STOCKS
Equities remain stable. The price action on the charts indicates that the chances of seeing one more rise on the indices is still alive before a sharp correction comes into the picture. The Dow is getting support at 26400 and may attempt to test/break 27000 in the coming days. DAX, Nikkei and Shanghai have bounced from their near-term range supports. They can move up within their preferred sideways ranges. Sensex and Nifty also remain stuck in a narrow range as expected. The bias is bullish for the indices to break their current consolidation on the upside and move up eventually.
The Dow (26584.77, +114.88, +0.43%) seems to be getting support near 26400 now. While above 26400, a rise to test 27000 and an attempt to break above it is possible. A strong break above 27000 is needed to see further rise towards 28000 and then a corrective fall. While below 27000, we remain cautious to see a corrective fall from here itself. A break below 26300 can be a trigger for this fall.
The DAX (12838.66, +0.60, +0.005%) is getting support at 12800 as expected. As mentioned yesterday, 12800-13200 can be a range seen for sometime. The bias remains bullish to see a break above 13200 and a rise to 13350-13400 initially and then to 13800 eventually over the medium-term.
Nikkei (22792.76, +76.91, +0.34%) sustains higher after bouncing back from the low of 22429 yesterday. It will have to be seen if it can gain momentum to rise past 23000 which is much needed to pave way for a fresh rally to 24000. Our bias is to see a rise to 24000 first and then a corrective fall. Immediate support is in the 22500-22400 region and then a slightly deeper support is at 22000.
Shanghai (3237.28, +32.06, +1%) sustains above 3200 and has moved up. The view of seeing a rise to 3300-3350 mentioned yesterday remains intact. As we have been mentioning for some time we expect the Shanghai to remain in the broad range of 3180/3200 – 3400/3450 for a few weeks.
Nifty (11131.80, -62.35, -0.56%) remains stuck between 11000 and 11250 in line with our expectation and can continue to retain this range for a few more sessions. The bias is bullish to see an eventual break above 11250 and a rise to 11400-11600.
Sensex (37934.73, −194.17, -0.51%) continues to hover around 38000. We reiterate that a strong close above 38200 will be needed for the Sensex to gain strength and move up to 39000 and even higher levels.
COMMODITIES
Rally in precious metals continue taking Gold to all time highs while Silver trades higher to test highs seen in 2013. Overall bulls seem to remain strong just now. Crude prices have moved up a bit but continue to show narrow movements. Our expected interim resistances could be tested soon. Copper is likely to remain stable for the near term. Weakness in Dollar Index keeps the upward pressure on Gold and Silver intact.
Brent (43.61) and WTI (41.70) have moved up slightly. We continue to look for price action near 45.27 (Brent) and 43.50-44 (WTI), a break above which would be bullish towards 50 and 48 respectively in the longer run. Some stability could be expected just now with narrow movements as our expected levels may take some time to get tested.
Gold (1969.70) and Silver (26.21) have surged quicker and sharper than what was expected. Silver has broken above a crucial level at 26 above which if the price sustains, we may expect uninterrupted rise towards $30-32 on the upside. Gold on the other hand trades at all time highs and could be headed to test $2000 in the next couple of sessions.
Copper (2.9295) has risen slightly but while below resistance at 3, we may expect subdued and narow movement keeping the 2.85-3.00 range intact for some more time.
FOREX
Dollar Index trades weak while Euro, EURJPY, Yen and Pound trades strong just now. Near term resistances are seen in Euro and EURJPY which could indicate a possible correction in the next few sessions. Aussie looks stable just now while USDINR could move up to test 75 before coming off from there. Dollar-Yen looks weak while below 106.
Dollar Index (93.77) continues to head lower. It is heading towards our expected levels of 93.20/10 mentioned yesterday and could soon face a bounce back towards 94+ levels. For now, we expect Dollar to remain weak for some more session, heading towards 93.20/10. We look for a bounce back either by the end of this week or the next.
Euro (1.1745) has risen as expected and may face rejection from anywhere in the 1.1750-1.1800 region that could take it down to 1.16 in the near term. A short corrective dip may now be expected after the recent rally that started near 1.12. Watch price action near 1.18 just now.
EURJPY (123.86) needs to break above 124 in order to move higher. Note that 124 is crucial just now and if that holds (more likely), we may expect a short corrective dip taking the pair back towards 122. On the contrary, if 124 break on the upside (looks less likely), we may have to allow for 124.61-125 over the coming sessions eventually leading towards 127.50.
Dollar-Yen (105.55) is stable near levels seen yesterday. While below 106, there is scope for a test of 105-104 on the downside.
Aussie (0.7145) is likely to hold below 0.72 as mentioned yesterday. We may expect trade within 0.70-0.72 in the near term.
Pound (1.2877) is rising in line with our expectation and could be headed towards 1.30/31 while weakness in Dollar continues. Near term looks bullish.
USDCNY (6.9979) continues to trade in the narrow 6.9770-7.02 and may continue to spend some more time within this range (revised from 7.03-6.9).
USDINR (74.84) has scope of testing 75 on the upside while above 74.75. For the near term, we expect 75 to hold and push back the pair towards 74.60 in the near term.
INTEREST RATES
The US Treasury yields have bounced across tenors as the supports that we have been mentioning have held very well as expected. A fresh leg of rise is possible from here if this bounce sustains. The US Government proposed for another round of stimulus yesterday and it will have to be seen as what the US Federal Reserve has on its plate from its policy meeting tomorrow. The German yields have dipped indicating that they can fall from current levels itself rather than seeing a consolidation before the fall. The 10Yr GoI has bounced above 5.85% and looks bullish to rise further.
The US 2Yr (0.15%) remains stable while the 5Yr (0.29%), 10Yr (0.62%) and the 30Yr (1.27%) yields have bounced-back by 2bps, 3 bps and 4 bps respectively. The support at 0.58% on the 10Yr is holding well as expected and has reduced the danger of seeing 0.40% on the downside. While the current bounce sustains, a fresh rise to 0.70%-0.75% and even higher levels can be seen in the coming weeks. The 30Yr has bounced-back above 1.25% and can gain strength to target 1.50% on a further rise past 1.30.
The German 2Yr (-0.68%) dipped 2bps while the 5Yr (-0.69%), 10Yr (-0.50%) and the 30Yr (-0.08%) fell slightly deeper by 5 bps. The yields seem to have begun to fall towards -0.60% (10Yr) and -0.20% (30Yr) from here itself without seeing a sideways consolidation between -0.48% and -0.40% (10Yr) and -0.05% and 0.05% (30Yr) that we had mentioned yesterday.
The 10Yr GoI (5.8592%) has risen above 5.85% yesterday. While the yield manages to sustain higher, a further rise to 5.92%-5.95% can be seen in the near-term. Support is in the 5.83%-5.82% region. The chances of seeing a break below 5.80% and a fall to 5.75% mentioned yesterday in the Morning Briefing stands reduced now.
