STOCKS
Asian indices seem to trade cautious ahead of the US Non-Farm payroll data release today. Broadly from the charts the equity segment looks vulnerable now for a corrective fall within their overall uptrend. However, any sell-off triggered by the US NFP data release today could be short-lived as the massive stimulus support from the major central banks and the improving sentiment on the back of the global economies opening up are likely to keep the ongoing uptrend in the equities intact. The ECB has increased its stimulus by Euro 600 billion yesterday to Euro 1350 billion. So , the correction that we expecting now in the Dow, DAX, Nikkie, Shanghai, Sensex and Nifty will be considered as an opportunity to buy on dips.
Dow (26281.82, +11.93, +0.05%) sustains above 26000 and remains bullish to test 27000 on the upside. In case of a fall below 26000 today after the jobs data release, a corrective fall to 25500 or even lower is possible before a rise to 27000 happens. However, as mentioned yesterday, from a bigger picture, the Dow has potential to target 28000 in the coming months while it sustains above 25000.
The resistance at 12500 looks to be holding well on the DAX (12430.56, −56.80, -0.45%) for now. While below 12500 a corrective fall to 12200-12000 can be seen in the near-term before a fresh leg of rally begins. As mentioned yesterday, the borader trend remains up and the current rally can target 13000-13500 on the upside in the coming months.
Nikkei (22616.77, −78.97, -0.35%) seems to lose steam to breach the immediate resistance at 23000 decisively as expected. As mentioned yesterday, while below 23000 a corrective fall to 22000-21500 can be seen first before the Nikkei moves up again to target 24000.
Shanghai (2915.17, −4.08, -0.14%) remains below 2950 and is coming down gradually towards 2900 in line with our expectation. As mentioned yesterday, Shanghai can consolidate between 2900 and 2950 for some time before resuming its uptrend towards 2975.
The resistance at 10160 on the Nifty (10029.10, −32.45, -0.32%) seems to be holding well. As such we see high chances of a corrective fall to 9800 before the overall uptrend resumes to target 10500-10750 on the upside.
Sensex (33980.70, −128.84, -0.38%) on the other hand can dip to 33000. Thereafter a fresh leg of rally can begin targeting 36000 on the upside.
COMMODITIES
Markets wait for further updates from the OPEC+ on supply. Saudi Arabia and Russia have been seeking guarantees from Iraq and other members such as Nigeria and Kazakhstan, to adhere to quotas and compensate for overproduction with deeper cuts in the coming weeks but the deal to extend the 9.7 million b/d production cut agreement through at least July still hangs on while the OPEC+ is yet to schedule a date for its meeting after the earlier fixed on 4th June was canceled. Crude prices could continue to rise in the near term till further updates from the OPEC+. Copper is bullish, Silver may moved down to test near term trend support before again rising back to higher levels. Gold is bouncing from lower end of the sideways range and could move up in the near term. A break on either side of the range is needed to give clarity on further direction.
Brent (39.96) and Nymex WTI (37.27) have moved up again ending the correction rather fast than what we had expected. If the momentum continues through the day, we may expect crude prices to close higher for the week opening up possibilities of higher levels in the coming week. For Brent we continue to look at interim resistance at 40 to hold while target of 45 is possible in the medium term. On WTI we may target 41.
Gold (1718.80) and Silver (17.97) have also risen a bit from lower levels seen yesterday. Gold is likely to hold above 1700 just now but needs to soon break on either side of the 1700-1775/80 region to indicate further direction. Till then, we expect the sideways range to continue. Silver, on the other hand is holding well below resistance at 19 and could test 17.5-17.0 in the near term before bouncing back from there. Immediate view for Silver is bearish towards trend support.
Copper (2.4880) has risen too and is headed to our earlier mentioned levels of 2.50/55. View is bullish for Copper.
FOREX
Dollar Index fell sharply and Euro rallied above 1.13 after the ECB increased its crisis bond buying program by 600bln Euros taking the bond buying to a 1.35 trln Euros. It extended the scheme till June 2021 or till the crisis is over. This gave a strong boost to the Euro taking it towards our expected target if 1.1350 where we would wait to see price action. Dollar Yen has also moved up breaking above 109 and could target resistance near 110. EURJPY needs to fall from 124 else could be bullish for the medium term. Aussie and Pound look bullish for the near term after a brief dip seen yesterday. Yuan is in a range and needs to break below 7.10 to turn further bearish. Dollar Rupee could see some pull back from 75.65 targeting 75.45/30 today.
Dollar Index (96.77) has fallen sharply breaking below 97 and could test our expected levels of 96.27. Note that 96.27 or lower at 96 could hold as immediate support from where a decent bounce could be expected.
Euro (1.1332) has rallied since yesterday after the ECB increased its bond buying program. The currency is headed to our mentioned target of 1.1350 on the upside which needs a close watch to see if a rejection could come in from there. Failure to fall from 1.1350 could take it higher towards 1.14+ in the near term. View is bullish for Euro but we would watch price action near 1.1350.
Dollar-Yen (109.16) has moved up breaking above 109 and could be headed towards 110 in the coming sessions before a dip is seen again. Immediate view is bullish for USDJPY.
EURJPY (123.68) has risen, breaking above our expected 123.40. If the cross does not fall immediately from 124, it could continue to rise towards 127 in the medium to long term. 124 would be crucial to watch in the next few sessions.
Pound (1.2590) is up again but could have resistance near 1.2650 above current levels. A re-test of resistance levels could be on the cards for near term.
Aussie (0.6946) has risen again targeting 0.70 in the near term. A break above 0.70 looks likely looking at the momentum and while that continues, there is room for a rise towards 0.7080 in the coming week. Aussie looks bullish while above 0.69.
USDCNY (7.1097) is fluctuating within the 7.13-7.10 region and could continue for some more time. We would eventually look for a break below 7.10 to target 7.08 in the medium term.
USDINR (75.5750) closed higher yesterday but while below 75.65/70, we may expect a pull back towards 75.45/30 again today. A broad range of 75.00-75.65 could hold for the coming week.
INTEREST RATES
The European Central Bank (ECB) increasing its Pandemic Emergency Purchase Programme (PEPP) by Euro 600 billion from 750 billion to 1350 billion Euros has boosted the bond yields. The German yields have surged especially at the far-end to the levels we had expected much faster than anticipated. The yields have room to move further up and the view remains bullish. The US Treasury yields have also surged especially at the far-end and look bullish to move up further while it sustains the momentum. The 10Yr GoI can consolidate sideways in the near-term before moving up eventually.
The US 2Yr (0.19%), 5Yr (0.39%), 10Yr (0.81%) and 30Yr (1.61%) Treasury yields have risen sharply across tenors, especially at the far-end (10Yr and 30Yr). Our bullish view is intact. The 10Yr and the 30Yr has reached the levels of 0.80% and 1.60% much faster than we had anticipated. While this momentum continues, we see high chances of the yields moving further higher towards 1% (10Yr) and 1.80% (30Yr) in the coming weeks.
The German 2Yr (-0.63%), 5Yr (-0.58%) yields have inched up by 2bps while those at the far-end the 10Yr (-0.33%) and 30Yr (0.19%) have surged 6bps and 11bps respetivey. The 30Yr has risen towards 0.20% as expected, but much faster than anticipated though. There is room to rise further towards 0.35%. The 10Yr has risen above -0.35% and can now move up to -0.20%.
The 10Yr GoI (6.0113%) sustains above 6% but is not gaining momentum to rise sharply. As mentioned yesterday, we expect the yield to remain in the range of 5.95%-6.10% in the near-term. The bias is bullish and the 10Yr GoI can break this range on the upside eventually and target 6.20% on the upside in the coming weeks.
