STOCKS
A further strong surge in the equities yesterday. Dow, Sensex and Nifty look bullish to move up 29000, 41000 and 12200 respectively from here. But DAX and Nikkei have crucial resistances ahead at 12400 and 24000/24500 respectively. These resistances will have to be broken in order to avoid a fall-back in them. Shanghai can move up towards the upper end of its 3180-3450 range now.
Dow (27847.66, +367.63, +1.34%) surged breaking above 27500 as expected. Though it has come-off sharply from the high of 28301 yesterday, the view continues to remain bullish. As mentioned yesterday a test of 28500-29000 is possible. It will now be important to see if the Dow manages to surpass 29000 decisively this time or not to become more bullish.
DAX (12324.22, +235.24, +1.95%) has surged further and is heading towards 12300 as expected. As mentioned yesterday, a strong rise past 12400 is necessarily needed to avoid a fall-back to 12000-11800 again. We will have to wait and watch closely the price action in the coming days.
Nikkei (23948.81, +253.58, +1.07%) has risen further to test 24000 as expected. 24000 and 24500 are crucial resistances to watch now. We will have to wait and watch if Nikkei can breach 24500 decisively which will then pave way for 27500-28000 over the medium-term. Inability to breach 24000 now can drag it down to 23000-22500 again. We wait and watch.
Shanghai (3298.83, +21.39, +0.65%) is sustaining above 3250 and has risen well today. This keeps the broader 3180-3450 range intact and Shanghai can now move up towards 3400-3450 – the upper end of the range in the coming weeks. A strong break above 3300 will accelerate the upmove.
Sensex (40616.14, +355.01, +0.88%) and Nifty (11908.50, +95, +0.80%) have risen and closed on a strong note yesterday. The outlook is bullish. Sensex can test 41000 and has potential to revisit 42000 levels on a strong break above 41000. Nifty can rise to 12100-12200 initially in the near-term and then to 12500 eventually on a strong break above 12200.
COMMODITIES
Precious metals and Copper look bullish for the near term. Silver and Copper looks clearly bullish for a rise to 26 and 3.20/25 while Gold has important resistance at 1920 which could limit the upside just now and keep it ranged within the broad 1880-1920 region. Crude prices could remain ranged.
Brent (40.50) and Nymex WTI (38.43) look stable. As mentioned yesterday we may look for ranged movement within the broad 43.50-35.00 and 41.0-32.50 for Brent and WTI respectively.
Gold (1908.30) and Silver (24.17) both trades higher. Gold has risen back to 1900+ contrary to our expectation and may re-test 1920 on the upside before coming off from there. Silver is bullish towards 26 while above 24.
Copper (3.1070) has also sharply risen in the near term and could target 3.20/25 on the upside on a successful break above 3.10. View is bullish for Copper.
FOREX
Currency markets remain volatile and show some corrective movements as compared to yesterday. Pound and Aussie look bullish. Dollar Index look ranged and Euro may test 1.1830 before coming off from there. USDCCNY and USDINR could trade lower for the day, indicating bearishness for the near term.
Dollar Index (93.3680) dipped sharply from 94.30 (slightly below our expected resistance at 94.40) seen yesterday. We would wait to see if it sustains a fall towards 92.70 or rises back towards 94+ again in the near term. For now view is ranged within 94.40-92.70.
Euro (1.1737) has bounced back exactly from 1.16 and trades higher just now on fresh Dollar weakness. While above 1.16, view is bullish for Euro but we may not negate an attempt to re-test 1.16 or break on the downside. For now we may expect a rise to 1.1825/1.1830 before another dip is seen.
EURJPY (122.34) has dipped after a brief rise to 123 yesterday. A fall back to 122-121 looks possible in the near term.
After a sharp rise to 105.3470, Dollar-Yen (104.26) has fallen back to earlier levels and look bearish for a test of 104 in the near term, which if breaks could be vulnerable and take the pair down towards 102. We caution for a possible break below 104 in the near term.
Aussie (0.7175) dipped slightly from levels above 0.72 but while above immediate support at 0.7145, view is bullish for Aussie.
Pound (1.2963) has dipped a bit but sustains trade above immediate support near 1.2890. The broad 1.29-1.31 region may continue to hold for now.
USDCNY (6.6503) has fallen sharply on weaker Dollar after testing 6.7490 on the upside yesterday, contrary to our expectation of seeing a bullish USDCNY. A test of 6.60 looks possible before a bounce is again seen on the upside.
USDINR (74.7450) could possibly see a dip today as resistance near 74.90-75.00 is likely to hold today and push the pair towards 74.50 (interim support) or even lower towards 74.30/20 (lower support) in the near term. On the upside while below 75, view is bearish but a strong rise past 75, if seen could open up chances of 75.35/40 on the upside (less likely just now). Movement in the pair yesterday had been much in line with our expectation.
INTEREST RATES
The US Treasury yields have declined sharply as the US Presidential Election night failed to give a clear winner. The expected reversal has happened and the yields can fall further on a break below their immediate supports. The US Federal Reserve meeting outcome is due today. The German yields remain lower and keep the broader downtrend intact. The 10Yr GoI can see a dip from here itself without seeing an extended rise above 5.90%.
The US 2Yr (0.14%), 5Yr (0.32%), 10Yr (0.74%) and 30Yr (1.52%) Treasury yields have declined sharply across tenors. The expected reversal on the 10Yr has happened from just below 0.90% while on the 30Yr it has happened from 1.66% itself. 1.50% on the 30Yr and 0.70% on the 10Yr are crucial immediate supports to watch. A break below these supports will confirm the end of the upmove and will drag the yields to 1.40% (30Yr) and 0.60% (10Yr) going forward.
As expected, the Tuesday’s bounce in the German 2Yr (-0.80%), 5Yr (-0.82%), 10Yr (-0.64%) and the 30Yr (-0.25%) yields was short-lived. The yields have reversed lower again and are keeping our bearish view intact of testing -0.70% (10Yr) and -0.40% (30Yr) on the downside. We expect the yields to bounce-back after this fall.
The 10Yr GoI (5.8872%) continues to trade below 5.90%. A dip to 5.85% is possible while the yield remains below 5.90% which in turn could reduce the chances of seeing 5.93%-5.95% on the upside that we have been expecting. We will have to wait and watch the price action closely in the coming days.
