STOCKS
Equities remain stable but continue to look weak from a bigger picture. Dow is holding above 28000 but will have to break above 29100 to become bullish and avoid a fall. DAX may not sustain the bounce from its support at 12350. The picture looks weak on charts for it to break 12350 and see a deeper fall. Nikkei has come back into its 23500-23800 range. Shanghai looks mixed and has equal chances to move on either side within its 3180-3450 range. Sensex and Nifty can consolidate in the 39500-41000 and 11600-12100 range before a fresh rally happens.
Dow (28363.66, +152.84, +0.54%) is managing to hold above 28000. A break above 28500 from here will increase the chances of a rise to 29000-29100. However, the bigger picture remains weak to see a fall to 27500-27000 in the coming weeks. As mentioned yesterday, only a strong break above 29100 will negate our bearish view and turn the outlook bullish.
The crucial 12400-12350 support zone on the DAX (12543.06, −14.58, -0.12%) is holding as of now. The index has bounced from the low of 12345.45. It will have to be seen if it can sustain the bounce. The broader picture remains weak. As such we expect the DAX to break 12350 and see a much deeper fall to 12000 initially and then 11700-11500 eventually. The price action in the coming days will need a close watch.
Nikkei (23519.45, +45.18, +0.19%) has bounced back into the 23500-23800 range. The danger of seeing a fall to 23000 mentioned yesterday has reduced, but not completely ruled out. While the index sustains above 23500, a rise to 23700-23800 can be seen and the 23500-23800 range will remain in play for some more time. We will have to wait and watch.
Shanghai (3317.65, +5.15, +0.16%) has bounced-back above 3300 and needs to see if it sustains higher. A breakout on either side of 3300-3350 will determine whether Shanghai will go up to 3450 or fall to 3200-3180 within its broad 3180-3450 range.
Sensex (40558.49, −148.82, -0.37%) and Nifty (11896.45, -41.20, -0.35%) look mixed in the near-term and are stuck within the 39500-41000 and 11600-12100 range respectively. We reiterate that a strong rise past 41000 on Sensex and 12100 on the Nifty will have to be seen in order to take them higher to 42000 and 12250-12500 respectively. The broader bias is bullish on the charts for the indices to breach these resistances going forward. We will have to wait and watch.
COMMODITIES
Commodities are mixed. Crude prices may remain ranged for now while Copper looks bearish towards 3.10 before it could again bounce back from there towards 3.20. Gold and Silver also look bearish for a test of 1900-1880 and 24 respectively in the next few sessions.
Brent (42.60) and Nymex WTI (40.76) have both risen after the brief decline seen yesterday. But we would look at the crude prices to remain ranged within 43-39.30 (Brent) and 36-42.50 (WTI) for the very near term.
Gold (1907.60) and Silver (24.75) have slipped from levels seen yesterday, in line with our expectation. Gold could fall to 1900-1880 in the near term before bouncing back from there while Silver may test 24 before again moving up towards 25+ levels.
Copper (3.1535) dips further and could test 3.10 as mentioned yesterday before again bouncing back towards 3.20 in the longer run. Immediate view is to see a fall towards 3.10.
FOREX
Dollar Index trades slightly higher today but could be capped at 93.40. View is bearish for the longer term. Euro could dip in the very near term but is expected to remain ranged in the broad 1.17-1.19 region for now. EURJPY has fallen to test crucial support and looks bullish while above 123. USDCNY has risen well and could test 6.70. USDINR could trade within 73.80-73.50 for now and fall towards 73.20-73.00 eventually. View is ranged to bearish for Dollar-Rupee.
Dollar Index (92.928) trades slightly higher today. Note that the longer term downtrend is intact and the index may rise to test 93.40 on the upside which could be a crucial resistance which if holds could eventually push the index down towards 92. Overall trend is bearish while below 93.40.
Euro (1.1800) has dipped from 1.1881 in the last 2-3 sessions and could fall further to test 1.1760-1.1750 in the next few sessions before again attempting to 1.18+ levels.
EURJPY (123.63) has important support at 123.16-123.00 which if holds could produce a bounce back towards 124-125 in the near term. View is bullish while above 123.
Dollar-Yen (104.74) almost tested 105 on the upside but has dipped back again from there. We may expect trade within 105.0-104.50 just now before the pair moves on either side.
Aussie (0.7118) has bounced above 0.71 as expected and could now be headed towards 0.7150-0.72 soon. View is bullish while above 0.70.
Pound (1.3070) has also dipped slightly and could extend to 1.2996 before again bouncing back from there. Immediate view is bearish while upside is likely to be capped at 1.32 just now.
USDCNY (6.6838) has bounced back well from levels near 6.66 as expected reducing chances of falling further towards 6.58 as mentioned yesterday. While above 6.66, we may expect a test of 6.69-6.70 again in the near term. Note that 6.70 would be a decent resistance above current levels.
USDINR (73.5350) has tested crucial resistance at 73.75/80 yesterday which has held well producing a sharp fall back towards 73.50 as expected. Failure to break below 73.50 immediately could lead to some sideways ranged movement within 73.50-73.80 region before a sharp decline is seen towards 73.20-73.00 in the longer term.
INTEREST RATES
The US Treasury yields have moved up sharply at the far-end and are heading to test their crucial resistances as expected. We expect the resistances that are coming up to cap the upside and trigger a reversal. Data showing lower jobless claims and the progress in the stimulus talks supported the upmove in yields. The German Yields have moved up and are witnessing a corrective rise as expected. There is room to rise further before the overall downtrend resumes. The 10Yr GoI has crucial supports coming up that need to hold in order to produce a bounce and avoid a much deeper fall from here.
The US 2Yr (0.15%), 5Yr (0.37%), 10Yr (0.86%) and the 30Yr (1.67%) Treasury yields have moved up sharply at the far-end. The 30Yr and 10Yr are heading towards the crucial resistance levels of 1.72% and 0.90% respectively in line with our expectation. We expect these resistances to hold and the yields to reverse lower again. The price action in the coming days will need a close watch.
The German 2Yr (-0.77%), 5Yr (-0.78%), 10Yr (-0.57%) and the 30Yr (-0.15%) yields have moved up further as expected. As mentioned yesterday, a corrective rise to -0.50% (10Yr) and -0.10% (30Yr) is possible in the near-term. Thereafter the overall downtrend can resume and target -0.70% (10Yr) and -0.35% (30Yr) on the downside in the coming weeks.
The 10Yr GoI (5.9105%) tested 5.90% as expected and has bounced-back slightly from there. As mentioned yesterday, 5.90% and 5.8850% are important supports which need to hold in order to produce a bounce to 5.95% again. A break below 5.8850% will be bearish and will drag the 10Yr GoI to 5.85% and 5.80% going forward.
