STOCKS
Equity segment has been caught between the hopes for an extension of the US stimulus on the one side and concers of renewed tensions between the US and China as well as increasing corona virus cases on the other side. But broadly on the chart, it looks like some more upside is left before the global equities run into a sharp correction. Dow can rise to 28000 and then reverse lower. DAX has room on the upside to test 13500-13800. Sensex and Nifty can also move up in the near-term. Shanghai can oscillate in a broad sideways range. Nikkei is closed for the rest of the week.
The Dow (27005.84, +165.44, +0.62%) is attempting to break above 27000 as mentioned yesterday. As such we may see a rise to 28000 first before a corrective fall begins. Immediate support is at 26800 and next at 26500-26300.
The DAX (13104.25, −67.58, -0.51%) has come-off below 13200 again. An intermediate dip to 13000-12900 looks likely over today/tomorrow. However, the broader picture continues to remain bullish and we expect the DAX to test 13350-13400 on the upside initially and then 13800 eventually over the medium term.
Nikkei (22751.61, −132.61, -0.58%) is closed today and tomorrow on account of public holidays.
Shanghai (3279.99, −53.17, -1.60%) has come-off from 3381 itself rather than extending the upside upto 3400-3450. A dip to 3200 looks likely again. As we have been mentioning over the last few days, Shanghai can oscillate in a broad range of 3200-3450 for a few weeks.
The test of 11250 and a dip to 11000 after that on Nifty (11132.60 -29.65 -0.27%) happened yesterday itself. We can expect the Nifty to remain stuck in between 11000 and 11250 for some time before a break above 11250 and a rise to 11400-11600 happens eventually.
Sensex (37871.52, −58.81, -0.16%) has come-off failing to sustain the break above 38100 yesterday. A strong close above 38100 will be needed to clear the way to see 39000 and even higher levels. While below 38100, a dip to 37000 is possible before a fresh rally begins.
COMMODITIES
Commodities trade higher as Dollar continues to weaken. Gold and Silver look bullish while Copper could spend some time below resistance at 3. Crude prices may also rise in the near term but watch price action near interim resistances above current levels.
Brent (44.28) and WTI (41.90) have moved up slightly. But as mentioned yesterday we would watch price action near 45 and 42.50 respectively for a corrective dip which if fails could lead to a sharp rally in the near term.
Gold (1863.80) continues to trade higher and while above 1860, a rise towards 1900 cannot be negated in the near term.
Silver (22.74) has broken above our expected level of 22 much faster than our expectation. Price seems to be under strong bull impact and could be now headed towards 23-24.
Copper (2.9045) declined from 3.00 in line with our expectation but downside could be limited to 2.85/80 just now before another bounce is seen. Overall we may expect some range trade below 3 for sometime before expecting a break on the upside.
FOREX
Dollar Index continues to trade lower but could possibly see a short corrective bounce from current levels that could lead to correction across global currencies for a few sessions before again seeing some strength. EURJPY, Aussie, Pound, Yen and Yuan face corrective dips just now. Rupee too may weaken slightly today.
Dollar Index (94.98) continues to fall and is at 94.97 mentioned yesterday. A break below current levels if seen could drag the index lower towards 93.90 in the upcoming sessions. But we would look for any bounce from current levels that could take the index back towards 95.50/70 in the near term. Watch price action over the next 1-2 sessions.
Euro (1.1569) tested 1.16 before coming off from there. While crucial resistance at 1.16 holds, we may expect a dip towards 1.15 or lower in the near term.
EURJPY (123.96) may face some rejection from 124.62 that could drag it lower towards 123. Yesterday the pair hit an intra-day high of 124.29 before falling from there. For the near term upside could be limited just now.
Dollar-Yen (107.13) has also bounced back to 107+ instead of falling lower. While above 107, we may negate a fall to 106-104 and instead look for a bounce towards 108-108.50 contrary to our expectation of seeing a fall.
Aussie (0.7135) tested 0.72 before dipping from there. But we may expect Aussie to spend some time in the 0.70-0.72 region before attempting to rise higher targeting 0.74 in the medium term.
Pound (1.2728) may also spend some time below 128 before rising higher again in the medium term.
USDCNY (7.0087) has risen a bit but could be broadly ranged within 7.03-6.9 region for the near term.
USDINR (74.76) could bounce back towards 74.90-75.00 today as some correction is seen in overall most currencies.
INTEREST RATES
The US Treasury yields have inched lower and are poised at their crucial support zones. The renewed tensions between the US and China and increasing corona virus cases are weighing on the yields. We expect the supports to hold and see a bounce in the Treasury yields going forward. The German yields have dipped and keep our bearish bias intact. The 10Yr GoI can trade sideways for a few sessions.
The US 2Yr (0.15%), 5Yr (0.27%) and the 10Yr (0.60%) Treasury yields remain stable while the 30Yr (1.29%) has dipped by 2 bps. The 10Yr and the 30Yr are at their crucial support zones of 0.60%-0.58% and 1.30%-1.25% respectively. We expect these supports to hold and see a fresh rise in the coming days. A break below 0.58% on the 10Yr and 1.25% on the 30Yr will prove our view of seeing a reversal wrong.
The German 2Yr (-0.70%), 5Yr (-0.70%), 10Yr (-0.49%) and the 30Yr (-0.07%) yields have dipped across tenors. remain stable. The 10Yr has declined below -0.45% and the 30Yr is trading below -0.05%. While these break sustains our bearish view of seeing a fresh fall to -0.60% on the 10Yr and -0.20% on the 30Yr will remain intact.
The 10Yr GOI (5.8150%) made a high of 5.8333% yesterday and has come-off from there. As mentioned yesterday a range of 5.80%-5.85% is possible in the near term. A strong rise past 5.85% will negate our view of seeing 5.75% on the downside. We will have to watch closely the price action around 5.85%.
