STOCKS
The rally in the equities that seemed to lose momentum last week has got a fresh boost again. A further progress in the Covid-19 vaccine has triggered a sharp rise in the equities. However, we continue to retain our cautious stance on the equities as crucial resistances are ahead that can halt the rally and trigger a sharp correction. 30800-31000 on the Dow, 13400-13500 and 13800 on the DAX, 44000-44500 on Sensex and 12800-12850 and 12900 on Nifty are important resistances that we will be watching closely from where a correction is possible Nikkei has risen past 25650 and will have room to move up further if this break sustains. 26500 and 27500 are the next important resistances to watch. Shanghai looks mixed and can go either way within its 2180-3450 range.
Dow (29950.44, +470.63, +1.60%) has surged back above 29500 and can test 30800-31000 in line with our expectation. However, we reiterate that 30800-31000 is a strong resistance which can halt the current rally and trigger a corrective fall. As such we would continue to remain cautious and look at the market from the sell side.
DAX (13138.61, +61.89, +0.47%) is managing to hold above 13000 but at the same time seems to lack momentum to breach 13200 decisively. The near-term outlook is mixed. However from a bigger picture, we see 13400-13500 and 13850 as strong resistances that are likely to hold. We expect a corrective fall from either of the above mentioned resistances to 12800 and even lower eventually in the coming weeks.
Nikkei (25890.62, −16.31, -0.06%) has risen sharply breaking above 25650 – the resistance that we had expected to hold. While this break sustains, a further rise to 26500 and even 27500 is possible and then a corrective fall can happen contrary to our expectation to see a correction from 25650 itself. We will have to wait and watch now.
Shanghai (3329.28, −17.69, -0.53%) has bounced-back again failing to sustain the break below 3300 witnessed last week. The immediate outlook is mixed. We see equal chances of going either up towards 3400-3450 or fall to 3250-3200 from current levels. Broadly, the 3180-3450 range remains intact and the index could go either way within this range now. Prefer the stay out and watch.
Sensex (43637.98, +280.79, +0.65%) is heading up towards the crucial 44000-44500 resistance zone. We expect this resistance to hold and a sharp corrective all to 42000 is possible. We will be watching cautiously the price action in the 44000-44500 region.
Similarly, Nifty (12780.25, +89.45, +0.70%) has come closer to the 12800-12850 resistance zone. Though the upside can extend up to 12900 we would prefer to remain cautious rather than becoming more bullish at current levels. As such we expect a sharp corrective fall to 12500-12250 going forward.
COMMODITIES
OPEC’s meeting that ended yesterday concluded with an announcement of a 3-month extension of the current levels of oil production cut, not easing it to 5.7mbpd from January’21 as proposed earlier. This would keep the cut at current levels of 7.7mbpd extended upto Mar’21. The news has boosted crude prices but we need to see if this could take the pries further up breaking above immediate resistances. Gold and Silver look bullish just now while the US Dollar trades weak. Copper has scope to rise towards 3.30/35 on the weekly charts.
Brent (44.05) and Nymex WTI (41.50) trade higher after the OPEC meeting ended with an extension of the current production cut upto Mar’21. While the crude prices trade higher we watch important resistances of 45 and 42.5 on Brent and WTI respectively which needs to break on the upside to bring in fresh bullish sentiments.
Gold (1888.30) and Silver (24.80) trade higher. Gold has bounced back from 1870 levels itself instead of attempting to test lower levels of 1860/1840. While above1870, we may expect a ranged trade within 1920-1870 within which a rise towards 1900-1920 could be possible. Silver on the other hand is bullish while above 24 and could soon test 25-26 levels again.
Copper (3.2250) has risen sharply to test 3.20/25 exactly in line with our expectation. On the 3-day charts, there is scope for a rise to 3.30 which is extended to 3.35 on the weekly candle charts. This indicates 3.30/35 to be the next crucial targets before a corrective fall is seen from there in the longer run.
FOREX
Dollar Index looks weak just now and could spend some more time trading lower. Euro may test 1.1920 before coming off from there. EURJPY, USDCNY look weak just now towards 123 and 6.50. Aussie and Pound could be headed towards resistances near 0.74 and 1.34. USDINR could also trade lower today but we keep a close watch to see if it manages to break below 74.40. Overall while Dollar trades lower, other currencies may remain strong just now.
Dollar Index (92.486) could test 92 on the downside before attempting to bounce back again. Immediate view is bearish.
Euro (1.1861) could test important resistance near 1.1920 which if holds could push the price back towards 1.18 or lower in the medium term.
EURJPY (123.93) looks stable within 125-123 with possibility to test the lower end of the range in the near term. Immediate view is bearish.
Dollar-Yen (104.47) has been falling towards 104.12-104.00 as expected. A bounce from 104 would take the pair again towards 106 in the medium term but failure to bounce from 104 itself could keep some chances of falling towards 103 open. Watch price action near 104 in the near term.
Aussie (0.7324) has risen well but could face rejection from 0.74 in the near term. Immediate view is bullish towards 0.74.
Pound (1.3224) could be headed towards 1.3284 which if breaks could take it higher towards resistance at 1.34 from where a decline could then be seen. Immediate view is bullish.
USDCNY (6.5684) is sharply down again and looks bearish for the near to medium term towards 6.50, While below 6.58, view is bearish.
USDINR (74.60) traded within 74.40-74.85 on Friday. It would be important to see if 74.40 holds as a support just now and manages to push the pair higher towards 74.80/85 again or allows the pair to break lower towards 74.20/00.
INTEREST RATES
The US Treasury yields sustain higher on the back of the positive development on the Covid-19 vaccine front. However, we expect the upside to be capped as there are strong resistances coming up which we expect to hold and trigger a fresh fall to keep the long-term downtrend intact. The German Yields are turning down much ahead of the resistances that we had been mentioning. The yields are likely to resume their broader downtrend and fall further in the coming days. The 10Yr GoI has declined below 5.90% and can fall further from here itself.
The US 2Yr (0.18%), 5Yr (0.40), 10Yr (0.90%) and 30Yr (1.65%) Treasury yields sustain higher. The 10Yr and 30Yr are holding above 0.80% and 1.60% respectively which keeps alive the chances of seeing 1% (10Yr) and 1.75 (30Yr) on the upside. However, we reiterate that 1% (10Yr) and 1.75% (30Yr) are important resistances that can cap the upside and trigger a fresh fall to keep the long-term downtrend intact.
The German 2Yr (-0.73%), 5Yr (-0.74%), 10Yr (-0.55%) and the 30Yr (-0.14%) have dipped further indicating the resumption of the overall downtrend. The corrective bounce has failed to move up to the extent (-0.40% on the 10Yr and 0.05% on the 30Yr) that we had expected. As such the 10Yr and the 30Yr can revisit -0.60% and -0.20% respectively. A further break below -0.60% (10Yr) and -0.20% (30Yr) can drag the yields lower to -0.70% (10Yr) and -0.35%/-0.40% (30Yr).
The 10Yr GoI (5.8793%) has declined below 5.90% and can now fall to test 5.85% and 5.80% from here itself. While below 5.90%, the earlier view of seeing 5.95% on the upside stands negated.
