STOCKS
Equities retain their strength. Though there is room to move up further crucial resistances will be coming up which can halt the rally and trigger a reversal. So as mentioned yesterday, we would be turning cautious as the equities move up further rather than becoming more bullish. We reiterate that 30000 and 30800-31000 (Dow), 13500-13850 (DAX), 44000-44500 (Sensex), 12850 (Nifty), 25500-25650 (Nikkei) are the crucial levels to watch where we expect profit taking to come in and trigger a reversal. Shanghai continues to trade stable within its 3180-3450 range .
Dow (29420.92, +262.95, +0.90%) sustains well above 29000 and retains the view of moving further up to 30000 initially and then to 30800-31000 eventually in the coming weeks. But as the Dow heads towards 31000 we will be turning cautious to see a strong corrective fall.
DAX (13163.11, +67.14, +0.51%) sustains higher. The immediate resistance in the 13400-13500 is holding as of now. Next important resistance is at 13850. The upside is likely to be capped at 13850. As mentioned yesterday, we expect DAX to reverse lower either from13500 itself or after an extended rise to 13850.
Nikkei (25289.91, +384.32, +1.54%) trades higher and have room to test 25500-25600. As mentioned yesterday, 25500 and 25650 are important immediate resistances and while that holds a corrective fall to 24000 is possible going forward.
Shanghai (3354.54, −5.61, -0.17%) continues to trade stable in the middle of its 3180-3450 range. While above 3350 we retain our view of seeing a rise to 3400-3450 (the upper end of the range) in the coming days. We will have to wait and see.
Nifty (12631.10, +170.05, +1.36%) has risen sharply breaking above 12500 as expected and can now target 12800-12850. However, we reiterate that 12800-12850 is a strong resistance which is likely to hold and produce a corrective fall to 12500-12250 or even lower on profit booking.
Sensex (43277.65, +680.22, +1.60%) has risen past 43000 and is heading up towards 44000 as expected. As mentioned yesterday, 44000-44500 is a strong resistance zone where we expect the current rally to halt and reverse on the back of profit booking towards 42000 or even lower going forward.
COMMODITIES
The belief that only a vaccine for the Coronavirus could help to eventually bring back oil consumption and hopes of positive news on the vaccine is probably boosting the rise in the crude prices but oversupply could still be a concern. While above 43.50, Brent looks bullish but we would be cautious for a rejection from 45-47.50 that could limit the immediate upside now. Chances of testing our earlier expectation of a fall to $37-35 now stands reduced. WTI could face rejection near 42.0-42.50. Gold and Silver could be stable for now with important supports near 1860-1840 and 24 respectively. Copper could rise within the broad range of 3.00-3.25.
Brent (42.03) and Nymex WTI (39.82) have risen sharply. Brent has broken above the immediate resistance near 43.50 and could be bullish towards 45-47.50 on the upside from where another decline looks possible. While above 43.50, chances of falling towards our expected $35 stands reduced. WTI on the other hand could test 42-42.50 which needs to break for further upmove to sustain. We would be cautious of a possible fall as resistances above current levels could limit the upside
Gold (1880.10) and Silver (24.48) look stable for now. We may expect Gold to trade lower for the near term with possible test of 1840 on the downside before bouncing back from there. Silver on the other hand trades above important support at 24 and could have some chances of moving up again while above 24. Watch price action near 1880-1860-1840 on Gold and 24 on Silver.
Copper (3.1525) looks stable but as mentioned yesterday, there is scope for a possible test of resistance at 3.25 while above 3.10. View is ranged for the near term within 3.15-3.25 (narrow) and 3.00-3.25 (broad) with bias tilted towards an initial rise towards 3.25.
FOREX
Dollar Index has fallen from 92.97 yesterday inducing a slight bounce in other currencies like the Pound, Aussie, Euro and the Yuan. Watch resistance on 1.19 to hold on Euro and 6.55 on USDCNY for the near term. Dollar Rupee looks stable within 73.80-74.25
Dollar Index (92.66) almost tested 93 yesterday but could not break above that and instead has fallen sharply. It could have some scope of a fall towards 92 again but unless a break above 93 is seen it could be difficult to see a rise back to 94-95 levels in the coming weeks.
Euro (1.1825) is slightly up as Dollar index dipped from 92.97 seen yesterday. Unless the index falls back towards 92 or lower, Euro has less scope for a rise above 1.19. While resistance at 1.19 holds, we may expect Euro to remain ranged within the broad 1.17-1.19 region for the near term.
EURJPY (124.31) is ranged but has scope to test 123.75/66 on the downside before again bouncing back from there. Immediate view is to see a dip within a range.
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 (0.7302) has broken above 0.73 and looks bullish for the near term towards 0.74.
Pound (1.3274) has risen well as expected and if it sustains a rise above 1.3284, we may expect further bullishness towards 1.34.
The fall in USDCNY (6.5963) is not over yet as the pair sees fresh fall after a brief correction in the last few sessions. Failure to sustain above 6.55 could drag it lower towards 6.45/40 in the coming 1-2 weeks.
USDINR (74.1850) may continue to trade sideways within 73.80-74.25 unless a sharp break on either side is seen. View is ranged.
INTEREST RATES
The US Treasury yields have risen further and are heading towards their crucial long-term resistances. We expect the resistances to hold and keep the long-term downtrend intact. But a close watch is needed to see if the yields can manage to surpass their long-term hurdle. The German yields have moved up further and has room to test their intermediate resistances in the coming sessions from where we expect the downmove to resume. The 10Yr GoI can move up in the coming sessions before resuming its downtrend.
The US 2Yr (0.18%), 5Yr (0.45%), 10Yr (0.96%) and 30Yr (1.74%) Treasury yields have risen further yesterday. As mentioned yesterday, 1% on the 10Yr and 1.75% on the 30Yr are crucial levels to watch. We expect the yields to reverse lower and keep the long-term downtrend intact. A strong and a sustained break above 1% on the 10Yr will be very important as it would turn-around the broader market outlook completely. We will have to wait and watch.
The German 2Yr (-0.72%), 5Yr (-0.70%), 10Yr (-0.49%) and the 30Yr (-0.05%) have moved up further. As mentioned yesterday, a test of -0.40% (10Yr) and 0.05% (30Yr) on the upside is possible in the near-term. The price action thereafter will need a close watch as a strong break above -0.40% (10Yr) and 0.05% (30Yr) will negate our bearish view of seeing -0.70% (10Yr) and -0.40% (30Yr) on the downside. .
The 10Yr GoI (5.9176%)has risen above 5.90% and can now test 5.90%. The reversal from 5.90% that we had expected has not happened. If the yield manages to break above 5.95%, an extended rise to 6% can be seen before our expected reversal happens and keep the broader downtrend intact.
