STOCKS
Equities sustain higher but seem to lack momentum. We reiterate our cautious stance as there is limited room from current levels on the upside in the major equity indices. As we have been mentioning for some time, we will be looking for a sharp correction in equities on the back of profit booking. Dow keeps alive the chances of testing 30800-31000 before reversing lower. DAX seems to lack strength and could fall from here itself without testing its resistances at 13400-13500 and 13850. Nikkei can come under pressure if it breaks below 25500 now. Shanghai looks mixed within its 2180-3450 range. Sensex and Nifty have come into their crucial resistance zones and can see a reversal anytime.
Dow (29783.35, −167.09, -0.56%) remains stable above 29500. There is room to test 30800-31000 on a strong break above 30000. However, we continue to remain cautious as the upside is likely to be capped and a corrective fall to 28500-28000 can be seen in the coming weeks. We will continue to approach the market from the sell side.
DAX (13133.47, −5.14, -0.04%) is still stuck in a narrow range above 13000. The near-term outlook continues to remain mixed. But, our broader view remains the same. We see strong resistances at 13400-13500 and then at 13850 which can cap the upside from here. We expect a sharp corrective fall to 12400 either from current levels itself or after testing 13400-13500 and 13850.
Nikkei (25823.24, −191.38, -0.74%) has failed to sustain the break above 26000 seen yesterday. A strong fall below 25500 from here can drag Nikkei lower to 24500-24000 going forward. It will also reduce the chances of seeing 26500-27500 on the upside that we had mentioned yesterday. We will have to wait and watch to get a clear cue on whether the fall to 24500-24000 is happening from here itself or after a rise to 26500-27500.
Shanghai (3349.36, +9.47, +0.28%) hovers around 3350 and looks mixed. The broader 2180-3450 range remains intact. Within this range, we see equal chances of Shanghai either moving up to 3400-3450 or fall to 3250-3200 from current levels. As mentioned yesterday, we prefer to stay away and just watch the movement.
Sensex (43952.71, +314.73, +0.72%) has risen further and is now testing the crucial 44000-44500 resistance zone as expected. We retain our cautious view of seeing a corrective fall from the 44000-44500 resistance zone towards 42000 or even lower going forward. The price action in the 44000-44500 region will need a close watch.
Nifty (12874.20, +93.95, +0.74%)has extended the upside to 12900 as mentioned yesterday. We expect the index to reverse lower in the coming days targeting 12500-12250 on the downside. A strong rise past 13000 will be needed from here in order to see a further extended rise to 13100-13200 and delay the above mentioned corrective fall. We will have to wait and watch.
COMMODITIES
Commodities have dipped slightly from higher levels seen yesterday. Crude prices could remain ranged within 45-42.50 (brent) and 40-43 (WTI) just now. Silver is bullish while above 24 and Gold could be ranged within 1860-1900 region. Copper may dip just now but could bounce back from 3.15/10 back towards 3.30/35 in the longer run.
Brent (43.60) and Nymex WTI (41.43) have also dipped from levels seen yesterday. Both Brent and WTI may remain ranged within 42.50-45.00 and 40-43 with possible extension towards 47.50 and 45 respectively.
Gold (1877.70) and Silver (24.45) have also dipped slightly. Gold is likely to be ranged within 1860-1900 region with possible extension to 1840 and 1920 on either side. Overall the mentioned range is likely to hold for the near term. Silver on the other hand could be limited to 24 on the downside. While above 24, scope for a rise towards 25-26 remains on the cards.
Copper (3.1950) came off from levels above 3.20 seen yesterday maintaining to hold below initial resistance mentioned near 3.25. The current dip could be a corrective one which could be short lived as the weekly charts now open up further scope for a rose towards 3.30/35 in the coming weeks. Although we see a corrective dip just now, view is bullish for the medium to long term. Immediate downside is likely to be limited to 3.15/10.
FOREX
Dollar Index looks weak towards 92 while Euro may rise to 1.1920 on the upside before seeing a possible dip from there. EURJPY looks weak towards 123 while Aussie and Pound could be limited to 0.74 and 1.34 on the upside fro where a fall is likely. USDCNY is bearish for the medium term while USDINR could be ranged within 74.85-74.40; however we would watch 74.40 losely to see if it breaks to the downside. Dollar-Yen is bearish towards 104.
Dollar Index (92.46) is stable near levels seen yesterday but has scope for a fall to 92 in the near term before a bounce looks possible. While the immediate view is bearish towards 92, we may expect some more rise in the Euro and major currencies today.
Euro (1.1859) is also slowly inching up towards 1.19-1.1920 from where a dip looks possible which is in line with the support near 92 on the Dollar Index. Unless a sharp break above 1.1920 is seen, view is cautious to see a reversal soon from just above current levels.
EURJPY (123.46) has dipped too as expected and could be headed towards 123 in the near term. A broad range of 123-125 is likely to hold for the medium term. Immediate view is bearish within the mentioned range.
Dollar-Yen (104.11) has been falling and could test 104 or lower before bouncing back from there towards 105-106. Support near 92 on the Dollar Index if holds would keep 104 as the lower limit on the Dollar Yen. Else we may have to consider a further dip towards 103, if the Dollar Index breaks below 92 to trade lower. Watch price action near 104.
Aussie (0.7284) may trade below crucial resistance at 0.74 and while the resistance holds, a dip back towards 0.72/0.71 looks likely.
Pound (1.3248) has risen slightly and could be headed towards 1.3284 as mentioned yesterday, a break above which could take it higher towards resistance at 1.34 from where a decline could then be seen in the medium term. Immediate view is bullish.
USDCNY (6.5597) has bounced a bit from 6.5456 but this could be short lived and limited to 6.58/60 as the direction for the near term points to further downside towards 6.50. View is bearish while below 6.60.
USDINR (74.4675) traded within 74.63-74.37 region yesterday well within our mentioned range of 74.85-74.40. Whether the pair would attempt a fall below 74.40 is to be seen as that could trigger a fall towards 74.25/20 or even lower in the near term. Failure to sustain below 74.40 would be bullish for an upside target of 74.85 again. For now we keep 74.85-74.40 intact while we watch price action near 74.40.
INTEREST RATES
The US Treasury yields seem to lack momentum although it continues to hover higher. The resistances that we had been mentioning are holding very well as expected and the yields are likely to see a fresh fall in line with our expectation going forward. The German yields have dipped further indicating the resumption of the overall downtrend. The yields can fall further in the coming days. The 10Yr GoI remains lower below 5.90% and can test 5.85%-5.80% on the downside.
The US 2Yr (0.17%), 5Yr (0.37), 10Yr (0.85%) and 30Yr (1.60%) Treasury yields have come-off sharply especially at the far end. The price action over the last one week indicates lack of strong follow-through rise although the yields sustain higher. This keeps our view intact of seeing a strong reversal in the coming days. We can expect the 10Yr to break 0.80% and fall to 0.70% and lower. Similarly, the 30Yr can fall to 1.50% and lower. The upside will be capped at 1% (10Yr) and 1.75% (30Yr).
The German 2Yr (-0.75%), 5Yr (-0.76%), 10Yr (-0.56%) and the 30Yr (-0.16%) have turned around well indicating the end of the corrective bounce that was in place. The yields can now revisit -0.60% (10Yr) and -0.20% (30Yr) initially. A break below -0.60% (10Yr) and -0.20% (30Yr) will then see the fall extending to -0.70% (10Yr) and -0.35%/-0.40% (30Yr) eventually in the coming weeks.
The 10Yr GoI (5.8776%) remains below 5.90% and was stable yesterday. While below 5.90% the view is bearish to see a fall to 5.85%-5.80% in the near-term.
