STOCKS
Further rise in equities keep the bias tilting towards bullishness intact as was mentioned yesterday. Dow has risen above 26000 and will have room to move up further. Nikkei and DAX have risen further as expected and are keeping our bullish view intact. Shanghai is moving up but at a slower pace. Sensex and Nifty have bounced sharply from the day’s low. Though the bigger picture is bullish, the on going tensions between India and China can keep the indices subdued for some time. As such the Indian indices may not participate or will underperform in the on-going rally in the global equities.
Dow (26289.98, +526.82, +2.04%) has risen above 26000. As mentioned yesterday, the follow-through rise above 26000 can now take the Dow higher to 27000-28000 in the coming days while the index sustains above 26000. Also while above 26000, the chances of seeing the fall to 24500-23000 stands negated.
DAX (12315.66, +404.31, +3.39%) has risen further as expected and closed above 12200 as well. The bullish outlook is intact and a rise to test 12800 on the upside is possible in the near-term. The chances of seeing a fall to 11300 is negated.
Nikkei (22414.50, −167.71, -0.74%) has surged to 22500 much faster that we had expected. The bullish outlook is intact. As mentioned yesterday a rise to 23200 can be seen now. Also from a broader picture our medium-term view of seeing 24000 on the upside remains intact.
Shanghai (2925.18, −6.57, -0.22%) broke above 2925 yesterday as expect and has come-off slightly today. We retain our bullish view of seeing 2975 on the upside intact. As mentioned yesterday, a further break above 2975 will pave way for 3000-3015 eventually.
Nifty (9914, +100.30, +1.02%) has recovered well after a sharp intraday fall to 9728.5 following the news on India-China conflict at the border. But the index will need a strong rise past 10000 in order to ease the downside pressure which is more preferred from a medium-term perspective but may not happen immediately on the back of the current situation between India and China. As such, Nifty can remain below 10000 in a range of 9500-10000 for some time. We continue to see 9600-9500 as a strong support which can limit the downside.
Sensex (33605.22, +376.42, +1.13%) on the other hand will need a strong rise past 34000 which might not happen immediately. The index can trade in the range of 32000-34000 for some time.
COMMODITIES
According to S&P Global Platts survey, EIA is expected to report a fall of 3.5mln barrels in weekly US supplies. Markets await the production cut compliance meeting tomorrow as it is expected to indicate the mood within the OPEC+. The weekly inventory data by EIA is due today. So near term could be volatile for crude prices. 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. Copper looks ranged and could experience some volatility in the near term.
Brent (40.28) could be headed towards 42.5 above which we may expect a test of 45, both being decent resistances. A dip from here is seen could be limited to 38-37 in the near term.
Nymex WTI (37.49) has risen too and could be headed towards of 41-42 again in the next few sessions. Immediate view is bullish.
Gold (1731.70) and Silver (17.54) have dipped slightly As mentioned yesterday, we continue to expect narrow and ranged movement for the near term. Silver has come down to test support at 17.50 which may produce a short upmove in the near term else could pave the way for a fall towards 17; while Gold continues to trade within the mentioned 1760-1690 region with interim support at 1725. Watch price action near 1725 on Gold.
Copper (2.5560) has not been able to sustain a rise to 2.60 and has instead fallen back towards 2.55. While downside is likely to be capped at 2.50 and upside at 2.6, we may expect some volatility in the near term with possibilities of moving on either side. Watch price action within the mentioned range.
FOREX
Dollar Index and Euro are stable but there is scope for the index to rise which could pull down Euro in the near term. EURJPY, Pound and Aussie look bearish for the near term. Dollar Yen is likely to trade sideways for the near term while Chinese Yuan and Indian Rupee could be weak in the near term especially after the Indo-China border conflict yesterday. We will have to wait to see more details coming in from that front to see its further impact on the currency pairs.
Dollar Index (97.04) could steadily move up towards 97.50 or higher while above 95.94-96.30 Near term looks stable to bullish.
Euro (1.1341) has also been trading in the 1.1385-1.1200 region and needs to break decisively below 1.12 to head lower else we may continue to look for a test of 1.14 or higher in the medium term. If the dollar index moves above 97.50 , Euro could come off sharply towards 1.12 initially and may be lower.
EURJPY (120.76) looks bearish while below 121.50. We may look for a fall to 120 or lower in the coming week.
Dollar-Yen (107.22) has again gone into a sideways narrow phase where it would be difficult to see any major movement for the next few sessions. A break above 107.70 would be important to take it higher towards 108+ levels else we continue to look for a sideways range of 107.70-106.56.
Aussie (0.6862) has dipped and could now be headed towards 0.6710 while below 0.69. Near term looks bearish before a rise thereafter is expected.
Pound (1.2546) could fall towards 1.2455-1.2400 in the near term and looks bearish while below 1.27. View is bearish for the near term.
USDCNY (7.0937) rose back after Indo-China border clash yesterday. We will have to watch the currency pair as volatility could continue for some more sessions.
USDINR (76.2050) rose sharply after a brief trade near 75.80 as news of Indo-China border clashes came in. We may expect some correction towards 76.00-75.90 over today or tomorrow but a test of upper levels of 76.30/40 cannot be negated. Near term could be bullish.
INTEREST RATES
The Treasury yields have risen further taking support from the strong US Retail Sales data release yesterday. The uptick in yields indicates that the corrective dip could have ended. A further rise from here will confirm the same and take the yields higher again. The German yields sustain well above their curcial supports as expected and are expected to see a bounce in the coming days to keep the broader uptrend intact. The Indian 10Yr GoI has risen-back above 6% and can move up further in the coming days.
The US 2Yr (0.20%), 5Yr (0.34%) and the 10Yr (0.74%) Treasury yields remain stable at levels seen on early Asian trades yesterday while the 30Yr (1.53%) has inched further higher by 4bps. The 10Yr sustains above 0.70% and the 30Yr has risen past 1.50%. As mentioned yesterday, this could negate our bearish view of seeing a fall to 0.58% (10Yr) and 1.25% (30Yr). In turn a further rise from here will bring back the bullish view of seeing 0.90% (10Yr) and 1.70%-1.75% (30Yr) on the upside going forward.
The German 2Yr (-0.67%), 5Yr (-0.65%), 10Yr (-0.43%) and 30Yr (0.05%) yields have inched up slightly across tenors. The support at 0% on the 30Yr and -0.45%/-0.50% region on the 10Yr seems to hold well for now in line with our expectation. However, a further rise from here would be needed to confirm the beginning of a fresh leg of upmove to test —0.25% (10Yr) and 0.25% (30Yr) on the upside again and also to negate the chances of breaking below these supports.
The 10Yr GoI (6.0253%) risen back and closed above 6% yesterday. This has reduced the chances of seeing 5.90% on the downside that we had mentioned yesterday. While above 6%, a further rise to 6.10% is possible in the coming days.
