STOCKS
The US Federal Reserve’s policy shift to “average inflation targeting” will be positive for the equities as the interest rates will be remaining low and the stimulus aids will continue. While the equities can move up in the coming days on the back of this recent development, we see little room on the upsides as strong resistances are coming up on major resistances. As such we would prefer to turn cautious after a while as indices come closer to those resistances and will be looking for the chances of a sharp correction. The important resistances to watch are 29000-29500 on the down, 13800 on DAX, 24000 on Nikkei, 40000 on Sensex and 12000 on Nifty. Shanghai looks likely to remain in a broad range.
Dow (28492.27, +160.35, +0.57%) has risen well above 28300 and has tested 28500 in line with our expectation. The bullish view of seeing 29000 on the upside remains intact. While the upside can extend up to 29500, we would prefer to turn cautious in the 29000-29500 region and will be looking for a corrective fall thereafter.
DAX (13096.36, −93.79, -0.71%) seems to be struggling to breach 13200. While below 13200, a dip to 12800 again cannot be ruled out and a range of 12800-13200 can be seen for some time. However, while above 12800, the bias continues to remain bullish to see a break above 13200 and a rise to 13800.
Nikkei (23293.07, +84.21, +0.36%) remains stable below the 23300-23400 resistance zone. As mentioned yesterday, Nikkei can remain in the 22700-23400 range while it remains below 23400. The bias continues to remain bullish to see a break above 23400 and a rise to 23800-24000 eventually. As we have been mentioning for some time, 24000 is a strong resistance from where a sharp corrective fall is possible.
Shanghai (3352.20, +2.09, +0.06%) is trying to bounce-back above 3350. Inability to sustain this bounce can drag Shanghai lower to 3250 in the coming days. We will have to wait and watch how the index closes for the week today. For now the broader 3180-3450/70 range remains intact and Shanghai is currently moving down within this range.
Nifty (11559.25, +9.65, +0.08%) tested 11600 as expected and has come-off from the high of 11617.35. Inability to bounce-back above 11600 immediately could see an intermediate dip to test the support at 11400 before bouncing back again. While above 11400, our broader bullish view remains intact to test 11750-11800 on the upside. As mentioned yesterday 11800-12000 will be an important region to watch cautiously for the chances of any sharp corrective fall from there.
Sensex (39113.47, +39.55, +0.10%) on the other hand has moved well above 39000. While above 39000, our bullish view of seeing 39500-40000 on the upside remains intact. As mentioned yesterday, there are chances to see a corrective dip from around 40000 which we will have to wait and watch.
COMMODITIES
Crude remains ranged while Gold has dipped a bit. Gold remains above support levels and could soon bounce back in the near term. Silver may rise too while above 26. Copper has moved up to test crucial resistance at 3.05 which needs to break higher to initiate fresh rally.
Brent (45.62) and WTI (43.00) both seems to be ranged for now. We look for a steady rise towards 47.50 and 44-45 in the medium term.
Gold (1943.10) has dipped, maintaining the sideways corrective range below 2000 and above 1920. While above support at 1920, view is to see a bounce back towards 1960/80 soon.
Silver (27.47) trades above 27 and could be headed to 28-29 in the near term. View is bullish while above 26.
Copper (3.0130) has managed to rise again above 3 but needs to break above 3.05 to maintain the upward momentum and initiate a fresh rally in the medium term. Watch price action near 3.05.
FOREX
Dollar Index and Euro look stable while Pound, Aussie, EURJPY, USDJPY, Yuan and Rupee trades strong and may continue to remain so for the near term.
Dollar Index (92.96) fell after the speech from Jerome Powell where he mentioned that FED would target a 2% inflation average while emphasis would now be on pursuing maximum employment; but the index rose back to close near 93. The Dollar Index trades stable near levels seen yesterday and could continue to remain in the 94-92 region for some sessions before deciding to move on either directions from here.
Euro (1.1832) is also stuck within a broad range of 1.1750 and 1.19 and could remain so while the Dollar Index trades sideways. Immediate view is to see consolidation.
EURJPY (126.37) has risen above 126 contrary to our expectation of seeing a ranged move within 125-126. A rise towards 127 is on the cards for the upcoming sessions.
Dollar-Yen (106.82) has risen again after a sharp bounce is produced from yesterday’s intra-day low of 105.58. A further rise from here if sustained above 107 could be bullish for the near to medium term towards 107.50.
Aussie (0.7279) can move up towards 0.74 in the near term while above 0.7193. Immediate view is of a rise which could gain momentum if Copper manages to rise above 3.05 (refer to commodities section above).
Pound (1.3228) could move up to test 1.33 on the upside as mentioned yesterday before seeing another dip from there. Broad range of 1.33-1.299 may hold for some time.
USDCNY (6.8788) has moved down further in line with our expectation and could soon test 6.85 before a corrective bounce is seen from there. Overall view is bearish while below 6.90.
USDINR (73.81) closed just at important support of 73.80, exactly in line with our expectations. A bounce may be seen from 73.80 today but if the Euro and Yuan continues to strengthen in the near term, we may expect USDINR also to be dragged down below 73.80. Watch price action near 73.80 today.
INTEREST RATES
The US Federal Reserve’s policy shift on inflation to “average inflation targeting” has taken the Treasury Yields, especially at the far-end (10Yr and 30Yr) sharply higher yesterday. With the new policy the Fed will now allow the inflation to remain above 2% for some time before deciding to increase rates. The Treasury yields have room to move up further and test their strong long-term resistances in the coming weeks. The German Yields remain higher and stable. Key resistances are ahead which will have to be broken in order to negate the broader bearish view. The 10Yr GoI can consolidate sideways for some time before resuming its uptrend.
The US 2Yr (0.16%), 5Yr (0.32%), 10Yr (0.77%) and the 30Yr (1.55%) Treasury yields have have surged, especially at the far-end. The 10Yr has risen past 0.70% and is heading towards 0.80% much faster than we had expected. It can room to test 0.90% on the upside while above 0.70%. The 30Yr on the other hand has breached well above our preferred level of 1.50% and can now target 1.65%-1.68% – a crucial long-term resistance region which will need a close watch.
The German 2Yr (-0.67%), 5Yr (-0.64%), 10Yr (-0.41%) and the 30Yr (0.05%) remain higher but stable. We reiterate that a rise past -0.39% on the 10Yr will negate our earlier bearish view and can see -0.30% on the upside. The 30Yr is heading towards 0.07% as expected and will have to be seen if it can break above it or not. Overall we will have to wait and watch for a few sessions to get clarity.
The 10Yr GOI (6.1483%) had dipped yesterday. A range-bound move between 6.10% and 6.23% is possible for some time. While above 6.10%, our broader bullish view remains intact to see 6.30%-6.35% on the upside eventually.
