STOCKS
Asian indices continue to trade strong as the Nikkei, Shanghai, Sensex and Nifty have risen further. The indices retain their strength and have room to move up further to keep the uptrend intact. Dow and DAX on the other hand will have to break above their resistances ahead in order to gain strength and move up further. While the broader bias remains bullish for both the Dow and the DAX, it will have to be seen if they will move up sharply like the Asian indices from here itself or after a near-term consolidation/correction.
Dow (25742.65, +267.63, +1.05%) has risen within our preferred range of 25000-26000. As we have been mentioning over the last couple of days, a breakout on either side of 25000-26000 will determine whether the Dow will move up to 27000 or fall to 24500-25000. The bias from the long-term charts indicate that while above 25000, the chances are high for the Dow to see a rise to 27000.
DAX (12021.28, +434.43, +3.75%) has risen further and is now poised in the 12000-12100 resistance zone. The broader picture remains bullish to see a rise to 12400-12500. However, if 12100 holds on its first test then a short-lived corrective fall from 12100 towards 11800-11700 cannot be ruled out before we see the rally to 12400-12500.
Nikkei (22581.74, +256.13, +1.15%) has surged above 22500. The expected corrective fall from 22500 has not happened. As such the Nikkei can move up to target 24000 straight away without a corrective dip.
Shanghai (2935.16, +13.77, +0.47%) remains higher above 2900 and keeps our bullish view intact of seeing 2975 on the upside.
Nifty (9979.10, +152.95, +1.56%) has risen and come closer to the intermediate resistance level of 10000. As mentioned yesterday, a strong rise past 10000 can trigger a further rally to 10500. In case if 10000 hold on its first test then a corrective dip to 9800-9700 can be seen before a fresh leg of rally begins to target 10500.
Sensex (33825.53, +522.01, +1.57%) on the other hand can surge to 36000 on a strong rise past 34000. Immediate support is at 33000.
COMMODITIES
Crude prices continue to rally ahead of the OPEC+ meeting scheduled tomorrow. Near term view of bullish crude remains intact while the markets expect that the 9.7 mln bpd production cuts could be extended to September. The sharp rise is crude prices also rose after the American Petroleum Institute (API) estimated a crude oil inventory draw of 483000 barrels for the week ended 29th May. This was against the analyst expectations of an inventory build of 3.038mln barrels. Gold and Silver have tested crucial resistances and could see some corrective dip in the near term. Copper has moved up sharply and is bullish towards 2.50/55.
Brent (40.01) has risen sharply, testing our expected 40. Failure to see an immediate dip from here could open up chances of testing 45 on the upside before a decent corrective decline is seen. 40 and 45 are crucial levels to watch just now. Nymex WTI (37.50) has also moved up and is also trading near important 37.50-38.00 levels which if breaks would take the price to 41. Watch for an immediate dip from current levels to 36-35.
Gold (1731.20) and Silver (18.21) have dipped amongst the rise in other commodities. Gold faced stiff rejection from near term trend resistance at 1775 and has been falling from there targeting 1720-1710 again in the near term while Silver tested 19 as expected and could now see a dip towards 18.0 or slightly lower. View is that of a dip from current levels for the near term.
Copper (2.4845) has finally moved up sharply and now looks bullish towards our earlier mentioned 2.50/55 in the coming sessions. Near to medium term view is bullish.
FOREX
Dollar index continues to trade weak while Dollar Yen, Euro, Pound and Aussie have risen sharply and looks bullish for the near term. EURJPY could also move up while Euro is bullish. Chinese Yuan could strengthen a bit supporting strength in Rupee for the near term. Overall currencies look strong against the US Dollar and could remain so for some more time.
Dollar Index (97.49) continues to remain weak with a possible downside target of 96.27 from where a reversal is expected in the medium term. Overall the index is likely to remain weak for another week falling towards our mentioned target. In the very near term, target of 97.40-97.00 is likely to be achieved.
Euro (1.1195) has risen to almost test 1.12. Higher target of 1.1250-1.1350 could be on the cards which may be tested by the coming week. View is bullish.
Dollar-Yen (108.55) has broken clearly to the upside and may target 109.39 in the coming sessions. This break above 108 has been indicative of a near term upmove. This is contrary to the weakness seen in Dollar Index, indicating a negative directional correlation between the two.
EURJPY (121.54) has also surprisingly risen above our expected 120.35. While the rally continues, we may expect a test of 123.0-123.4 before a fall from there is seen.
Pound (1.2570) is no exception to the other strong currencies. Pound is also in an upward rally and could move up towards initial resistance at 1.2650 which if breaks could be further bullish for the medium term.
Aussie (0.6938) is rallying breaking our expected 0.68 boosted by the sharp rise in Copper prices. While Copper looks further bullish towards 2.508/55 (refer commodities section above), Aussie may move higher towards 0.70-0.71 in the near term. Also weakness in US Dollar could help Aussie to rise further.
USDCNY (7.1121) is almost stable and could fall towards 7.10/08 in the medium term. Upside is likely to remain limited to 7.15 in the near term.
USDINR (75.3725) did rise to 75.6125 yesterday but while below 75.65, it came down sharply to close at 75.3725, reinitiating the bearish sentiment for the near term. A fall towards immediate support at 75.30 could be seen with an eventual fall towards 75 in the near term. View is bearish for USDINR while below immediate resistance near 75.65.
INTEREST RATES
Strength in the equities is supporting the yields to move higher. The US Treasury yields have risen in line with our expectation but much sharper/faster than we had anticipated. The outlook is bullish and the yields have room to move up further in the coming days. The German yields hover near their crucial resistances which will have to be broken decisively in order to negate our bearish view. The 10Yr GoI has come-off sharply yesterday and could remain in a sideways range for sometime which could delay our preferred rise.
The US 2Yr (0.15%) Treasury yield remains stable while the 5Yr (0.34%), 10Yr (0.71%) and th 30Yr (1.52%) have moved up sharply. The 30Yr has moved up to 1.50% in line with our expectation but faster than we had anticipated though. The outlook remains bullish and a further rise to 1.60% and even higher levels looks possible in the near-term. The 10Yr is poised at the upper end of its 0.58%-0.71% range and is likely to breach 0.71% and rise to 0.80% in the coming days.
The German 2Yr (-0.68%), 5Yr (-0.63%), 10Yr (-0.42%) and 30Yr (0.06%) remains higher but stable across tenors. As mentioned yesterday, 0.10% on the 30Yr is a very crucial resistance. A strong break above it will be bullish to see a rise to 0.20% and even 0.30%. Such a move will negate our bearish view. The 10Yr on the other hand will need a strong rise past the -0.40%/-0.35% resistance zone in order to negate our preferred bearish view of seeing a fall to -0.60%.
The 10Yr GoI (5.9977%) had come-off sharply from the high of 6.0881% yesterday. Our preferred rise to 6.15%-6.20% might get delayed while the yield remains below the intermediate resistance level of 6.10%. The 10Yr GoI can now remain in the 5.95%-6.10% range for some time before breaking the range on the upside to target 6.15%-6.20%.
