STOCKS
Strong surge in the equities following the news on a positive development on the Covid-19 vaccine. But we would now start becoming cautious as the major indices are coming closer to their crucial resistances. While there is room to move up in the coming days to test these resistances, we would be approaching the equities cautiously from the sell side rather than becoming over bullish at the moment. 30800-31000 (Dow), 13500-13850 (DAX), 44000-44500 (Sensex), 12850 (Nifty), 25500-25650 (Nikkei) are the crucial levels that we will be keeping an eye for a possible reversal. Shanghai surprisingly remains stable within its 3180-3450 range today and has not moved much.
Dow (29157.97, +834.57, +2.95%) has surged above the key level of 29000 and has come-off from the high of 29933. While above 29000 there is room to test 30800-31000 on a strong break above 30000. But we will be cautious to see a sharp reversal from the 30800-31000 region and will approach the market from the sell side .
DAX (13095.97, +615.95, +4.94%) has surged to test 13200 much faster that we had expected. 13500 and 13850 are important resistances that can cap the upside in the current rally. We will be looking for a sharp corrective fall from 13500 or 13850 that can drag the DAX to 13000 and even lower going forward.
Nikkei (25108.21, +268.37, +1.08%) has risen further and is heading towards 25500 as expected. 25500 and 25650 are important resistances that can hold well and produce a reversal 24000 and even lower thereafter.
Shanghai (3372.87, −0.87, +0.03%) remains relatively stable and seems to have not joined the rally in equities. We retain our view of seeing a rise to the upper end of its 3180-3450 range while it remains above 3350. The 3180-3450 range is likely to remain intact.
Nifty (12461.05, +197.50, +1.61%) could break 12500 and move up to test the next crucial level of 12800-12850 (revised higher from 12750 mentioned yesterday) in line with our expectation now. But thereafter we expect a corrective fall to 12500-12250 and even lower.
Sensex (42597.43, +704.37, +1.68%) on the other hand can target 43000-44000 as we have been mentioning over the last few days. 44000-44500 is a strong resistance zone that can halt the current rally and trigger a reversal possibly to 42000.
COMMODITIES
Precious metals face rejection from near term resistances also aided by the rise in Dollar Index. Gold has fallen from resistance at 1980 and could now test 1840 before a corrective bounce is seen again. Silver has held below resistance at 26 and could now target support at 24 in the near term before a bounce is seen from there. Copper has also dipped but could be ranged within the broad 3.00-3.25 and narrow 3.15-3.25 region for now. Crude prices have risen sharply over the last 1-2 sessions, heading towards near term resistances that could limit the upside and push the prices lower in the medium term. Watch crucial resistances near 42.50-43.50 on Brent and 41.0-42.0 on WTI.
Brent (42.03) and Nymex WTI (39.82) have both risen sharply. Brent could pause near 42.50-43.50 region (revising from resistance at 42 mentioned yesterday) limiting the upside for the near term as the mentioned levels are crucial just now. Only a break above 43.50, if seen and sustained would fore us to turn bullish on the crude. While below 43.50, there are chances of a fall back towards 40-37.50 again. The rise in WTI could be limited to 41.0-42.0 (revised from 40-41 mentioned yesterday) before a decline is seen again.
Gold (1875) and Silver (24.27) have declined sharply as Dollar Index bounced higher from 92.13 unable to test our expected long term crucial support region of 92.0-91.75. Gold fell from levels as close to 1980 towards current 1875, posing a sharp decline on the near term charts. We may now look for a possible test of 1840 on the downside before a corrective rise is seen. Silver has also seen a sharp fall from levels near 26.135, holding on well to the resistance mentioned near 26. While the resistance holds, we may expect a dip back to daily trend support at 24.
Copper (3.1530) has dipped from 3.18 seen yesterday but this dip has not been as sharp as the ones seen on the precious metals. We may still look for a possible test of resistance at 3.25 on the upside while above 3.10. View is ranged for the near term within 3.15-3.25 (narrow) and 3.00-3.25 (broad).
FOREX
Dollar Index has bounced, trading above crucial long term supports of 91.75-92.00. This is important and could keep Euro below 1.19 for now pushing it down towards 1.17 or lower again. EURJPY could be bearish towards 123. Dollar Yen may fall to 104.12-104.00 before bouncing back from there again. Aussie looks paused at 0.72 and could fall from here in the near term. USDINR could be ranged within 74.40-73.80 for the day. USDCNY has bounced well from 6.5623 and could test 6.65/70 soon.
Dollar Index (92.69) has risen well from 92.13 before testing the crucial long term supports at 92.0 and 91.75. A Biden victory might be indicative of Dollar strength in the longer run as supports near 91.75 may continue to hold and eventually lead to a rise towards 94-96. But for now, we may expect a pause near 93 first and then near 94 as the Dollar Index eventually attempts to move up. While above the long term supports at 91.75-92.00, we would be fairly bullish on Dollar Index.
Euro (1.1829) did rise briefly above 1.19 to test 1.1920 but could not sustain higher and instead fell back towards 1.18. As mentioned yesterday, only a break below 92.00-91.75 on Dollar Index would take Euro towards 1.20 or higher. While crucial supports hold on Dollar Index, we will have to consider resistance near 1.19 to hold and produce a rejection towards 1.17-1.16 again in the medium term.
EURJPY (124.01) rose sharply to test 125.13 contrary to our expectation of declining from 123.66 itself. A fall to 123 now looks possible for the near term.
Dollar-Yen (104.83) tested 105.65 on the upside before falling off sharply from there. We may expect a test of 104.12-104.00 before again bouncing back higher.
Aussie (0.7278) has stalled just below 0.73 and needs to break above 0.73 to keep further upside momentum intact. Failure to break above 0.73 could drag it down towards 0.72 again.
Pound (1.3186) looks bullish for a test of 1.3284 on the upside which if holds could produce a corrective dip back towards 1.31. View looks ranged for now.
USDCNY (6.6129) tested 6.5623 as expected before bouncing back sharply from there. While the rise sustains, we may expect a test of 6.65-6.70 again in the near term.
USDINR (74.17) held well above the initial support at 73.80 not allowing a further dip towards lower support at 73.50 as RBI intervened to buy near 73.80 taking the pair sharply higher towards 74+. While above 73.80 in presence of RBI, we may have to look for a further rise towards 74.25/50 before again falling back towards 74.00 or lower. This delays our expected test of 73.50 on the downside, keeping the overall broad range of 73.50-74.50 intact for now. For today, we may expect the pair to trade within 74.40-73.80 with bias tilted for a trade above 74 for major part of the day.
INTEREST RATES
The US Treasury yields have surged following the news on a promising development on the Covid vaccine front. But watch the crucial strong resistances coming up that can trigger a sharp reversal and keep the long-term downtrend intact. There will be a major shift in the view across markets in case if the Treasury yields break above the upcoming resistances. Will need a close watch. The German yields have also risen sharply and have room to move up within their broad downtrend. The expected fall is likely to get delayed. The 10Yr GoI can move up to test a key near-term resistance and then can reverse lower again.
The US 2Yr (0.17%), 5Yr (0.42%), 10Yr (0.92%) and 30Yr (1.70%) Treasury yields have surged across tenors. The expected rise to 0.90% on the 10Yr and 1.75% on the 30Yr has happened. 1% on the 10Yr and 1.75% on the 30Yr are crucial levels to watch that can cap the upside and trigger a fresh fall taking the yields back to 0.70% (10Yr) and 1.50% (30Yr). We will be watching closely these resistances to see if the yields can break above them and change the outlook completely.
The German 2Yr (-0.74%), 5Yr (-0.73%), 10Yr (-0.51%) and the 30Yr (-0.08%) have risen sharply across tenors. The corrective rise breaking above -0.60% (10Yr) and -0.20% (30Yr) has happened. While this rise sustains there is room to test -0.40% (10Yr) and 0.05% (30Yr) on the upside. The fall to -0.70% (10Yr) and -0.40% (30Yr) stands reduced now and we will have to wait and watch if it is getting negated completely.
The 10Yr GoI (5.8777%) sustains well above 5.85% and keeps alive the chances of testing 5.90% on the upside again. We expect the 10Yr GoI to reverse lower from 5.90% to keep the broader downtrend intact to test 5.80%/78% on the downside. In case of a break above 5.90%, we may have to allow for an extended rise to 5.95%-6% before the downtrend resumes.
