interim resistances of 75.75/80 into the picture.
INTEREST RATES
The US Treasury yields have come down further and have room to fall further in line with our expectation. The US Federal Reserve Chairman Jerome Powell has stated yesterday that more stimulus is needed to support the economy. He also ruled out the chances of negative rates which the market has been talking about recently. The German yields are turning down and might see further fall from here itself instead of seeing a corrective rise first before reversing lower that we had been expecting. The 10Yr GoI can dip to test its support in the near-term and then can reverse higher again.
The US 2Yr (0.16%), 5Yr (0.31%), 10Yr (0.64%) and 30Yr (1.33%) Treasury yields remain lower and have dipped further. As mentioned yesterday, the resistances on the yields have held very well and the outlook has turned negative. The 10Yr ca test 0.60%-0.58% and the 30Yr can dip to 1.23%-1.20% in the near-term which are the next key supports. A break below these supports will then pave way for a further fall to 0.40% on the 10Yr and 1.10% on the 30Yr.
The German 2Yr (-0.77%), 5Yr (-0.75%), 10Yr (-0.54%) and 30Yr (-0.11%) have reversed lower across tenors. The near-term rise before a fresh fall that we had been expecting seems to be not happening. Inability to bounce from here can drag the 10Yr low to -0.60% and the 30Yr to -0.20%. A strong break below -0.60% (10Yr) and -0.20% (30Yr) will indicate the resumption of the overall downtrend and will then negate completely the chances of seeing any further rise
The 10Yr GoI (6.0958%) opened with a wide gap-up yesterday but had come-off sharply during the day giving back all the gains. We retain our view of seeing 6.05% on the downside from where a bounce-back move is possible. However, in case of a break below 6.05% we may then have to allow for a further fall to 6% and 5.95% again.
