STOCKS
The case for seeing a corrective fall on the major indices from current levels itself is increasing rather than after a further rise. As seen from the charts, the rally in the major indices like the Dow, DAX and Nikkei seem to be fizzling out. As such our bias is inclining towards seeing a correction soon as we expect to see more profit taking from the current rally. 26600 on the Dow, 12500 on the DAX and 22500 on the Nikkei are very key levels which if broken can trigger the corrective fall from here. Shanghai is stuck in a narrow range. Sensex and Nifty looks likely to be range bound in the near-term. But the bias is negative to see a break below 10000 (Nifty) and 34000 (Sensex) eventually before seeing further rally.
Dow (26989.99, −282.31, -1.04%) has dipped below 27000 and the chances of seeing 28000 on the upside seems to be getting reduced. 26800 and 26600 are important supports to watch. A strong break below 26600 will negate completely the chances of a rise to 28000 and will drag the Dow lower to 26000.
DAX (12530.16, −87.83, -0.70%) has come down further and is hovering above the crucial support level of 12500. As mentioned yesterday, a strong break below 12500 will negate the chances of seeing 13500-13800 immediately. In turn a corrective all to 12000 or even lower levels will be seen first before a fresh leg of rally begins.
Nikkei (22882.28, −242.67, -1.05%) has dipped below 23000 and can come down gradually towards 22500 now. The chances of seeing a test of 24000 stands reduced now. A break below 22500 can trigger a further corrective fall to 22000 or even lower from here itself rather than after a rise to 24000 that we had been expecting so far.
Shanghai (2948.50, +4.75, +0.16%) remains stuck below 2950 in the narrow range of 2950-2925. As we have been mentioning over the last few days, the index can remain in the range of 2925-2950 (narrow) or 2900-2950 (broader) for sometime before an eventual break above 2950 happens to target 2975 on the upside.
Nifty (10116.15, +69.50, +0.69%) is managing to hold above 10000. A range of 10000-10400 looks possible in the near-term. However, we will still continue to remain cautious to see a break below 10000 and a fall to 9800 or even lower levels before a fresh leg of rally begins.
Sensex (34247.05, +290.36, +0.86%) can trade between 34000 and 35000. While below 35000, the bias is bearish to see a corrective fall to 33000-32000 before a fresh leg of rally begins to target 36000 and higher levels on the upside.
COMMODITIES
Commodities except crude prices are bullish on a weaker Dollar and but could have limited upside if interim resistances hold. Copper has to break above 2.65 to move further up while Gold and Silver has enough room on the upside. Crude prices could remain stable for a few sessions.
Brent (40.69) and Nymex WTI (38.45) have dipped slightly but may spend some time in a stable trade for the next few sessions before moving up towards 45 and 41 respectively. Immediate view looks stable.
Gold (1742.60) has risen to our expected 1740 and looks bullish for a further rise from here to daily trend resistance near 1760/65 in the coming sessions.
Silver (18.16) has immediate support at 17.5 which if holds could take the price higher towards 19 again in the medium term. For now, a test of 17.5 is possible followed by a bounce from there. View is bullish for the longer run.
Copper (2.6490) has risen to our mentioned resistance at 2.65 and if that holds, we could expect a short corrective dip to 2.55/50 before a sharper rise is seen; else continued rise from here above 2.65 could take the prices straight towards 2.70/80 in the medium term. Preference is to see a dip from levels around 2.65.
FOREX
Dollar Index has dipped after the FED meeting yesterday where it mentioned that the FED would keep near term benchmark rates near zero. Additionally, the FED would keep buying bonds targeting $80 bln a month in Treasuries and $40 bln in mortgage-backed securities. Euro is almost risen to test 1.14 and if it manages to break higher, 1.15 would be the next target. EURJPY has declined as on a sharper fall in USDJPY below 107 which could now target 106.74-106.00 in the near term. Pound and Aussie looks stable and could range sideways for now. Yuan trades strong too but we have to see if the Rupee manages to strengthen as a combined impact of stronger Euro and Yuan. Else the sideways consolidation may continue, while RBI keeps buying at lower USDINR levels.
Dollar Index (96.00) has fallen as expected and could possibly test 95.94-95.70 too in the near term before a bounce is seen again to levels above 96-97. Note that the index already tested an intra-day low of 95.70 exactly as expected and failure to bounce back from there could make the index vulnerable to further dip towards 95.24 or lower. Watch price action near 95.70 just now.
Euro (1.1392) has bounced back well after a brief dip from 1.1389 was seen earlier. This indicates the intrinsic strength in Euro while the upside momentum remains intact. As mentioned yesterday, we would look at 1.15 as the upper target for the near term before a fall from there is seen. Near term view is bullish.
EURJPY (121.81) surprisingly has fallen from levels above 122 as both Euro and Yen are in a strengthening zone. We may not expect a fall below 121.30 just now but the pair may trade sideways for sometime before moving higher. We would turn further bearish on EURJPY on a sustained break below 121.30.
Dollar-Yen (106.92) has fallen below 107 contrary to our expected bounce from 107.40 mentioned yesterday. The trend is strong in line with the movement in dollar Index and the pair looks bearish for the near term. A further fall towards 106.74-106.00 is on the cards for this week and the next before any bounce could be expected from there.
Pound (1.2736) tested an intra-day high of 1.2817 yesterday before coming off from there to levels seen yesterday. Pound may not be able to break above 1.2820 just now and could either spend some time in a sideways consolidation or start to move down slowly. View for Pound is sideways to bearish for the near term.
Aussie (0.6973) is stable near levels seen yesterday and looks like it has entered a sideways consolidation zone between 0.6890 and 0.7066 which could hold for some time. Near term looks stable for the next 1-2 sessions.
USDCNY (7.0596) has fallen as expected and could test 7.05 on the downside within the next 1-2 sessions. Immediate view is bearish for the pair.
USDINR (75.5950) is stuck in the 75.40-75.65 region and is likely to hold within this range today also. We would wait for further confirmation on a break of either side of this range to get more clarity on further direction. For now we keep the mentioned range intact. Preference would be to see a stronger Rupee as both Euro and Yuan trades stronger today.
INTEREST RATES
The Treasury yields have come-down sharply across tenors following the outcome of the Federal Reserve meeting yesterday. The Fed’s projections show that the rates will remain unchanged till 2022 and will continue the bond purchase atleast at the current pace. The Treasury yields have crucial supports coming up which will have to hold in order to keep our broader bullish view intact and also to avoid a fresh fall. The German yields have also come down in line with our expectation and have room to fall further. The 10Yr GoI remains lower and can dip within the 5.95%-6.10% range in the near-term.
The US 2Yr (0.17%), 5Yr (0.31%), 10Yr (0.72%) and 30Yr (1.50%) Treasury yields have come down further sharply across tenors following the outcome of the US Federal Reserve meeting yesterday. Crudial supports are at 0.70% on the 10Yr and in the 1.50%-1.47% region on the 30Yr. A bounce (most preferred) from these supports will keep our bullish view intact and a rise back to 0.80%-0.90% on the 10Yr and 1.70% on the 30Yr is possible again. We will have to wait and watch.
The German 2Yr (-0.63%), 5Yr (-0.58%), 10Yr (-0.33%) and 30Yr (0.15%) have dipped further in line with our expectation within the overall uptrend. As mentioned yesterday, the 10Yr can dip to -0.40%/-0.45% while the 30Yr has room to test 0.10% and even lower levels in the coming days.
The 10Yr GoI (5.9846%) remains below 6% and keeps our view intact of testing 5.95% on the downside in the near-term from where a bounce is possible. We retain our view of seeing a range of 5.95%-6.10%. In case of a break below 5.95%, the downside can extend up to 5.90%.
