STOCKS
Equities struggle to gain momentum and looks mixed in the near-term. A sideways consolidation looks likely to be seen in many major indices. If this consolidation resolves on the downside, then a sharp correction can happen from here itself without seeing another leg of rally that we have been expecting in some of the indices. Dow has to sustain above 27500 in order to avoid a fall from here itself. DAX and Nikkei have important supports at 12800 and 22700 which will need a close watch. Shanghai can fall within its broad sideways range. Sensex and Nifty can give back the gains made yesterday taking cues from the fall in SGX Nifty (11272.50, -150, -1.31%) in early Asian trades.
The Dow (27692.88, −85.19, -0.31%) has been inching lower slowly over the last few days. 27500 will be a crucial support which will have to hold in order to avoid a fall to 27000-26500 from here itself. On the other hand, a strong rise past 28200 will be needed to bring back the bullishness and see a fresh rise to 28500-29000. We will have to wait and see.
DAX (12977.33, +95.57, +0.74%) sustains above 12800 and is trying to move up within the 12800-13200 range. The sideways range can remain intact for some more time. The bias is bullish and we expect the DAX to break this range on the upside above 13200 and rise to 13600-13800 in the coming weeks. 13800 is a strong resistance from where a fresh corrective fall can happen.
Nikkei (22948.86, −161.75, -0.70%) has fallen-back into the 23000-22700 support zone. We expect the index bounce-back from 22700 to keep the broader bullish view intact of seeing 23800-24000 on the upside. Incase of a break below 22700, a fall to 22500-22000 can be seen again and the rally mentioned above will get delayed.
Shanghai (3378.80, −29.33, -0.86%) has declined sharply below 3400. This keeps the broader 3180-3450/70 range intact. While below 3400, the index can fall within the range to 3330-3300 in the coming days.
Nifty (11408.40, +23.05, +0.20%) can give back yesterday’s gains and decline sharply to 11250-11200 again following the fall in SGX Nifty (11272.50, -150, -1.31%) in the early Asian trades. This could delay our preferred rise to 11600. However, 11200-11100 will continue to remain as a strong support and can limit the downside for now.
Sensex (38614.79, +86.47, +0.22%) on the other hand can fall to test the 38000-37700 support zone again. We expect this support zone to hold and keep the index stable for a few days. Only a strong break below 37700 will increase the downside pressure to see further fall to 37000 levels.
COMMODITIES
The EIA reported a draw of 1.6mln barrels in crude inventories for week ended 14th August. Despite the positive data for crude prices to rise, the prices have dipped from levels seen yesterday and show some signs of a possible fall from here in the coming sessions. Gold and Silver may dip in the near term but watch price action near respective supports which if holds could lead to another bounce back in the near term. Copper trades near resistance at 3 and needs to break higher in order to see a fresh rally.
Brent (45.02) is possibly forming a rounding top on the 3-day and weekly candles and if the formation turns out to be valid, it could be indicative of a fall from current levels in the near term. With such a fall, if seen could drag down WTI (42.73) too towards 41-40 or even lower in the near to medium term.
Gold (1946.70) and Silver (26.94) have both dipped as the US Dollar index (refer to Forex section below) has bounced back well from support at 92. If the Dollar Index manages to rise upto 94 and break higher, we may have to declare a top formed in Gold and Silver prices and thus look for lower levels. But while the dollar index trades below 94, we keep some chances of the metals to rise back in the near term. Watch price action near support at 1920 on Gold and 25-26 on Silver to see if they bounce back or break below the respective supports to indicate further bearishness.
Copper (2.9785) is almost stable. Watch price action near 3 for an eventual break on the upside.
FOREX
Dollar Index has bounced well from support, dragging down Euro, EURJPY, Yen, Yuan and Pound lower. Aussie trades near immediate support and could bounce higher in the near term while Dollar Rupee may move up today to test 75.
Dollar Index (93.02) has bounced well from 92.13, just above the support of 91.95 mentioned yesterday. If the rise sustains, we may expect a test of 94 in the near term. But in the longer run, a break above 94 would be needed to indicate a fresh rally; else we may have to stick to our lower targets of 90. Watch price action near 94.
Euro (1.1844) has fallen sharply from 1.1966 seen on the upside in the last 2- sessions. While the dip sustains, we may expect a dip towards 1.18 or even 1.17 in the upcoming sessions. Watch price action near 1.18 or 1.17 in the near term. Only a sustained fall below 1.17 would confirm bearishness for the medium term. Else, a bounce back from 1.18-1.17 could take the currency back towards 1.20.
EURJPY (125.65) has dipped as Euro falls and on weakness in Yen over the last 1-2 sessions. A test of 125 is possible in the very near term from where a bounce looks likely.
Dollar-Yen (106.06) has risen well from support at 105 and could be headed towards 106.50-107 in the near term before facing another rejection from 107. Immediate view is bullish while the US Dollar trades strong.
Aussie (0.7187) is trading at immediate support and looks likely for a bounce from here towards 0.7280-0.73 in the near term.
Pound (1.3098) has fallen sharply from 1.3267 and while the fall sustains, a test of 1.30 looks possible before another rise is seen. Our expected rise to 1.35 mentioned yesterday can be negated for now while the Dollar index trades above 92-93 levels. Watch for a sideways consolidation in Pound between 1.30 and 1.33.
USDCNY (6.9207) has also bounced back well. A test of 6.93-6.95 could be possible within the downward channel. View is bearish while below 6.95.
USDINR (74.8250) saw a sharp rise from 74.68 to 74.93 before closing near 74.8250. With weakness in Euro and Yuan overnight, we may expect a rise in USDINR towards 75 today. Watch price action near 75 for a possible dip; else the pair may rise towards 75.15/25 in the near term.
INTEREST RATES
The US Treasury yields remain stable. The minutes of the last Fed meeting released yesterday reflected increased concern about the impact of the corona virus spread and indicated that the rates would remain lower for a prolonged period of time. A near-term dip is possible before the yields bounce-back again to target higher levels. The German yields have dipped further thereby keeping our bearish view intact of seeing an extended fall in the coming days. The 10Yr GoI can move up further from current levels in the near-term. But a crucial resistance is coming up at 6.10% from where a fresh leg of fall can begin.
The US 2Yr (0.14%), 5Yr (0.27%), 10Yr (0.66%) and the 30Yr (1.39%) Treasury yields remain stable near levels seen in early Asian trades yesterday. Inability to bounce-back from current levels can trigger a near-term dip to 0.60% on the 10Yr and 1.35%-1.30% on the 30Yr. Thereafter the yields can bounce-back again to keep the broader bullish view intact of testing 0.80% (10Yr) and 1.50% (30Yr) on the upside over the medium-term.
The German 2Yr (-0.68%), 5Yr (-0.68%), 10Yr (-0.48%) and the 30Yr (-0.04%) Yields have dipped further and is confirming that the downtrend has resumed. As such our bearish view of seeing a fall to -0.55%/-0.60% (10Yr) and -0.15%/-0.20% (30Yr) in the coming days remains intact.
The 10Yr GOI (6.0096%) has risen above 6% yesterday and keeps our bullish view intact. While above 6%, our bullish view of seeing 6.10% on the upside in the near-term remains intact. As we have been mentioning over the last couple of days, 6.10% is a strong resistance from where a fresh leg of fall to 6%-5.95% and even lower is possible again.
