STOCKS
Dow, Nikkei and Shanghai are consolidating sideways and can move up within their respective sideways range. DAX has bounced but has an immediate resistance ahead which will have to be broken in order to become bullish and also to negate any further fall. Sensex and Nifty have declined below their key supports contrary to our expectation. They have room to dip further before resuming the broader uptrend.
The Dow (26664.40, +236.08, +0.89%) has risen above 26500 thereby reducing the danger of seeing an immediate break below 26000. A rise to 27000 is possible now and a range of 26000-27000 can be seen for some time. A strong rise past 27000 is needed to become bullish to see 28000 and higher levels.
DAX (12646.98, +333.62, +2.71%) has bounced-back sharply. However it will have to breach 12800 to become bullish again. While below 12800, our bearish view of seeing 12000 and even 11500 will continue to remain intact.
Nikkei (22513.63, +318.25, +1.43%) sustains well above 22000 and has risen further to 22500 as mentioned yesterday. The danger of seeing a fall below 21500 has reduced. A rise to 22700-23000 is possible now. A strong rise past 23000 is needed though to become more bullish to see 23800-24000 levels. While 23000 holds, Nikkei can remain in a sideways range of 21500-23000.
Shanghai (3367.06, −0.91, -0.03%) sustains higher and keeps our near-term bullish view of seeing a rise to 3400-3450. The broader range of 3180-3450 is likely to remain intact and Shanghai can come down again from the 3400-3450 region.
Contrary to our expectation, Nifty (10891.60, -181.85, -1.64%) has declined below 10900 – a key support that we had expected to hold. While below 10900, the outlook will be bearish to see a further fall to 10750-10700 and even 10600 in the near-term. Thereafter a fresh leg of rally is possible.
Sensex (36939.60, −667.29, -1.77%) on the other hand has dipped below 37000. Inability to bounce above 37100 from current levels will negate the chances of the rally to 39500-40000 that we had been mentioning. Instead a fall to 36500-36000 can be seen first before a fresh leg of rally begins.
COMMODITIES
Gold and Silver continue to trade higher while Dollar Index dips below 94. Crude prices are stable but could soon move on either side. Copper has risen back to 2.90+ levels and could be headed towards resistance near 3.00.
Brent (43.86) and WTI (40.75) both have been trading within a tight range finding it difficult to move up just now. But while below our expected interim resistances at 45 and 43.50-44.00 respectively, we may not look for a sharp rise immediately. The mentioned resistances seem to be holding well but at the same time are not strong enough to produce a sharp fall. We would have to wait to see which side the breakout is seen in the medium term. Preference would be to see an initial corrective dip before again starting to move up.
Gold (1994) has continues to trade high despite a corrective bounce in the Dollar Index yesterday. While the index trades below 94 and indicates another leg of a fall, Gold could continue to remain near $2000 in the near term.
Silver (24.48) trades below the crucial 26.50 and while that holds, we may expect some sideways consolidation while upward pressure remains intact. On the downside, the corrective dip could be limited to 22.
Copper (2.9055) has risen back to 2.90+ and while above support near 2.80/85, we may expect another attempt towards 3.00 in the near term. View is bullish while above 2.80/85.
FOREX
Dollar Index may show some correction but overall looks likely to be ranged. Euro too could see some ranged movement now while above 1.17. EURJPY, USDJPY, Pound, Aussie, Yuan look bullish just now. Dollar-Rupee may trade in the 75.10-74.80/75 region for the next 1-2 sessions.
Dollar Index (93.48) is stable near levels seen yesterday but has tested an intra-day high of 94 yesterday. As mentioned in the previous edition, while 94 holds, it could be difficult for the index to move up sharply just now and instead the index could spend some time in the 92-94 region before attempting a break above 94 in the medium term.
Euro (1.1771) has bounced back from 1.17 as Dollar index faced rejection at 94. Trade within 1.1850-1.1750 could be possible for some sessions before a break on either side of 1.17-1.1850 is seen.
EURJPY (124.86) has risen back to 124+ levels and if it manages to break above 124.60-125.00, it could continue to rise towards 127. Immediate view is bullish, but we would watch price action near 124.60-125 in the next few sessions.
Dollar-Yen (106.05) has risen above 106 as expected. For the medium term 106.60-104 is the broad range that could hold and keep the pair range bound. For now, watch price action near 106.60.
Aussie (0.7127) has dipped slightly and could be headed towards 0.71-0.7050 before again bouncing back towards 0.72 in the medium term.
Pound (1.3085) bounced back from 1.30 and could spend some time in the 1.30-1.32 region before moving sharply on either side.
USDCNY (6.9792) could be ranged in the 6.98-6.95 region for the medium term but could see an immediate rise towards 6.99.
USDINR (75.0175) closed just above crucial levels of 75. If the rise sustains we may have to keep an upside target of 75.20. But if the pair manages to fall back below 75, we may expect a fall towards 74.80/75. Levels of 74.50/25 mentioned yesterday could be delayed or negated while the pair trades above 74.70.
INTEREST RATES
The US Treasury yields have seen some uptick yesterday. A further bounce over today/tomorrow will ease the danger of breaking below their key supports that we have been cautioning for some time. We will have to wait and watch. The German Yields remains bearish and can fall further in the coming days. The 10Yr GoI needs to break above its immediate resistance at 5.85% in order to gain momentum. Else it can remain stuck in a narrow range.
The US 2Yr (0.11%) and 5Yr (0.22%) Treasury yields remain lower and stable while the 10Yr (0.56%) and the 30Yr (1.24%) have seen some slight uptick. Further upticks in the 10Yr and 30Yr over today/tomorrow will reduce the danger of seeing a break below their respective crucial support levels of 0.50% and 1.18% that we had mentioned yesterday. In that case the 10Yr can move up to 0.60%-0.65% and the 30Yr can test 1.30% in the near-term. We will have to wait and watch.
The German 2Yr (-0.71%), 5Yr (-0.72%), 10Yr (-0.53%) and the 30Yr (-0.11) German yields continues to trade lower and keep the bearish view intact. The 10Yr can test -0.60% on the downside while the 30Yr can fall to -0.20%. Near-term resistances are at -0.50% (10Yr) and -0.05% (30Yr).
The 10Yr GoI (5.8395%) tested 5.85% as expected but did not break above it. While above 5.82%, our preference is to see a rise to 5.90% in the near-term. But as mentioned in the Evening Comments yesterday, a strong rise past 5.85% will be needed to boost the strength for that.
