STOCKS
Equities continue to gain strength and may need some fresh trigger to move up sharply from here. Dow remains below 28000 and will need to sustain above 27500 to avoid a sharp fall from here itself. DAX is showing sign of weakness to break 12800 and fall to 12400-12200. Nikkei is managing to hold above its support and has high chances to move up to test its key resistance. Shanghai can fall within its broad range. Sensex and Nifty can consolidate for some more time before seeing a fresh rally..
The Dow (27739.73, +46.85, +0.17%) tested 27500 and has bounced from there. As mentioned yesterday, 27500 will be a crucial support to watch and it needs to hold in order to avoid a fall to 27000-26500. While above 27500, the Dow can trade in the 27500-28000/28200 range. Also, a break above 28200 is needed to become bullish again and see a rise to 28500-29000.
DAX (12830, −147.33, -1.14%) has come down to test the lower end of the 12800-13200 range. The price action on the daily chart signals that a break below 12800 is likely to happen contrary to our expectation to see a break above 13200 from here. A fall below 12800 can drag the DAX lower 12400-12300 again. In that case our preferred rise to 13800 will get delayed.
Nikkei (22953.66, +73.04, +0.32%) is trying to bounce-back above 23000 again. The price action suggests that the 23000-22700 support zone is strong. As such, we expect Nikkei to sustain above 22700 and move up to 23800-24000 from here. Thereafter a sharp corrective fall is possible. Only an immediate break below 22700 from here will negate the chances of seeing 23800-24000 from here.
Shanghai (3388.32, +24.42, +0.73%) is bouncing after testing 3350 on the downside yesterday. It will have to be seen if it can break above from here to revisit 3450 levels. While below 3400, we retain our bearish view of seeing 3330-3300 on the downside in the coming days. Overall, the broader 3180-3450/70 range remains intact.
Nifty (11312.20, -96.20, -0.84%) fell below 11400 as expected yesterday thereby delaying our preferred rise to 11600. As mentioned in the Evening Comments yesterday, Nifty can remain in the 11200-11400 for some time before breaking above 11400 eventually. Significant support is at 11200.
Sensex (38220.39, −394.40, -1.02%) has also declined to test the 38000-37700 support zone as expected. We expect it to remain in the range of 37700-39000 for some time. Thereafter we expect it to break above 39000 and rise to 39500-40000 eventually. As mentioned yesterday, only a strong break below 37700 will turn the view negative for seeing a fall to 37000.
COMMODITIES
Crude prices trade stable but we keep a close watch for a possible rounding top formation on the near term charts that may caution a possible obstruction for further upmove in the prices. Gold and Silver are subdued as Dollar Index rises higher. Watch price action near 94 on Dollar Index that could further impact the movement in the precious metals. Copper trades near crucial resistance at 3, which is likely to break on the upside.
Brent (45.07) and WTI (42.91) have both risen slightly. But the rise in WTI seems to be inching up in a sharper rate than that seen in Brent. However, we would keep an eye on the possible rounding top formation on both the charts to be cautious of a possible sharp decline from current levels soon. Only a sharp rise above current levels if seen would indicate further bullishness for the crude prices.
Gold (1953.70) trades stable with a slight rise while Silver (27.43) has moved up from levels below 27 seen yesterday. We continue to watch price action near 93.50-94 for Dollar Index as a rejection from there could increase chances of further upmove in the metals. On the other hand, a successive break above 94 on the dollar index could drag the metal prices lower in the near to medium term, indicating that a top is already in place.
Copper (2.9905) continues to trade near 3.00 and needs to close above the crucial level to indicate bullishness for the near term.
FOREX
Dollar Index has dipped again breaking below 93 and could pull up other currencies including the Aussie, EURJPY, Euro, Pound, Yen and Yuan. All the currencies trade strong against the US Dollar. We may also expect a dip in USDINR from yesterday’s close levels which has been an important resistance.
Dollar Index (92.66) has dipped back sharply, unable to sustain above 93 seen yesterday after the release of the FED minutes. While below 94, if the index continues to fall, we may expect a rise in precious metals and another round of strength in the other currencies.
Euro (1.1871) has bounced back well from 1.18 and while that holds, a rise back towards 1.19 or higher looks possible.
EURJPY (125.45) can test 124.99 on the downside before bouncing back towards 126 again in the near term. Immediate view is bearish.
Dollar-Yen (105.65) has fallen below 106 again and could test 105 before again bouncing back higher.
Aussie (0.7202) has dipped back to test 0.72 but if Copper prices manage to rise above 3.00 (comex copper), Aussie may also move up towards 0.73-0.74 in the near term.
Pound (1.3232) has risen back after a brief dip. A rise towards 1.34 could be on the cards while the dollar index trades lower. A rejection from 1.34 could be possible in the medium term.
USDCNY (6.9069) resumes its downtrend and looks bearish below 6.90 in the near term. Watch price action near 6.90 to see if the pair manages to bounce back or heads lower towards 6.85. View is bearish for the near term.
USDINR (75.0125) too could fall from resistance at current levels and dip towards 74.85/80 as the other currencies trade strong against the US Dollar and Dollar Index falls back.
INTEREST RATES
The US Treasury yields continue to trade stable. We expect the Treasury yields to dip in the near-term and then reverse higher again sharply. The German yields continue to move down as expected and are keeping our bearish view intact. The 10Yr GoI remained stable yesterday. It can move up to 6.10% and then reverse lower again.
The US 2Yr (0.15%), 5Yr (0.26%), 10Yr (0.66%) and the 30Yr (1.39%) Treasury yields continue to trade stable. The chances of seeing a near-term dip to 0.60% (10Yr) and 1.35%-1.30% (30Yr) remains intact. Thereafter we expect the Treasury yields to reverse higher and target 0.80% (10Yr) and 1.50% (30Yr) on the upside over the medium-term.
The German 2Yr (-0.69%), 5Yr (-0.70%), 10Yr (-0.50%) and the 30Yr (-0.08%) Yields have been coming down inline with our expectation. Our bearish outlook is intact. As we have been mentioning over the last few days, a fall to -0.55%/-0.60% on the 10Yr and -0.15%/-0.20% on the 30Yr can be seen in the coming days.
The 10Yr GOI (6.0013%) remains stable around 6%. We retain our bullish view of seeing 6.10% on the upside in the near-term. Thereafter we expect the 10Yr GoI to come down again. 5.99% is an immediate support and 5.96%-5.95% will be a slightly deeper support.
