STOCKS
Equities continue to trade stable at higher levels. We retain our cautious stance to see a sharp corrective fall going forward. But whether this corrective fall will happen from here, the first level of resistances itself or after an extended rise to test the second level of resistances is not clear at the moment. For now the immediate resistances at 30000 (Dow), 13500 (DAX), 13250 (Nifty), 45000 (Sensex), 27000 (Nikkei) and 3450 (Shanghai) are holding well. We will have to wait and see if the indices manage to break these resistances and move up to 30800-31000 (Dow), ), 13800-13900 (DAX), 13500 (Nifty), 46000 (Sensex), 27500 (Nikkei) and 3500 (Shanghai) before the expected correction comes into play.
Dow (29969.52, +85.73, +0.29%) is struggling to breach 30000 decisively. While above 29500 the chances of seeing 30800-31000 is still there after which a sharp corrective fall to 28000 and even lower is possible. In case if the Dow falls below 29500-29000 now then the above mentioned correction can happen from here itself.
DAX (13252.86, −60.38, -0.45%) has been inching lower after testing the first resistance level of 13500 initially this week. 13200 and 13000 are important immediate supports. A break below 13000 will trigger the corrective fall to 12400 that we had been cautioning for some time. We will have to wait and see.
Nikkei (26690.47, −118.90, -0.44%) continues to trade stable between 26500 and 27000. A rise to 27500 is still possible while the index stays above 26500. Thereafter a sharp corrective fall to 25500 and even lower levels can be seen. A break below 26500 now will reduce the chances of seeing 27500 and in turn can drag the index to 26000-25500 from here itself.
Shanghai (3430.86, −11.27, -0.33%) remains below 3450 and is coming down slowly. This keeps the 3180-3450 range intact and is also reducing the chances of seeing 3500 on the upside that we had mentioned earlier. A sideways consolidation between 3400 and 3450 is possible in the near-term. A break below 3400 will then drag the index lower to 3300-3250 going forward.
The resistances at 13200/13250 on Nifty (13113.75, +4.70, +0.04%) and 45000 on Sensex (44618.04, −37.40, -0.08%) are holding well. We retain our broader view of seeing a sharp corrective fall to 12800-12500 (Nifty) and 42000 (Sensex) in the coming weeks. However, while above 13000 (Nifty) and 44000 (Sensex) we may still have to allow for an extended rise to 13500 (Nifty) and 46000 (Sensex) before the above mentioned correction happens.
COMMODITIES
Crude prices have risen as supports near 45 and 43 holds well on Brent and WTI respectively. While the supports hold we may expect a rise in oil prices towards respective resistance zones of 50-52 (Brent) and 48-50 (WTI). Gold, Silver and Copper trade higher, breaking above respective interim resistances and while that sustains, we may expect further rise in the near term. Overall all commodities look bullish for the near term.
Brent (49.68) and Nymex WTI (46.54) have risen well today indicating the underlying bullish strength intact. While above 45, Brent could aim to test the 50-52 resistance zone in the near term before dipping back from there. WTI can rise towards 48-50 too in the near term. Immediate view is bullish towards respective resistances.
Gold (1845.40) and Silver (24.17) have risen well breaking above the immediate resistances of 1840 and 24 respectively and while the rise sustains, we may expect a further rise in the near term towards 1860-1880 and 25 respectively.
Copper (3.5120) has broken above 3.50 instead of falling from there, proving our corrective fall towards 3.40/35 wrong for now. While above 3.50, there is scope for a further rise towards 3.60 on the upside. View is bullish while above 3.50.
FOREX
Dollar Index has bounced a bit pulling down Euro slightly. But this corrective movement is expected to remain for a short period. USDCNY may fall further towards 6.53/50 while USDJPY has broken below 104 and could test immediate support at 103.50. Aussie looks bullish towards 0.75/0.76 while Pound could test crucial resistance near 1.35. Dollar-Rupee could trade within 73.70-74.00 for today while a test of 74.20 is a possibility in the medium term.
Dollar Index (90.71) has bounced from an intra-day low of 90.50 seen yesterday and trades slightly higher just now. While the overall trend remains strongly bearish, we may have to allow for a corrective bounce to 92 or even 92.50 before a fresh fall is seen again. We do not negate a possible test of 90-89 in the medium term.
Euro (1.2143) has dipped from 1.2175 but on the weekly charts there is scope for a rise towards 1.23 before a dip is seen. The current dip is likely to be short lived a d we may expect a rise towards resistance at 1.23 in the near term.
EURJPY (126.14) tested 126.65 on the upside before falling off from there. A possible test of 127-127.50 is still not negated but before that we may expect an extension of the current dip to 125.78.
Dollar-Yen (103.85) could not sustain above 104 and instead fell sharply breaking below 104. For the very near term, 103.50 is an immediate support which if holds could produce a corrective bounce back towards 104-105.
Aussie (0.7430) has sustained well above 0.74 possibly boosted by stronger commodity prices. While Copper heads towards 3.60 (refer to commodities section above), we may expect a test of 0.75-0.76 on the Aussie in the medium term.
Pound (1.3452) has risen well but could face rejection from daily trend resistance near 1.35. Note that 1.35 and higher at 1.36 are crucial long term resistance levels which could hold. Watch price action for an initial decline from 1.35.
USDCNY (6.5412) continues to fall and could be headed towards 6.53-5.50 in the near term. View is bearish.
USDINR (73.9050) may test 74 on the upside before dipping from there today. While there is scope for a rise towards 74.00-74.20 on the upside, for today we may expect a range of 73.70-74.00 to hold.
INTEREST RATES
The US Treasury yields have reversed lower from near their crucial long-term resistances. We will have to wait and watch if the yields fall further in order to reduce the chances of seeing a breakout above the resistances and keep the long-term downtrend intact. The German yields have turned down from their intermediate resistances as expected. This keeps our bearish view intact and a further fall is possible in the coming days. The 10Yr GoI has bounced from its immediate support as expected and keeps the near-term bullish view intact. The RBI’s monetary policy meeting is due today and the policy rates are likely to be kept unchanged.
The US 2Yr (0.15%), 5Yr (0.39%), 10Yr (0.90%) and 30Yr (1.65%) Treasury yields have reversed sharply lower across tenors. This indicates lack of fresh momentum to breach the crucial long-term resistance levels of 1% (10Yr) and 1.75% (30Yr). While below these resistances, the long-term downtrend will remain intact and keep alive the bearish view of seeing a fall to 0.70%/0.60% (10Yr) and 1.25% (30Yr) over the next couple of months. We will have to wait and watch the price action in the coming days very closely.
German 2Yr (-0.75%), 5Yr (-0.75%), 10Yr (-0.56%) and the 30Yr (-0.15%) yields have reversed lower. The resistances at -0.50% (10Yr) and -0.10% (30Yr) are holding well as expected. This keeps the broader downtrend intact of revisiting 0.60% (10Yr) and -0.20% (30Yr) initially and then -0.70% (10Yr) and -0.35%/-0.40% (30Yr) eventually over the medium-term. Thereafter a fresh bounce is possible.
The support at 5.91% on the 10Yr GoI (5.9323%) has held very well as expected and the yield has bounced from the low of 5.9088% yesterday. While above 5.91%, the outlook is bullish to see a test of 5.95% again now and then 6% in the coming weeks. As mentioned yesterday, a strong break below 5.91% is needed to turn the outlook negative and drag the 10Yr GoI lower to 5.88% and even lower.
