STOCKS
Global equities continue to trade strong. Dow, DAX and Nikkei have risen further sharply and are coming closer to their key intermediate resistances which can hold on its first test. A corrective fall is possible from there before another fresh leg of rally begins. Sensex and Nifty have risen past their key resistances and has reduced the danger of seeing a fall that we had been expecting. The outlook is bullish and the indices can move further higher. Shanghai needs to break above its near-term resistance in order to gain strength and move higher.
Dow (25548.27, +553.16, +2.21%) has moved up further and is heading towards 26000 in line with our expectation. The level of 26000 is a strong resistance which might hold on its first test. As such we can look for a corrective fall from 26000 towards 25000-24500 in the coming days.
DAX (11657.69, +153.04, +1.33%) has risen past 11500 decisively and is keeping our bullish view intact. A test of 12000-12100 is likely now and a corrective fall to 11600-11500 can be seen thereafter.
Nikkei (21849.09, +429.86, +2.01%) has surged breaking above 21500 and is heading towards 22000 as expected. A corrective fall from the 22000-22500 region towards 20500-20000 is a possibility before a fresh leg of upmove begins targeting 24000 over the medium-term.
Shanghai (2833.87, −2.94, -0.10%) has failed to sustain the break above 2850 and has come-off sharply from the high of 2861 today. A decisive close above 2850 is needed to strengthen the momentum and move up towards 2900. Else the index can remain stuck in between 2800 and 2850 for some time before moving higher eventually.
Nifty (9314.95, +285.90, +3.17%) has risen past 9250 sharply thereby negating the chances of a break below 9000 that we had been expecting. The outlook is bullish. 9200-9150 can be a good support now. While above this support a further rise to 9500 and even 9700 is possible now.
Sensex (31605.22, +995.92, +3.25%) has risen above 31000 but will need a further strong break above 32000 in order to gain momentum. Such a break can take the index higher to 33000 thereafter. The chances of seeing a fall below 30000 that we had been expecting stands reduced now. The region between 31000-30800 can now act as a strong support.
COMMODITIES
Adding on to the US-China tensions, the API estimated a crude inventory build of 8.731mln barrels for week ended 22nd May compared to analyst prediction of 2.5mln barrels draw for the mentioned week. While we wait for the EIA figures, crude prices may trade lower for the next 1-2 sessions. Gold and Silver have risen back and now look sideways to bullish for the near term. Copper is trading lower and looks stable in a sideways range.
Brent (34.14) and Nymex WTI (31.83) have dipped on API’s estimation of crude inventory build. As mentioned yesterday, $37.50 on Brent and $35 on WTI seems to be holding well for now with the narrow sideways consolidation likely to continue for some more sessions before a bounce is seen. For the next 1-2 sessions, crude looks stable.
Gold (1725.80) has been holding well above 1700, contrary to our expectation of a possible fall below 1700. Trading above 1720 currently, chances of seeing a fall below 1700 in the near term has been reduced. A bounce back towards 1740-1760 could be likely while above 1720. Only on a break below 1720, we would again look for a fall towards 1700 or lower.
Silver (17.81) has also risen back. As mentioned yesterday, there are chances of seeing sideways consolidation for some more time in the 17.30-18.20 region before a potential rise to 19 is seen in the longer run.
Copper (2.3940) has been hovering around 2.40 attempting to rise above it but unable to sustain the rise. 2.30-2.50 is the broad region of trade for the coming sessions.
FOREX
Dollar Index trades at immediate support and could bounce back dragging Euro lower in the near term. Dollar Yen looks bullish. Pound is bearish while Aussie could have room on the upside. Yuan is weak amongst the currencies mentioned below and could keep Rupee weak today.
Dollar Index (98.89) came off sharply after the EU announced a EUR750 bln as stimulus package for the post COVID19 taking Euro (1.1018) higher above 1.10. Technically, charts show immediate support at current levels on Dollar Index which if holds, could take the index back to higher levels of 100 in the near term. Price movement in Dollar Index would be important to decide on further bullishness on Euro or whether Euro can see yet another dip towards 1.09 before bouncing from there in the medium term.
Dollar-Yen (107.82) has risen despite the fall in Dollar Index keeping the upside momentum strong for now. A rise towards 108.10 is the immediate view while medium term outlook is also bullish.
EURJPY (118.82) has risen above our mentioned 118.25 contrary to our expectation of seeing a fall towards 1117. The rise has come in along with the rise in Euro after the announcement of stimulus package by the European Union. Now while above 118.25, the cross could test 119.05 before seeing a corrective dip from there.
Pound (1.2267) is holding just below immediate trend resistance at 1.2324 and while that holds, Pound looks bearish for the near to medium term towards 1.2150.
Aussie (0.6621) has support near 0.6525 and while that holds, Aussie could be bullish towards 0.6760 in the medium term.
USDCNY (7.1668) needs to come off from current levels immediately to avoid further rise towards 7.18-7.20 in the near term. View is potentially bullish for the near term.
USDINR (75.7250) did not manage to fall to our expected 75.60 or lower yesterday instead traded higher. With the weakness in Yuan and possible weakness in Euro from current levels, Rupee could be negatively impacted and could possibly trade above 75.60 today. We keep intact a possible range of 75.60-75.85-76.00 in the near term.
INTEREST RATES
The strength in the equities keep the US Treasury yields higher. It will have to be seen if the US-China issue escalates more and bring down the yields. Otherwise, the Treasury yields will have room to rise further. The German Yields have moved up and are coming closer to their key resistances. The European Commission unveiling a stimulus of Euro 750 billion is supporting the yields. But while the resistances hold, the German yields can come down again. The 10Yr GoI can remain stuck in a narrow range for some time before moving up.
The US 2Yr (0.18%), 5Yr (0.34%) and10Yr (0.69%) Treasury yields remain stable while the 30Yr (1.46%) has inched further up by 2 bps. The 30Yr has risen just above the key level of 1.45% and will need to see if it can sustain higher. The outlook is bullish and the 30Yr can gradually move up to 1.50% and 1.60% in the coming weeks. The 10Yr will have to breach 0.71% in order to move further up towards 1.80%.
The German 2Yr (-0.65%), 5Yr (-0.61%), 10Yr (-0.42%) and 30Yr (0.02%) yields have moved up again across tenors The crucial resistances at 0.05% on the 30Yr and -0.40% on the 10Yr can be tested again. We expect these resistances to hold and the yields can resume their broader downtrend. A reversal from these resistances can drag the 30Yr to -0.10%/-0.20% and the 10Yr to -0.60% in the coming weeks.
The 10Yr GoI (5.9844%) can remain stuck in between 5.94% and 6% for some time. The region between 5.95% and 5.90% will continue to act as a good support and we expect the yield to breach 6% eventually and rise to 6.15%-6.20% in the coming days.
