STOCKS
Dow and DAX sustain higher but seem to lack strong follow-through rise in order to move up further to test their crucial resistance levels. 30800/31000 on the Dow and 13500 and 13800/900 on the DAX are crucial resistances that are likely to cap the upside from here. Nikkei remains higher and has chances to test 27500 before reversing lower. Shanghai keeps the 3180-3450 range intact and can fall towards the lower end of this range in the coming days. Sensex and Nifty have risen past their crucial resistances of 46000 and 13500 and need to see if they can sustain this break or not. The price action today/tomorrow will need a close watch to see if our view of seeing a sharp corrective fall from these resistances is getting negated or not.
Dow (30068.81, −105.07, -0.35%) seems to lack strong follow-through buying to breach 30300 decisively. But as long as it stays above 29500, the chances of seeing 30800-31000 on the upside cannot be ruled out. However as we have been cautioning for sometime 31000 will be a cap on the upside and a sharp corrective fall to 28000 and even lower is likely to be seen in the coming weeks.
DAX (13340.26, +61.77, 0.47%) remains mixed as it has been oscillating between 13200 and 13500 over the last couple of weeks. 13500 and 13800/900 are the important resistances that we see on the upside and are expected to cap the upside. We expect DAX to see a corrective fall to 12400 eventually in the coming weeks either from here itself or after an extended rise to 13800/900.
Nikkei (26728.97, −88.97, 0.33%) is managing to hold above 26500 and can move up to 27500 on a break above 27000. As we have been mentioning for sometime, 27500 will be a cap on the upside from here and Nikkei can see a sharp corrective fall to 25500-24500 going forward.
Shanghai (3379.36, +7.40, +0.22%) has declined below 3400 and is now likely to head down towards 3300-3250 in line with our expectation. A break below 3350 will trigger a further fall. Broadly, the 3180-3450 range remains intact and the index will now move down towards the lower end of this range in the coming weeks.
Nifty (13529.10, 136.15, 1.02%) and Sensex (46103.50, +494.99, +1.09%) have risen past their crucial resistances of 13500 and 46000 respectively. It will have to be seen if they can sustain this break. A strong and sustained break above 13550 on the Nifty and 46500 on the Sensex will negate our view of seeing a corrective fall to 12800-12500 (Nifty) and 42000 (Sensex). Until then we will continue to retain our cautious stance. The price action today and tomorrow will need a close watch.
COMMODITIES
EIA report stated an inventory build in the US stockpiles for week ended 4th December. According to the EIA, the commercial crude oil inventories excluding the Strategic Petroleum reserves rose by 15.2mln barrels from the earlier week. Crude prices could move up towards 50-52 (Brent) and 48-50 (WTI) in the medium term. Gold and Silver have declined to test support levels and while they hold, we may expect a bounce back soon. Copper on the other hand could remain stable and ranged within 3.55-3.47 for sometime.
Brent (49.10) and Nymex WTI (45.78) have both risen despite the US weekly inventory build. On the charts there is scope for a rise to 50-52 on Brent and 48-50 on WTI for the medium term. Overall while above 45 and 44 respectively, crude prices are bullish.
Gold (1845.10) and Silver (24.13) both have dipped from higher levels and both Gold and Silver could bounce back from 1840 and 24 towards 1880 and 25 gradually. Overall view is bullish as the metals now have come down to test immediate support levels.
Copper (3.4855) has fallen back and could possibly trade within 3.47-3.55 region for sometime before moving sharply on either direction. We may expect some volatility as Copper finds it difficult to decide which direction to move to.
FOREX
Dollar Index trades higher just now and has dragged Euro down but the movement is a corrective one and likely to be short lived. Dollar Index could fall back from 91.50-92.00 levels while Euro could limit its fall to 1.20.Aussie is headed towards 0.75-0.76 while Pound looks stable and ranged within 1.328-1.3450. EURJPY looks bullish for a rise to 127. USDCNY needs to break above 6.55 to move uo further else the range of 6.55-6.50 could hold for now. USDINR remains above 73.50 and while that holds a temporary rise to 73.70/80 looks possible before the pair attempts to break below 73.50 and fall sharply.
Dollar Index (91.04) rose above 91 but immediate upmove could be limited to 91.50-92.00 before again dipping back towards 90 or lower. While the overall trend is bearish, we may expect some interim upmoves over the next few sessions.
Euro (1.2088) could limit its fall to 1.20 before again rising back sharply in the medium term towards 1.22. Any fall seen just now is likely to be temporary and short lived within an overall uptrend.
EURJPY (126.24) has risen sharply after falling towards 125.75. We do not negate a rise to 127 or higher while above 125.75.
Dollar-Yen (104.42) rose sharply in line with the Dollar strength seen yesterday. A break above 104.50, if seen could take it higher to 105 before again seeing a dip back to 104. Broad range of 103.50-105 is likely to hold for the medium term.
Aussie (0.7474) has moved up well and if the momentum continues, we may expect a rise to 0.75-0.76 soon. Overall trend looks bullish.
Pound (1.3365) is likely to trade sideways within 1.3285-1.3450 region for the near term. Thereafter a break on either side will decide on further direction of the currency.
USDCNY (6.5424) continues to trade within the 6.55-6.50 region and only on a break above c, we would look for a rise towards 6.57-6.60 for the medium term, else there is scope for a fall back towards 6.50 soon.
USDINR (73.5650) traded above the important support at 73.50 and while that holds a bounce back to 73.70/80 cannot be negated in the near term. Although the RBI does not seem to have bought aggressively near 73.50 yesterday, the strength in Dollar Index seen yesterday could be negative for currencies today possibly pulling up Dollar Rupee also towards higher levels and respecting the trendline for now. Only a break below 73.50 would turn bearish for the pair. Watch price action near 73.50 today.
INTEREST RATES
The US Treasury yields have been coming down slowly this week. The fall in yields might gain momentum when the expected correction in equities begins. Until then they can remain stable below their long-term resistances. The German Yields remain lower and keep our bearish view intact. They have room to fall further. The ECB policy meeting is due today and it will have to be seen if they make any change in their Pandemic Emergency Purchase Programme (PEPP). The Indian 10Yr GoI has come-off failing to breach 5.95% and keeps the 5.88%-5.95% range intact.
The US 2Yr (0.15%), 5Yr (0.39%), 10Yr (0.92%) and 30Yr (1.67%) Treasury yields have been inching lower slowly since the beginning of the week. We retain the view of seeing a fall to 0.85%-0.80% on the 10Yr) and 1.55%-1.50% on the 30Yr while they remain below 1% and 1.75% respectively in order to keep the long-term downtrend intact. Only a strong and sustained break above 1% (10Yr) and 1.75% (30Yr) will negate the view and signal a long-term trend reversal, a major turn-around that will need a close watch.
German 2Yr (-0.78%), 5Yr (-0.80%), 10Yr (-0.61%) and the 30Yr (-0.18%) yields remain lower and keep our bearish view intact. The 10Yr can fall to -0.70% while it remains below -0.61%. The 30Yr can fall to -0.35%/-0.40% (30Yr) on a break below -0.20% in the coming weeks. Thereafter a fresh bounce is possible.
As expected the 10Yr GoI (5.9173%) tested 5.95% yesterday and has come-off sharply from the high of 5.9513%. This keeps the 5.88%-5.95% range intact and a test of 5.89%-5.88% is likely now in the coming sessions. A breakout on either side of this 5.88%-5.95% is needed to get a clear cue on whether the 10Yr GoI can move up to 6% or fall to 5.80% going forward.
