STOCKS
Overall the sentiment and the picture are tilting back towards bullishness on the equities. A strong follow-through rally today will confirm the same. Dow has risen-back sharply from its low yesterday following the announcement from the US Federal Reserve to buy Corporate Bonds as a part of its purchasing programming. A rise past 26000 on the Dow today will be bullish. DAX and Nikkei have risen-back sharply after testing their key supports as expected and can move higher in the coming days. Shanghai is likely break its near-term resistance now and move up. Sensex and Nifty have failed to extend Friday’s bounce-back. But they can move up today taking cues from the strong bounce-back move in the global indices.
Dow (25763.16, +157.62, +0.62%) has recovered sharply from the low of 24843.18 thereby avoiding the danger of making a weak close below 25000. A follow-through rally today breaking above 26000 will reduce the danger of seeing the fall to 24500 and 23000 that we had been cautioning over the last few days. Such a rise will open doors for a test 27000-28000 levles again. We will have to wait and see.
As expected, DAX (11911.35, −37.93, -0.32%) tested 11600 and has bounced-back from there in line with our expectation. A decisive close above 12000 today will be bullish to breach the immediate resistance level of 12200 and rise to 12500 and higher levels from here itself. Else a dip to 11300 is possible before a fresh rally begins.
Nikkei (22235.17, +704.22, +3.27%) has recovered all the loss made yesterday. The support at 21500 is continuing to hold very well in line with our expectation. A strong close above 22000 today and a subsequent rise past 22500 will boost the momentum to move up to 23200 in the near-term. As mentioned yesterday, a strong break below 21500 will be needed to see much deeper fall which looks less likely.
Shanghai (2923.11, +33.08, +1.14%) continues to trade above 2900 and is likely to breach 2925 in the coming sessions. Such a break will take it to 2975 initially. A further rise past 2975 will then pave way for 3000-3015 going forward.
Nifty (9813.70, -159.20, -1.60%) and Sensex (33228.80, −552.09, -1.63%) failed to see a follow-through rise after witnessing a storng bounce on Friday. It will have to be seen if they take cues from the global markets and move up today. Nifty will have to breach 10000 decisively and Sensex has to break above 34000 in order to gain momentum and move further up to 10250 and 35000 respectively. Such a move will reduce the chances of revisiting 9600-9500 (Nifty) and 32000 (Sensex) on the downside that we had mentioned yesterday.
COMMODITIES
As mentioned yesterday the bounce in Nymex WTI from immediate support levels has pulled up Brent too and we may expect some upmove in the coming sessions. This rise in crude prices and other commodities came in after the FED said yesterday that it will update its purchases of corporate bonds to include individual bonds in addition to the exchange traded funds. Gold and Silver have risen slightly. Gold continues to trade within the broad sideways range while Silver could bounce from interim support just now within an overall long term bearish looking trend.
The OPEC-led monitoring panel is scheduled to meet on Thursday to discuss whether the countries have delivered their share of output reductions.
Brent (39.57) bounced back from 37 itself instead of testing lower levels of 35-33 as mentioned yesterday. If the rise sustains, we may see a test of 41-42 again in the next few sessions else a ranged movement within 42.50-37 (max extension to 35) could be possible for some time before the price moves up to 45 in the medium term.
Nymex WTI (36.92) bounced back in line with the immediate support mentioned yesterday and has pulled up Brent.
Gold (1739.70) and Silver (17.61) had dipped slightly but has bounced back to levels seen yesterday. Overall narrow and ranged movement is visible for the near term. Immediate support is visible on Silver at 17.50 which could produce a short upmove in the near term while Gold continues to trade within the mentioned 1760-1690 region with interim support at 1725. Silver is bearish in the longer time frame but we may prefer an initial bounce from 17.50 before a sharp fall is seen.
Copper (2.6030) bounced higher before testing 2.55 on the downside, in line with the bounce seen in other commodities. A rise back towards 2.65 could be on the cards for the near term.
FOREX
Dollar Index has dipped while Euro and Dollar Yen looks bullish for the near term. EURJPY and Aussie are set to rise too in the near term. Yuan is likely to strengthen towards 7.05 but the strength in Yuan and Euro may or may not impact in a stronger Rupee.
Dollar Index (96.46) has been falling since the last 2-sessions breaking below 98. A re-test of recent lows near 95.99-95.70 looks possible while the falling momentum remains intact. Watch for a possible bounce by the end of the week to levels above 97.50.
Euro (1.1341) is back above 1.13 again but will it be able to target 1.1365/85 again will have to be seen in the next 1-2 sessions. A re-test of 1.14 could indicate that there could be some strength left in the currency that is not allowing a sharp fall just now with possible test if recent high just above 1.14. Watch price action near 1.1365/85 then higher near 1.14.
EURJPY (121.96) has moved up well as expected. Now a rise to 122.20 and higher looks possible in the next 1-2 sessions.
Dollar-Yen (107.51) has moved up too while expected support near 106.56-106.36 holds well. As mentioned yesterday, a break above 107.70 in the next few sessions is needed to expect a rise to 108 or higher else a sideways range of 107.70-106.56 could be possible.
Aussie (0.6965) has moved up from yesterday’s low of 0.6775 and could be headed towards 0.70-0.71 in the near term. View is bullish while above 0.68.
USDCNY (7.0733) has fallen contrary to our expectation of a rise towards 7.10. Note that now 7.10 is a crucial resistance and is likely to hold for the medium term. A further fall towards 7.05 could be on the cards.
USDINR (76.0350) closed above 76 yesterday after testing an intra-day high of 76.1450, trading within our expected range of 75.90-76.20. Support is seen near 75.85 on the downside which could hold for the near term. Upside is open to a test of 76.30. A range of 75.90-76.25 could hold for the next 1-2 sessions. Alternatively, if a stronger Euro and Yuan impacts Rupee, we may see a fall to 75.85/75 today but while above 75.75, view is biased to the upside.
INTEREST RATES
The Treasury yields have bounced well especially at the far-end (10Yr and 30Yr). The US Federal Reserve’s announcement to buy Corporate Bonds as a part of its measure to boost the liquidity/credit facility in the market has triggered this bounce in the Treasury yields. It will have to be seen if the yields can sustain this bounce in order to gauge if our view of seeing a near-term dip gets negated or not. The German Yields remain stable above their crucial support and will need a close watch to see if they bounce from their supports or not. The 10Yr GoI can dip in the near-term before reversing higher again.
The US 2Yr (0.19%) and 5Yr (0.34%) Treasury yields have inched up slightly while those at the far-end, the 10Yr (0.73%) and 30Yr (1.49%) have risen sharply by 6bps and 8bps respectively from the levels seen in early Asian trades yesterday. The 10Yr has to remain above 0.70% and the 30Yr has to rise past 1.50% decisively in order to negate the fall to 0.58% (10Yr) and 1.25% (30Yr) that we had been expecting. We will have to wait and watch.
The German 2Yr (-0.68%), 5Yr (-0.66%), 10Yr (-0.45%) and 30Yr (0.03%) yields remains stable above their crucial supports. Our view remains the same. 0% on the 30Yr and -0.45%/-0.50% region on the 10Yr are crucial supports to watch. A break below these supports will negate our bullish view of seeing a bounce-back and will take the yields lower to -0.60% (10Yr) and -0.10% (30Yr) in the coming days.
The 10Yr GoI (5.9730%) has failed to rise past 6% yesterday and could now test 5.95%. Also we see high chances of seeing a break below 5.95% and a dip to 5.90% before reversing higher again. As such we would now be looking for a range of 5.90%-6.10% (revised from 5.95%-6.10% mentioned yesterday).
