STOCKS
Dow has moved up and is heading towards the upper end of our preferred range. It will have to be seen if it manages to break the range on the upside or not. Nikkei and Shanghai seem to be losing strength as they have come closer to the upper end of their respective range. The chances are high for both the Nikkei and Shanghai to come down within their range now. DAX is facing resistance as expected and remains weak to fall further. Sensex and Nifty has bounced-back sharply yesterday thereby easing the danger of seeing a deeper fall that was mentioned yesterday. A further rise today will bring back the broader bullish sentiment.
The Dow (26828.47, +164.07, +0.62%) has moved up further within our preferred range of 26000-27000. It will have to be seen if it manages to gain momentum and break above 27000 which is needed to become bullish to see 28000 levels on the upside. Inability to breach 27000 can keep the index in the 26000-27000 range for some more time.
DAX (12600.87, −46.11, -0.36%) is facing resistance at 12800. As mentioned yesterday, while below 12800 the DAX will remain vulnerable to see a fall to 12000 and even 11500 in the coming week. A strong rise past 12800 will be needed to negate the fall.
Nikkei (22431.14, −142.52, -0.63%) seems to be struggling to get a strong follow-through rise above 22500. Inability to rise past 22500 from here can drag the Nikkei lower to 22000-21700 again. It will also bring back the danger of seeing a break below 21500. We will have to wait and watch. For now the 21500-23000 range remains intact with the bias slightly inclined towards bearishness while below 22700-23000.
Shanghai (3362.95, −8.74, -0.26%) made a high of 3391 and has come-off slightly from there. A close below 3350 today will increase the chances of seeing a fall within our preferred range of 3180-3450 to 3300-3250 again in the coming days.
Nifty (11095.25, +203.65, +1.87%) has risen back very well and closed above 11000 yesterday. This has reduced the danger of seeing 10750-10700 mentioned yesterday. While this bounce sustains, a further rise to 11200-11250 can be seen now and the medium-term view of seeing 11400-11600 will come back into the picture.
Sensex (37687.91, +748.31, +2.03%) has also risen sharply breaking above 37100 and can test 38000 now. A strong rise past 38000 will boost the momentum and will pave way for our medium-term target of 39500-40000. It will also negate the danger of seeing 36500-36000 on the downside mentioned yesterday.
COMMODITIES
After the recent rally in precious metals, its possibly time for crude to show some positive movement. Crude prices have risen as the American Petroleum Institute (API) reported a draw in crude inventories by 8.587mln barrels for week ended 31st July. This is higher than the analyst expectation of 3.267mln barrels. Gold and Silver continue to rally and look bullish for the near term. Copper is steady.
Brent (44.36) and WTI (41.60) have risen on higher than expected crude inventory draws. Brent is nearing the mentioned resistance at 45.27 while WTI could be headed towards 42.50 in the very near term. We would wait to see if a rejection is seen from our expected levels that could produce a short corrective dip from slightly higher levels or keep the prices ranged within a narrow range for some time. Overall view is bullish for the next 2-3 sessions.
There is no looking back for Gold (2032.50) which continues its rally above $2000. Trading at all time highs, it is difficult to say just now where this rally would take a pause or face rejection. We may look for a test of $2100-2200 while above $2000. However, we would be cautious to see a corrective dip anytime soon.
Silver (26.01) has moved up to 26 and seems to indicate a possible break on the upside. Sustenance above $26 would be bullish towards $30 on the upside.
Copper (2.8935) has support near 2.85/80 which if holds could produce a bounce back towards 2.95-3.00 in the near term. View is bullish while above 2.80/85.
FOREX
Dollar Index continues to dip after a brief pause seen in the last 2-sessions. Euro, EURJPY, Aussie, Pound, Yen, Yuan all look bullish for the near term. Dollar-Rupee may have scope to come down only on a break below 75. While above 75, it could trade within 75.0-75.25 for some time. Watch price action today to see if a break below 75 is seen.
Dollar Index (93.14) dipped again yesterday and could be headed towards 93-92 in the near term. This could impact the other currencies positively.
Euro (1.1813) has bounced well yesterday and continues to move up again, targeting 1.1850-1.1900 in the near term. While 1.19 holds, we may expect another rejection from there. Watch for a break or rejection from 1.19 in the near term.
EURJPY (124.75) is bullish while above 124. While the rally sustains, a test of 125-126 cannot be negated on the upside.
Dollar-Yen (105.54) failed to sustain above 106 as cautioned and fell back from 106.48. Immediate structure on the daily chart is of a downward channel and indicates a further fall towards 105 in the next 1-2 sessions. View is bearish while below 106.48-106.00. A re-test of 104 could be seen again while the immediate downtrend remains intact.
Aussie (0.7186) is again showing signs of moving up. A break above 0.72 is needed to take it further up towards 0.74 in the medium term. Failure to break above 0.72 would keep it ranged within 0.70-0.72.
Pound (1.3086) is stable near 1.30 and could trade within 1.30-1.32 in the near term. Failure to sustain above 1.30 could take it down towards 1.28 in the coming sessions.
USDCNY (6.9558) has fallen as expected to almost test 6.95 as mentioned yesterday. This is a fresh low within the current downfall and if the fall continues, we may expect a further extension towards 6.94 on the downside.
USDINR (75.0550) moved up sharply to close at 75.0550 after testing 75.1650 on the upside. Note that 75.15/20/25 are crucial levels on the upside and while that holds we may expect trade in the 75.00-75.25 region for sometime before a possible correction is seen taking the pair below 75 again. For now we watch price action from respective resistances above 75. Only a break below 75 if seen today would bring back a test of 74.85 on the downside.
INTEREST RATES
The deadlock in the US on passing the next relief package is keeping the Treasury yields under pressure. The US Treasury yields have failed to see follow-through uptick yesterday and the far-end yields have come down closer to their key supports. A break below these supports can see the yields at the far end declining further in the coming days. The German yields are moving down in line with our expectation and keeping our bearish view intact. The 10Yr GoI is continuing to face resistance at 5.85% which will have to be broken in order to move further higher.
The US 2Yr (0.11%), 5Yr (0.19%), 10Yr (0.51%) and the 30Yr (1.19%) have declined across tenors, indeed slightly deeper especially at the far-end. Inability to see a follow-through rise after a slight uptick yesterday has increased the danger of the 10Yr and 30Yr breaking below their key support level of 0.50% and 1.19%. Such a break can drag the 10Yr down to 0.40% and the 30Yr to 1.10% in the coming days.
The German 2Yr (-0.72%), 5Yr (-0.74%), 10Yr (-0.55%) and the 30Yr (-0.15) German yields have dipped further across tenors. The bearish view of seeing -0.60% on the 10Yr and -0.20% on the 30Yr remains intact.
The 10Yr GoI (5.8348%) tested 5.85% but failed to break above it for the second consecutive day. We reiterate that a strong rise past 5.85% is needed to strengthen the momentum and move up to 5.90%-5.92%. Support is at 5.82% which if broken can take the 10Yr GoI down to 5.80% in the near-term.
