STOCKS
A sharp fall in equities all over as the concerns on a sudden surge in Covid cases in the US is weighing on the sentiment. The IMF slashing the global growth to contract by 4.9% from 3% forecasted earlier also weighs on the sentiment.While the fall in the Dow is in line with our expectation, it has been a surprise in other indices like the DAX and Nikkei where we had expected the rise to extend. A further is likely in the next few sessions. However, the broader picture is still positive as the indices have strong supports that can limit the downside. Dow has support at 25000/24500, DAX at 11600, Nikkei at 22000/21500. Shanghai is closed for the rest of the week. Sensex and Nifty can see a much deeper correction than we had expected following the fall in global indices. However, the trend will remain up and both the Sensex and Nifty can reverse higher from slightly deeper levels on the downside rather than from the immediate supports.
Dow (25445.94, −710.16, -2.72%) has declined sharply below 26000 and keeps intact our view of seeing 25000 on the downside first before resuming the upmove. 25000 and 24500 are strong supports that we expect to limit the downside to keep our broader bullish view of seeing 27000-28000 on the upside eventually. Only a strong fall below 24500 will negate the bullishness.
DAX (12093.94, −429.82, -3.43%) failed to sustain the break above 12500 and has declined sharply breaking below 12200. This has now increased the chances of seeing 11900-11600 on the downside first and then a fresh rally again targeting 12800 and 13000-13200 in the coming weeks. While above 11600, the broader uptrend will remain intact.
Nikkei (22232.89, −301.43, -1.34%) has declined below 22500 but can find support at 22000. As we had mentioned earlier 22000 and then slightly deeper at 21500 are important supports which can limit the downside and keep the broader uptrend intact. While above these supports the bigger picture remains bullish to see 23000-23200 initially and then 23800-24000 eventually over the medium term.
Shanghai (2979.55, +8.93, +0.30%) is closed for the rest of the week on account of public holidays.
The resistance at 10500 has held well as expected and the Nifty (10305.30, -165.70, -1.58%) has come-off from 10553.15 failing to sustain the break above 10500. However, considering the fall in the global equities, it looks like the Nifty can see much deeper fall beyond 10200 towards 10000 (our less preferred view mentioned in the Evening Comments yesterday) as against our expectation to see a bounce-back from 10200 itself. We will have to wait and watch today.
Sensex (34868.98, −561.45, -1.58%) on the other hand has come-off from 35700 itself as against our expectation to reverse lower after testing 36000. While below 35000, a further dip to 34000 is possible in the near-term. Incase of a break below 34000, the correction can extend upto 33000 before a reversal happens.
COMMODITIES
Commodities have dipped after a strong session yesterday during the first half after Dollar Index moved up sharply to rise towards 97.25 again. The fall in Crude came in after the inventory stock levels rose for week ended 20th June by 1.4mln barrels exceeding analysts expectations. Crude could remain subdued for a few sessions before again moving back to higher levels. Downward pressure on Gold and Silver likely to remain if the Dollar Index moves up further. But both have crucial support below current levels which needs a close watch to get clarity on further movement. Copper could dip to 2.60 before again rising back to higher levels.
Brent (40.02) and Nymex WTI (37.80) saw a fall of over $2 after the inventory data came in yesterday. The gap down opening seen earlier in mid-March was filled in by the rising prices in the last 2-sessions and that itself was an indication of a fall in prices in the near term on the charts. Crude prices could continue to trade weak for some more sessions with a possible test of 37.50 and 35 on Brent and WTI respectively.
Although Gold (1770.00) has dipped a bit but it continues to trade above support at 1760 and while that holds, we may not negate further upside immediately. But a rising Dollar Index in the next few sessions could keep the downward pressure on Gold intact that could either lead to a sideways consolidation above 1760 or a fall back below 1760 to head towards 1740/20 again in the medium term. Watch price action near 1760 for the near term.
Silver (17.58) has been highly volatile since the last few sessions. Similar to Gold, Silver also has important trend support near 17.50 and while that holds, we may expect some consolidation if not an immediate reversal from 17.50. On the upside, there is room towards 19 but we would have to wait to see if the price would again attempt to rise given the strength in US Dollar.
Copper (2.6375) has dipped a bit but while above 2.60, we may not negate a rise towards 2.70/80 in the medium term. Downside is likely to be limited to 2.60 just now.
FOREX
Dollar Index has risen contrary to our expectation of a further fall, dragging down Euro and pulling up Dollar Yen. Volatility in currency pairs could continue for some more sessions. EURJPY looks stable while Aussie and Pound could be bearish for the near term. Yuan has weakened as expected and could now head towards 7.10. USDINR could rise too targeting 75.85+ in the next couple of sessions while above support at 75.60.
Dollar Index (97.27) has moved up again rising back sharply towards 98. Our earlier mentioned 98.00-98.50 could be on the cards for the medium term. The index looks bullish while above 97.
Euro (1.1247) has dipped back contrary to our expectation of testing 1.1355-1.1385 on the upside before coming off from there as Euro did not rise above 1.1326 and dipped back to current levels. A re-test of 1.12-1.1170 could be on the cards.
EURJPY (120.59) is almost stable and could trade within 121.20-119.80 region in the near term.
Dollar-Yen (107.20) has bounced back as support near 106 is holding well. We may expect sideways trade in the 106-108 region for the medium term.
Aussie (0.6864) has dipped from levels above 0.69 seen yesterday but has immediate support at 0.68 which if holds could produce a bounce back towards 0.69 or higher. We may expect Aussie to trade lower for some more sessions followed by a rise again in the medium term.
Pound (1.2414) looks bearish after the fall yesterday and could head towards 1.2350-1.2300 contrary to our expectation of a rise to 1.26-1.2730 which could now be delayed.
USDCNY (7.0770) has risen as expected and while above immediate support at 7.06, the pair looks bullish for a rise to 7.10 in the near term.
USDINR (75.6430) is holding well above interim support near 75.60 and our earlier preferred test of 75.50/40 may not be seen. Instead the pair could again start rising towards 75.85-76.00 in the near term. Overall range of 75.60-76.00 could hold for the next 2-3 sessions.
INTEREST RATES
The US Treasury yields have seen a sharp dip especially at the far-end (10Yr and 30Yr). A further dip looks likely in the near-term before we see a reversal again. The German yields have also failed to see a follow-through rise yesterday which has brought back the danger of seeing further fall in the coming days. The 10Yr GoI has bounced-back well and can move up for the rest of the week.
The US 2Yr (0.19%) and 5Yr (0.31%) Treasury yields have dipped slightly while at the far-end the 10Yr (0.67%) and the 30Yr (1.42%) have seen a deeper dip thereby bringing back the chances of a fall that we had been expecting. 1.40% on the 30Yr and 0.66% and 0.60%-0.58% on the 10Yr are important support that will need a watch. We expect the yields to reverse higher from these supports. A break below these supports will turn the outlook bearish.
The German 2Yr (-0.69%), 5Yr (-0.69%), 10Yr (-0.45%) and the 30Yr (0.0%) failed to see a follow-through rise yesterday and have come down again. This keeps alive the danger of seeing the fall to -0.50% on the 10Yr and -0.10% on the 30Yr in the near-term. An extended fall below these levels will be bearish to see -0.60% (10Yr) and -0.20% (30Yr) going forward. We will have to wait and watch.
The 10Yr GOI (06.45 GS 2029; 6.0357%) sustains well above 6% and has risen back well after seeing an intraday dip yesterday. A test of 6.05% is possible and the chances are looking high to see a break above 6.05% and rise to 6.10% in the coming days.
The other 10Yr (05.79 GS 2030, 5.9184%) yield had bounced-back from the low of 5.8834%. It has room to test 5.95% on the upside in the coming days.
