STOCKS
The sharp fall in the US second quarter GDP seem to weigh high on the sentiment and looks to be putting pressure on the equity segment. The US GDP fell 32.9% in the second quarter. Broadly the indices like the DAX and Nikkei has signaled the beginning of a correction afer their sharp fall yesterday and today respectively. Dow fell sharply but has recovered a bit from the low yesterday. In ability to see a follow-through bounce today could be bearish. Shanghai can fall within our preferred range. Sensex and Nifty have room to dip but the supports can limit the downside and take them higher again. On the charts, Sensex and Nifty seems to be poised better and have chances to outperform others.
The Dow (26313.65, −225.92, -0.85%) fell to test 26000 but has recovered a bit. Inability to rise past 26500 from current levels will keep alive the danger of breaking below 26000 and see a corrective fall to 25000 from here itself. We will have to wait and watch.
Contrary to our expectation, DAX (12379.65, −442.61, -3.45%) has tumbled breaking below the support level of 12800 which we had expected to hold. This has negated our bullish view of seeing 13350-13400. Instead a fall to 12000 or even 11500 looks possible now before a fresh leg of rally begins.
As cautioned yesterday, Nikkei (21919.28, −419.95, -1.88%) has declined sharply and is now trading below 22000. While the break below 22000 sustains a further fall to 21500 can be seen in the near-term. The near-term outlook is bearish.
Shanghai (3272.57, −14.25, -0.43%) has come-off sharply after making a high of 3333.79 in early trades today. The resistance at 3320 mentioned yesterday seems to be holding well. While below 3300, a dip to 3200-3180 can be seen again in the coming days. 3180-3450 was the broad range that we had been mentioning for some time. This range might now get narrowed down to 3180-3350 going forward.
Nifty (11102.15, -100.70, -0.90%) has come down yesterday but is likely to find support in the 11100-11000 region. While above 11000, we retain our bullish view of seeing a rise to 11400-11600.
Sensex (37736.07, −335.06, -0.88%) has support near current levels in the 37700-37600 region which itself can limit the downside for now. In case of a break below 37600, the downside can extend up to 37000. However, the broader picture will continue to remain bullish to see 39500-40000 on the upside as long as the Sensex remains above 37000.
COMMODITIES
Gold and Silver continue to trade higher and could move up further from here while Crude and Copper trades stable without any major movement.
Brent (43.49) and WTI (40.09) both dipped a bit yesterday but have bounced back again today. The prices are stable with narrow movements as if waiting for some news to trigger a sharp move on either side. We wait to watch for confirmation of further direction from here while our interim resistances near 45.27 (Brent) and 43.50-44 (WTI)hold.
Gold (1984.70) may continue to move up towards 2000 while the upward momentum remains intact. Silver (23.66) on the other hand has also risen and could again move up towards 24 or higher in the near term. View is bullish for the very near term.
Copper (2.9220) trades stable above 2.90 and could continue so for another couple of sessions before attempting to test 3 on the upside.
FOREX
Strong bears control the Dollar Index now which could be headed towards 92-91-90 in the near term. At the same time we are cautious to see a correction from anywhere near current levels before the current momentum continues again. Euro has surged past 1.1806 ad is now headed towards 1.20 on the upside. EURJPY and Pound are headed towards 124.60 and 1.32 which are immediate resistances and look likely to hold. Aussie trades near resistance at 0.72 and we need to see if it manages to break on the upside. Yuan also trades stronger today. We may expect USDINR too, to open lower in line with movement in other currencies globally.
Dollar Index (92.70) has surprisingly broken below 93, continuing with the bearish momentum. The break below 94 levels itself was crucial on the longer term charts and while the fall sustains, there is scope for a test of 92-91-90 on the downside. Such a fall could aid further strength to major currencies going forward. But we would be cautious to see a correction anytime soon.
Euro (1.1885) has been rallying, breaking above our expected 1.1806. The momentum looks very strong just now with possibility of showing up 1.20 on the charts soon. With Dollar Index still falling and in full control of the bears there could be more scope for Euro to rise if the Dollar Index continues to head towards 91-90.
EURJPY (124.06) has risen too along with the rise in Euro and aided by the fall in Dollar Index. A further rise towards 124.60 is possible in the near term.
Dollar-Yen (104.28) has fallen sharply in line with the weakness in Dollar Index. Weekly trend support is seen at 104 just now from where a bounce could be possible taking the par back towards 105-106 again in the medium term. Failure to bounce back from 104 could drag the pair sharply down towards 102 in the coming sessions. For the pair to bounce from 104, we will have to see a bounce in Dollar Index which needs to sustain in the medium term.
Aussie (0.7195) has come closer to the resistance at 0.72 and needs to break on the upside in order to move higher towards 0.74. Watch price action at current levels. Failure to break above 0.72 could keep it stable for now.
Pound (1.3129) has broken above our expected 1.31 and could now be heading towards the crucial resistance at 1.32 from where a dip could be expected back towards 1.30. Note that 1.32 is a crucial level that is likely to hold just now.
USDCNY (6.9893) is falling and could test the lower end of the 6.977-7.0247 range before again bouncing back from there.
USDINR (74.8450) may continue trade within 74.90-74.70 with bias towards a break below 74.70 to head towards 74.50 or even lower. We may expect a sharp rise in Rupee in line with the currency strength seen globally.
INTEREST RATES
The US Treasury yields have dipped further and are coming closer to their intermediate support levels. The US GDP in the second quarter falling by 32.9% has taken the yields lower. It will have to be seen if the yields manage to bounce from the upcoming supports or not. The German yields have come down further sharply. The bearish view remains intact and the German yields can continue to fall. The 10Yr GoI is hovering above a near-term support which we expect to hold and produce a bounce in the coming days.
The US 2Yr (0.12%), 5Yr (0.22%), 10Yr (0.53%) and the 30Yr (1.19%) Treasury yields have dipped further across tenors. The 10Yr and 30Yr are coming closer to their key levels of 0.50% and 1.18% respectively in line with our expectation. A break/close below these levels will negate the chances of seeing a bounce-back that we had been expecting. We will have to wait and watch.
The German 2Yr (-0.73%), 5Yr (-0.73%), 10Yr (-0.54%) and the 30Yr (-0.13) German yields have come down sharply across tenors thereby keeping our bearish view intact. As we have been mentioning for some time, the 10Yr can fall to -0.60% and the 30Yr can test -0.20% on the downside.
The 10Yr GOI (5.8262%) is holding above its support at 5.82%. While above 5.82%, the yield could try bounce-back above 5.85% and target 5.92%-5.95% on the upside in the coming days. As mentioned yesterday, a break below 5.82% will negative the view of seeing a bounce to 5.85% and higher levels.
