STOCKS
Equities continue to trade weak. Dow has declined below 27000 as expected and remains weak to fall further. DAX also remains under pressure to fall further from current levels. Nikkei is moving down within its 23000-23500 range. It could be vulnerable to break this range on the downside on the back of the overall weakness in the equity segment. Shanghai has room to fall towards 3180-3150 from current levels. Sensex and Nifty also remain weak and can fall to 10800-10750 and 37000 respectively in the near-term.
As expected, the Dow (26763.13, −525.05, -1.92%)has declined below 27000. The outlook is bearish and we expect the Dow to extend the fall towards 26000 and even lower in the coming weeks. Resistance will now be at 27500.
DAX (12642.97, +48.58, -0.39%) failed to sustain the break above 12800 and has come-off from the high of 12830.70. As mentioned yesterday, 12800 and 13000 are important support-turned-resistances that can cap the upside now. While below these resistances, the outlook is negative to see a break below 12400 and a fall to 12000 and even lower.
Nikkei (23219.26, −127.23, -0.54%) is coming down within the 23000-23500 sideways range. We reiterate that a breakout on either side of 23000-23500 will determine whether Nikkei will move up to 24000 or fall to 22500-22000. Given the weakness in the global equities, the chances are high for the Nikkei to break the range below 23000. We will have to wait and see.
Shanghai (3237.48, −42.23, -1.29%) remains below 3300 and is moving down. Our view of testing 3180 – the lower end of the 3180-3450 range remains intact. The chances of the downside extending up to 3160-3150 cannot be ruled out. Broadly 3180-3150 will be a crucial support zone which will need a close watch in the coming weeks.
Nifty (11131.85, -21.80, -0.20%)fell to a low of 11024.40 yesterday and has bounced from there. The outlook remains weak to see a break below 11000 and a fall to 11800-11750 initially and even deeper thereafter. For now if the Nifty manages to sustain above 11000, a range-bound move between 11000 and 11200/300 is possible for some time before a fresh fall is seen.
Sensex (37668.42, −65.66, -0.17%) can test 37000 while it remains below 38000. A further break below 37000 will see the fall extending to 36000 going forward. A bounce above 38000 and a subsequent rise past 39000 is needed to turn the outlook positive. But that looks very difficult at the moment.
COMMODITIES
Commodities have dipped from levels seen yesterday especially the precious metals as Dollar shows fresh strength. As mentioned yesterday, downward pressure is likely to continue on the commodities for the near term while Dollar holds strong. Gold and Silver look bearish while Copper may test 2.95/90. Crude prices may have scope to fall back to immediate supports.
Brent (41.43) and Nymex WTI (39.50) are stable near levels seen yesterday but we keep a close watch for piece action near support levels of 39.32 and 36.43 respectively.
Gold (1864.50) has fallen sharply. Its break below 1920 initially and now below 1880 has been clearly indicative of bearishness that could last for at least one more week now. While below 1880, we may expect a fall towards 1840-1820 by next week.
Silver (22.34) has broken below the important support at 23 and has turned bearish for the near term while the fall below 23 holds. A test of 21-20 cannot be ruled out in the next one week before a bounce is seen.
Copper (2.9695) has also broken below immediate support at 3 and while that holds, there could be scope of testing 2.95/90 before a bounce is seen.
FOREX
Dollar holds strong while Euro, Pound and Aussie may still have some chances of extending their fall in the near term. EURJPY looks stable while USDCNY is rising. USDINR too may head higher in the near term within the overall long term bearishness.
Dollar Index (94.36) looks bullish for a rise towards 95.15 in the near term.
Euro (1.1662) is stable for now. A possible test of 1.17 looks likely but could face rejection there before seeing another leg of decline in the medium term. We do not negate a test of 1.1540-1.1480 before a fresh rise comes in.
EURJPY (122.94) has risen slightly but is mostly expected to remain stable within 122-124 region for a few sessions. We do not negate a fall towards 120 in the longer run but for now we may expect some ranged movement before another breakout on either side is seen.
Dollar-Yen (105.39) has moved up further and could test 105.50/70 initially. Immediate view is bullish.
Aussie (0.7053) has fallen in line with our expectations and if it fails to bounce back from 0.70, we may have to allow for a fall towards 0.68 in the medium term.
Pound (1.2721) has bounced after testing 1.2675 yesterday. While above 1.26, there is some scope of seeing a bounce back towards 1.28 but if it breaks below 1.26, it could be vulnerable to further fall towards 1.25/24 or even lower in the longer run.
USDCNY (6.8170) has risen in line with our near term view mentioned in yesterday’s edition. We may expect the rise to 6.85 soon from where if the pair fails to decline can head towards higher targets of 6.90/95.
USDINR (73.5750) trading above 73.50 for consecutive 2-sessions is not very positive and we may expect a rise in the pair towards 73.70/80-74.00 in the next 1-2 weeks. Weakness in Chinese Yuan and Euro could prevent strength in Rupee.
INTEREST RATES
The US Treasury yields continue to remain stable. The near-term outlook is mixed. It will have to be seen if the yields can witness one more leg of rise before reversing lower or will fall from here itself. The German yields continue to trade lower. There are chances to see an intermediate bounce before resuming the broader downtrend. The 10Yr GoI can continue to oscillate within its 5.98%-6.03% (narrow) or 5.95%-6.05% (broader) range for some more time.
The US 2Yr (0.14%), 5Yr (0.27%), 10Yr (0.68%) and the 30Yr (1.42%) Treasury yields have inched up across tenors by 1 bps each. The near-term outlook is mixed. The 30Yr can fall to 1.30%-1.25% over the medium-term. But whether this fall happens from here itself or after one rise to 1.60% remains unclear. The 10Yr remains stuck in the 0.65%-0.73% range. A breakout of this range will give a cue on whether the 10Yr will go up to 0.80%-0.90% or fall to 0.50%.
The German 2Yr (-0.71%), 5Yr (-0.71%), 10Yr (-0.51%) and the 30Yr (-0.06%) yields remain lower and stable. There is support near current levels. An intermediate bounce to 0% on the 30Yr and -0.43% on the 10Yr cannot be ruled out. However, the broader bearish view remains intact. As such we expect the upside to be capped and retain the view of seeing a fall to -0.20% on the 30Yr and -0.60%/-0.70% on the 10Yr eventually in the coming weeks.
The 10Yr GoI (5.9908%) has dipped below 6% yesterday and can test the lower end of its 5.98%-6.03% range. As we have been mentioning for some time, the 10Yr GoI will have to see a breakout of its broader 5.95%-6.05% range to give a clear picture on whether it will go up to 6.10% or fall to 5.90% from here.
