STOCKS
Positive sentiment on the back of getting a vaccine for Covid-19 and a smooth power transition in the US are keeping the risk appetite in the market high. But we continue to remain cautious on equities as crucial resistances are ahead that can halt the current rally and trigger a sharp correction. Dow has risen above 30000 and will face resistance at 30800-31000 from where it can reverse lower. DAX can test 13500 and 13850 if it manages to break 13300 now. Sensex and Nifty can see an extended rise to 13200/13250 and 45000 before the expected correction comes into play. Nikkei has room to test 27500 in the coming days and then can reverse lower. Shanghai hovers near the upper end of its 3180-3450 range. We expect 3450 to hold and keep the range intact for some more time.
Dow (30046.24, +454.97, +1.54%) has surged and closed above 30000 yesterday. This has brought the chances of testing the next crucial resistance level of 30800-31000 into the picture which can be tested while the Dow sustains above 30000. However, we reiterate our cautiousness and will be looking for a sharp corrective fall from the 30800-31000 region targeting 29000-28000 on the downside.
DAX (13292.44, +165.47, +1.26%) is showing signs for breaking the current 13000-13300 range on the upside. Such a break can take it up to 13500 initially. A further break above 13500 will pave way for 13800. As we have been mentioning for some time, 13400-13500 and 13800 are important resistances that can cap the upside. We expect a corrective fall to 12400 from any of the above mentioned resistances.
Nikkei (26596.90, +431.31, +1.65%) has risen towards 26500 as expected and has room to test 27500. As mentioned yesterday, we can expect a corrective fall from 27500 to 25500 or even lower in the coming days.
Shanghai (3404.74, +1.91, +0.06%) remains stable above 3400. Resistance at 3450 is likely to hold and keep the 3180-3450 range intact for some more time. As such we can expect Shanghai to reverse lower from 3450 to 3350-3300 in the coming days. The price action at 3450 will need a watch.
Nifty (13055.15, +128.70, 1%) has risen above 13000 and can now see an extended rise to 13200 as mentioned yesterday. We retain our view of seeing a corrective fall from around 13200 to 12600-12500. In case if the Nifty manages to breach 13200-13250, then the upside can extend further to 13450-13500 before the expected reversal happens. We will have to wait and watch the price action around 13200 now.
Sensex (44523.02, +445.87, +1.01%) on the other hand has risen above 44500 and can now see an extended rise to 45000 as mentioned yesterday. 45000 is a strong resistance and is unlikely to be broken. We can expect the Sensex to reverse lower from 45000 targeting 43000-42000 on the downside.
COMMODITIES
Positive news on vaccine trials and the Biden-transition together seems to pull up the crude markets setting a near term rally as important resistance levels break to take the crude prices to fresh highs within the current rally. Copper has moved up sharply too but we watch price action near 3.35 to see if the price faces rejection from here or manages to rally further towards 3.40/50. Gold has declined and trades near the support at 1800 which if holds could produce a bounce towards 1840/60 again else a fall towards 1750 cannot be negated. Silver is bearish while below 24.
Brent (48.36) and Nymex WTI (45.42) have risen sharply breaking above the respective resistances of 47.50 and 45 mentioned yesterday. Our view of seeing a further decline from here has been clearly proven wrong as the market seems to show fresh bullish signals for the crude. A test of 50 on Brent and 48 on WTI is on the cards within the next 3-4 sessions if the momentum remains intact.
Gold (1807.80) has fallen sharply as expected. We need to see if the price manages to bounce back from 1800 and move up again towards 1840 and higher or breaks lower to indicate further bearishness towards 1750 or lower in the medium term. Watch price action near 1800 today for further directional confirmation.
Silver (23.37) trades below 24 and while that sustains we may not negate chances of falling towards of 22-21 in the medium term. View is bearish while below 24.
Copper (3.3140) has risen sharply to our expected 3.30/35 region mentioned yesterday. OIt is now to be seen whether the price face rejection from 3.35 or manages to break on the upside and move up towards 3.40-3.50 in the medium term. Watch price action near 3.35 today.
FOREX
Dollar Index is testing important support zone of 92.0-91.75 from where a bounce looks possible in the next 3-4 sessions. Euro may test 1.1950-1.20 on the upside in the meantime. EURJPY has scope for a test of 125-126 if it holds above current levels. Dollar Yen could be limited to 105 from where a rejection could drag it down towards 104 again. Aussie and Pound trader near crucial resistance of 0.74 and 1.34 which if breaks could target fresh highs of 0.75 and 1.36. USDCNY and USDINR could be ranged within 6.50-6.60 and 73.80-74.20 respectively.
Dollar Index (92.09) trades near support zone of 92-91.75 and a break below 92 if seen could be bullish for other major and EM currencies for the next couple of sessions. Watch price action at 92 which if breaks could take it down to 91.75. Bias is tilted to the downside.
Euro (1.1904) has risen well and could test 1.1920/1.1950 or even 1.20 on the upside if the Dollar Index falls to 91.75. View is bullish for the near term while above 1.1850. Note that 1.20 is the next crucial resistance on the upside.
EURJPY (124.43) has risen exactly as expected and could rise towards 125 or even 126 before coming off from there if it does not face rejection from current levels.
Dollar-Yen (104.52) trades stable. It could pause its upside at 105 and dip back from there. A sustained break above 105 is needed to show more strength for the medium term else we may expect a decline back to 104 or lower.
Aussie (0.7356) has risen on rising Copper prices and could test resistance at 0.74 just now. A rejection from here if seen could take it down back towards 0.72 else a further rise towards 0.75-0.76 could set in from here. Watch price action near 0.74 for today and resistance at 3.35 on Copper.
Pound (1.3361) has risen to test immediate resistance near 1.34. A break on the upside backed by Dollar weakness could set up new target of 1.36 on the upside if the break above 1.34 sustains. Watch price action near 1.34 today.
USDCNY (6.5795) has bounced a bit but we expect the broad range of 6.50-6.60 to hold for now.
USDINR (74.01) tested 73.88 before bouncing back to close at higher levels. We may expect trade within 73.80-74.20 to hold for now.
INTEREST RATES
The US Treasury yields have moved up further but have key resistances coming up that can cap the upside. We retain our view of seeing a sharp reversal in the Treasury yields in the coming days. The German yields have bounced but are unlikely to sustain higher. The view remains bearish and the yields can fall again in the coming days. The 10Yr GoI has come-off sharply below 5.90% again and can dip to 5.86% now. 5.86%-5.92% can be a possible near-term range.
The US 2Yr (0.16%), 5Yr (0.40%), 10Yr (0.88%) and 30Yr (1.61%) Treasury yields have inched further higher. As mentioned yesterday, 0.92% on the 10Yr and 1.65%-1.67% (revised higher from 1.60%-1.62% mentioned yesterday) can cap the upside. We expect the yields to reverse lower again targeting 0.78% (10Yr) and 1.50% (30Yr) initially and further deeper levels of 0.70%/0.60% (10Yr) and 1.25% (30Yr) eventually over the medium-term.
The German 2Yr (-0.76%), 5Yr (-0.75%), 10Yr (-0.56%) and the 30Yr (-0.15%) yields have bounced slightly but is unlikely to sustain higher. Our view of seeing -0.60% (10Yr) and -0.20% (30Yr) on the downside initially and then -0.70% (10Yr) and -0.35%/-0.40% (30Yr) eventually over the medium-term remains intact. Thereafter a fresh rally can begin.
The 10Yr GoI (5.8816%) has moved up towards 5.92% in line with our expectation but had failed to sustain higher. The yield has come-off sharply below 5.90% after making a high of 5.9146%. While below 5.90%, the yield can break 5.88% and fall to 5.86%. We expect a range of 5.86%-5.92% for the next few days.
