STOCKS
Equities have seen further fall on Friday. Many of the indices have come closer to their crucial support and will need to see a strong bounce from here. A break below those supports can trigger a further fall going forward and will indicate that the much awaited correction has set in. The Dow but will have to rise past 28500 from here to avoid a fall to 27500-27000. DAX will have to sustain above 12800 in order to remain sideways and keep the chances alive of seeing one more leg of rise before a sharp correction. Nikkei trades stable within it sideways range. Shanghai can move down within its sideways range. Sensex and Nifty have crucial supports coming up which will need a close watch this week. A break below the support can drag the Sensex and Nifty lower.
Dow (28133.31, −159.42, -0.56%) had managed to recover from the low of 27664.8 and close above 28000 on Friday. However, a strong rise past 28500 will be needed in order to strengthen the case for seeing 29000-29500 and then see a sharp correction. While below 28500, the Dow is likely to remain under pressure to test 27500 and 27000 in the coming days. A strong close below 27000 will indicate that the top is already in place and will trigger more fall.
DAX (12842.66, −215.11, -1.65%) tested 12800 on Friday as expected and is managing to hold above it. While above 12800, the sideways range (12800-13200) can remain intact for some more time. It will also keep the broader bullish view of seeing 13800 on the upside alive. But a strong break below 12800 will reduce the chances of seeing 13800 and in turn will drag the DAX lower to 12400 and even lower levels.
Nikkei (23150.34, −55.09, -0.24%) remains stable above 23000. As mentioned on Friday Nikkei can trade in the the range of 23000-23500 (narrow) or 22500-23500 (broad) for some time. A strong break below 22500 is needed to negate the bullish view of seeing 24000 on the upside then see a sharp corrective fall.
Shanghai (3335.85, −19.51, -0.58%) oscillates around 3350 and remains vulnerable to test the lower end of the 3250-3450 (narrow) range. As mentioned on Friday a break below 3250 will bring the 3180-3470 (broad) range into the picture and will drag the Shanghai lower to 3200-3180.
Sensex (38357.18, −633.76, -1.63%) has declined further and is heading to test 38000 as mentioned on Friday. We reiterate that 38000 is a crucial support which needs to hold to keep the bullish view intact of seeing 40500-41000 on the upside. A strong break below 38000 will negate the bullish view and can trigger further fall to 37000. We will have to closely watch the price action around 38000 now.
Nifty (11333.85, −193.60, -1.68%) has declined below 11400 and has crucial support at 11300 and 11250. It will have to sustain above 11250 and bounce-back strongly to ease the downside pressure. A strong break below 11250 will increase the downside pressure and can trigger further fall breaking below 11200 to test 11000 and even lower levels. 11250 will be crucial to watch this week.
COMMODITIES
Crude prices have fallen but the fall may be short lived before the prices start to bounce back to higher levels. Gold and Silver needs to sustain above current levels in order to keep bullish sentiment intact. Watch crucial supports on precious metals that would decide on further direction from here. Copper has moved up sharply and looks bullish for a rise towards 3.15/20. For now, only Copper looks bullish amongst the others mentioned below.
Brent (42.25) and WTI (39.28) have dipped below levels of 42.50 and 40 that we had mentioned last week and if the fall sustains, crude prices could be bearish for the near term with a possible test of $40 (Brent) and $37.50 (WTI). However, we would look to see if the prices manage to bounce back from current levels.
Gold (1945.10) trades lower but while above 1940/20, we remain fairly bullish for the near term to see a bounce towards 1980-2000. A rise in Dollar Index above 93 would reduce the upside chances for Gold in the near to medium term.
Silver (27.31) is bullish while above 27. But we would wait to see if it manages to rise towards 28-30 soon.
Copper (3.0725) has risen back above 3.05 and could rise to 3.15/20 soon. View is bullish for Copper while above 3.05.
FOREX
Dollar Index needs to decide a break above 93 or not to give cues for directional movement o other currencies. Aussie, Pound, EURJPY, Euro all have important supports below current levels which may or may not break and would be crucial decider for the direction in the coming sessions. USDCNY looks weak for the coming sessions. USDINR also has some scope of testing 72.75 but we will have to keep a close watch to see if the rise back to 73.50 is limited within the next few sessions. Intra-day trade within 72.90-73.40 looks possible.
Dollar Index (92.87) tested 93.24 on Friday but has failed to sustain above 93. Trading at crucial levels, the index needs to break above 93, to signal an upcoming bullishness else a fall back towards 92.50-92.00 could be seen in the near term.
Euro (1.1832) is also headed towards support near 1.1760/50 from where a bounce cannot be negated in the coming sessions. A rise in Dollar Index above 93-93.50 can pull down Euro below 1.1750 in the medium term. We will have to wait and watch for price confirmation at these crucial levels.
EURJPY (125.76) has support at 125.44 and lower near 125 which if hold could produce a bounce in the medium term and keep possibility of an upmove intact towards 126-127. A fall below 125 would initiate fresh bearishness negating our current upside view.
Dollar-Yen (106.27) is broadly trading in the 107-105 region and may continue to do so while the Dollar Index continues to trade within 93-92 region. An initial rise to 106.80-107.00 is possible followed by a fall towards 105.
Aussie (0.7284) has dipped but trades above support near 0.7217-0.7200 which needs to hold to keep the upside possibility intact. A break below 0.72, if seen could drag it down to 0.71/70 soon.
Pound (1.3240) has fallen a bit but we continue to look at support near 1.32 which may hold for now. Only a break below 1.32 would shift our focus to the downside.
USDCNY (6.8293) has fallen back after seeing a slight corrective rise last week from levels near 6.8115. Failure to hold and rise above 6.8475 could make the pair vulnerable to a fall below 6.82 eventually and take it towards 6.80. We do not negate a fall for the near term while the pair trades below 6.8475.
USDINR (73.14) closed lower after testing 73.50. While we expect 73.50 to hold and produce a fall towards 72.75, we do not negate another attempt to test 73.50 in the next 1-2 sessions. Frequent attempts to test 73.50 over the week could signal a possible break on the upside which we need to watch carefully. Overall broad range of 72.75-73.50 may hold for the near term while 72.90-73.40 could be the trade range for the day.
INTEREST RATES
The US Treasury yields have risen back following the strong jobs data release on Friday. The Nonfarm payroll increased by 1.37 million in August as against the market expectation of a rise by 1.32 million and the unemployment rate fell to 8.4% from 10.2%. If the bounce in the yields sustain then a further rise is possible in the coming days. The German yields broadly remain lower but have important supports coming up which will have to hold in order to prevent a further fall. The price action in the coming days will need a close watch. The 10Yr GoI has bounced-back well on Friday and could see a corrective rise this week before resuming the broader downtrend.
The US 2Yr (0.14%), 5Yr (0.30%), 10Yr (0.7%) and the 30Yr (1.47%) Treasury yields have risen back sharply across tenors. It will have to be seen if this bounce sustains or not. The 10Yr has to sustain above 0.70% in order to bring back the earlier bullish view of seeing 0.80% and 0.90% into the picture and also to avoid a fall to 0.50%. Similarly a strong rise past 1.50% from here will be bullish for the 30Yr to test 1.60%-1.65% on the upside. It will also negate the danger of seeing 1.20% on the downside that we had mentioned last week.
The German 2Yr (-0.71%) and the 5Yr (-0.70%) German yields remain stable while the 10Yr (-0.47%) and the 30Yr (-0.03%) have inched slightly higher. Our view remains the same. -0.52% will be an important level on the 10Yr which has to hold in order to avoid a fall to -0.60%. On the 30Yr the support is at -0.11% which needs to hold to prevent a further fall to -0.20% again. We will have to wait and watch.
